By Abraham Finberg, Rachel Wright, Simon Menkes No Comments
Cannabis companies representing 45% of California’s cannabis sales are pushing a bill that will crack down on non-paying customers. Well known operators, including Kiva, Lowell Farms, Nabis and Sunderstorm, recently formed Financial Stability for California Cannabis (FSCC) and moved to support Assembly Bill 766.”
The bill, nicknamed “The Cannabis Credit Protection Act,” would require a cannabis licensee to pay for goods and services sold or transferred by another licensee no later than 15 days following the final date set forth in the invoice. If full payment is not received by that date, the seller would be required to report this to the Department of Cannabis Control (DCC), which in turn would notify the delinquent buyer and begin disciplinary proceedings. The buyer would be prohibited from purchasing any other cannabis products on credit until the delinquent invoice was paid. In addition, the DCC would be empowered to issue a penalty (unspecified), taking into account “the frequency and gravity of the licensee’s [past] failure to pay outstanding invoices”.
In a letter of support for AB 766, the FSCC stated, “This culture of nonpayment that has emerged in California’s cannabis market leaves businesses across the entire industry and supply chain – as well as ancillary businesses that support legal cannabis operators – with outstanding balances and unpaid invoices sometimes totaling hundreds of thousands of dollars…This ballooning debt bubble in the cannabis industry will only continue to grow without proper oversight, putting the entirety of the state’s supply chain at risk of collapse and impacting state revenue decline even further.”
Opponents of the bill acknowledge the problem of non-payment in the industry, but feel AB 766 is too heavy handed and is “ripe for abuse.” In a blog post for the international legal firm Harris Bricken, cannabis attorney Griffen Thorne writes, “[L]icensees who are reported would be legally prohibited from buying goods or services on credit from other licensees until they pay the invoices for which they were reported in full … The person making the report has to give the DCC almost no information in order to make the report. There is no hearing. There does not even seem to be an opportunity to contest the report. The second a report is made, the other side loses its rights to buy goods on credit – presumably even under preexisting contractual arrangements with third parties. This seems like an obvious due process concern and ripe for abuse.”
The number and amounts of unpaid cannabis product invoices have ballooned over time and have driven California cannabis vendors to take such extreme measures. Collections and outstanding receivables are a symptom of an industry struggling under heavy taxes and competition from illegal operations that pay no taxes whatsoever, and which now account for over 60% of all cannabis sales within the state.
In order to ascertain the current status of AB 766, 420CPA reached out to Assemblymember Phil Ting (D-San Francisco), co-sponsor of the bill along with FSCC, the Cannabis Distribution Association, California Cannabis Industry Association and the California Cannabis Manufacturers Association. We corresponded with Tania Dikho, Ting’s Legislative Director. Ms. Dikho informed us that the bill was heard in the Assembly Appropriations Committee on May 18, but it was not passed.
“It’s a 2-year bill meaning we can’t act on it until this legislative year is over, so the bill will not have another hearing [and we] can’t make any changes to it until next year,” explained Ms. Dikho.
The 2-year status is a tenuous one. The bill must be approved by the Assembly and make its way to the Senate between early January 2024 and January 31, 2024 or it may no longer be acted upon and will die a legislative death.
Businesses that would like to voice their opinion for or against AB 766 should contact their state legislative representatives.
There are a lot of risks throughout the entire supply chain in the cannabis and hemp markets. Legal and regulatory issues, quality control reliability, security problems, product safety, potency, and constantly changing supply and demand are just a few major risks cannabis operators must stay on top of. A lot of companies mitigate these risks by implementing programs to find the source and figure out what actions could alleviate it. Those actions can look like reviewing testing or certification reports, auditing supplier facilities, and much more.
Jennifer Lott, AMAS Service Delivery Director for the standards certification body, BSI, has over 25 years of experience in quality, safety, lab management, consulting, packaging, and systems development. She’s an expert in GMP, ISO 22716, 21 CFR 117, 21 CFR 111, 21 CFR 210-111, ICH Q7, WHO GDP, RSPO, food safety, GMP/HACCP and much more.
She is a panelist for an upcoming webinar, Supply Chain Risks in Hemp and Cannabis June 27, 2023. During that webinar, she’ll join other experts where they’ll discuss some of the supply chain risks cannabis companies face and what they can do to mitigate those risks.
Ahead of her webinar, where she’ll take a deep dive into supply chain risks, we sat down with Lott to get a preview for what she’ll talk about.
Q: What are the major supply chain issues faced by the cannabis and hemp markets currently?
Jennifer Lott: The U.S. market remains highly complicated for cannabis companies and investors. Fewer than half of U.S. states and territories have legalized recreational cannabis use as of Nov. 2022.
To this day, cannabis is still a Schedule one substance under the Controlled Substances Act, alongside drugs like heroin, LSD and ecstasy – an issue that has led to several regulatory and fiduciary challenges for growers, processors, and distributors of cannabis/hemp.
Legal concerns aside, cannabis companies operate much like other businesses and face almost the same exposures that most enterprises do. Here are the top risks cannabis businesses encounter, according to experts.
Distribution – Current regulations prevent products from one state to be transported to another state.
Natural disasters – including wildfires, storms, and flooding, can easily damage crops
Cybersecurity – Because of the type of information that cannabis companies handle, they can also become a prime target for hackers.
Despite the supply chain challenges mentioned above, the cannabis industry is growing, and its use is becoming more accepted in society, but still faces major challenges. These trends also will create a volatile and fast-changing environment cannabis companies in 2023. The big challenge will be deciding which of the scores of startups, IPOs and established cannabis companies can surmount the upheaval and succeed long term.
Q: How are companies mitigating risks and what tools are at its disposal?
Lott: Anyone involved in the cannabis/hemp business knows they need to manage their risk with a solid risk management plan.
The three biggest risks facing cannabis/hemp businesses aside from the supply chain issues mentioned above, include:
Employee theft – employees have easy access to the product, run cash registers at dispensaries, and generally know a lot about the inner workings of the company. Protecting against insider theft is critical for the business.
Product tampering – this can happen at any stage in the supply chain. Businesses whose products cause harm could be liable for injury and damages.
Compliance regulations – compliance varies from state to state and laws are frequently changing.
Thanks to regulatory uncertainty and limited access to tools other industries have access to, the cannabis industry likely will have an increased risk profile for the foreseeable future. This heightens the need for a structured, risk management approach. However, even with so many external factors out of its control, cannabis companies still can dramatically decrease risks by addressing internal strategies and processes.
Cannabis companies with effective, relevant, and well-documented risk management practices can better positioned to create and preserve capital, attract investment, and achieve long-term sustainable growth.
Jennifer Lott is speaking at the Supply Chain Risks in Hemp and Cannabis Webinar, taking place June 27 at 11:00 am EST. Click here to register.
About Jennifer Lott
Jennifer Lott is the AMAS Service Delivery Director for the internationally recognized standards certification body, BSI. Jennifer currently supports the quality and integrity of food and fast-moving consumer products. She is an accredited Lead Auditor and Trainer with over 25 years of experience in quality and safety, management system development, consulting, packaging, and laboratory management. Jennifer’s expertise includes GMP, ISO 22716, 21 CFR 117, 21 CFR 111, 21 CFR 210-111, ICH Q7, BRC GS Consumer Products, WHO GDP, EudraLex, BRC GS Storage & Distribution, BRC GS Packaging, BRC GS Agents & Brokers, RSPO, Food Safety, and GMP/HACCP.
The cannabis industry in the United States is booming. In just a few years, it has gone from a small, underground market to a multi-billion-dollar industry. This growth is due in part to the legalization of cannabis in many states, as well as the growing public acceptance of its use for both medical and recreational purposes.
The industry is still in its early stages, but it has the potential to be a major economic driver for the United States. However, the industry’s success has brought with it challenges, such as THC inflation. This is when growers inflate the THC levels of their products in order to sell them for a higher price. This practice has led to widespread lab shopping, as growers send their products to labs that promise to give them the highest THC readings.
THC Inflation and Lab Shopping: A Look Under the Hood
Among cannabis enthusiasts, a prevailing belief circulates, asserting that cannabis products with elevated THC levels inherently possess greater potency and induce more pronounced effects. Nevertheless, this belief rests upon a fallacy, for it erroneously assumes that THC levels alone dictate the overall potency of a cannabis product. Genuinely comprehending the potency and effects of cannabis products requires the consideration of an array of factors. These factors include the presence of other cannabinoids and terpenes, the method by which the substance is consumed, as well as an individual’s metabolic and tolerance peculiarities. For instance, a particular strain of cannabis with low THC content, but elevated levels of other cannabinoids and terpenes, may engender a more intense impact in contrast to a variety exhibiting higher THC levels but diminished quantities of other compounds.
This misguided notion that heightened THC levels correspond to augmented potency has contributed to a surge in the demand for high-THC products. Consequently, producers have resorted to offering incentives to labs that provide inflated THC numbers for their products. Thus, certain labs have engaged in a practice coined as “lab shopping,” whereby they furnish reports that align with the producers’ desired THC levels, rather than accurately reflecting the genuine levels present within the product.
The manipulation of THC levels and the deceitful practice of lab shopping inflict profound damage upon the cannabis industry, eroding the foundation of trust. The fact that growers selectively collaborate solely with labs that yield desired outcomes, generates a mirage of superiority surrounding their products, thus deceiving consumers. Consequently, unsuspecting customers find themselves in possession of goods that fall far short of the promised standards of potency or quality. Moreover, this predicament places labs that remain steadfast in their commitment to integrity and the provision of accurate test results at an unfair disadvantage.
Fighting Back to Eradicate THC Inflation and Lab Shopping in the Cannabis Industry
The relentless surge of THC inflation finds its origins in the glaring absence of standardized testing protocols within the cannabis industry. As each lab embraces diverse methodologies and tools, testing produces disparate outcomes. This dissonance becomes a fertile ground for unscrupulous labs, who seize the opportunity presented by this lack of uniformity to peddle false THC numbers. To compound matters, the scope for manual interference looms large. The solution to this problem is to create a set of standards that everyone in the cannabis industry must follow. It’s important for the industry to come together and establish a common set of rules for testing. This will ensure that all labs consistently follow the same procedures and produce accurate results. In addition, it is important to have different labs take part in proficiency testing to find outlier labs. States should also take quick action to punish labs that provide incorrect or exaggerated THC values in their reports.
A representation of various ways to arrest the budding trend of THC inflation and lab shopping (Figure courtesy CloudLIMS)
It is extremely important to prioritize transparency among labs in order to address the growing concerns regarding the inflation of THC potency. State regulatory bodies can achieve this by conducting frequent audits to detect and correct any inconsistencies or inaccuracies in the data. To make this possible, state agencies need to hire skilled data scientists who can thoroughly analyze the data produced by labs. If the industry collectively works towards addressing these issues, it will enhance consumer trust in the regulated market. By eliminating the incentives that drive THC potency inflation, a more trustworthy cannabis industry can take shape and flourish.
Next, it is crucial to educate customers about the false notion that higher THC levels always result in stronger effects. Through effective communication and raising awareness, the industry can address the issue of THC potency and discourage the practice of selectively choosing labs with desired results.
The Importance of Deploying a Cannabis Lab Testing Software
Having a Laboratory Information Management System (LIMS) is essential to meet the challenging ISO/IEC 17025 requirements. This system plays a critical role in providing an extra level of assurance and trust in the accuracy of lab results. By automating processes, integrating analytical instruments, and adhering to rigorous quality standards, a cannabis lab testing software minimizes the possibility of manual manipulation of test results.
Furthermore, a cannabis lab testing software maintains a sample chain-of-custody (CoC) through the sample life cycle and tracks samples using barcodes. Furthermore, it generates custom reports that include scannable QR codes, which can be instantly shared with customers. By configuring the QR code, it becomes possible to include a link to the original Certificate of Analysis (CoA) produced by a lab. This allows buyers to verify the reported composition on the product label by referring to the authentic test results on the CoA. This approach promotes transparency, trust, and accountability within the cannabis industry.
Cannabis lab testing software to manage and track samples through their lifecycle and maintain a CoC (Figure courtesy CloudLIMS)
A cannabis lab testing software carefully monitors and records all activities, such as staff logins, document modifications, sample records, and test results, with a date and time stamp along with the name of the person who performed those activities. This thorough record-keeping process eliminates any chance of manual tampering with lab data, thereby enhancing the reliability and defensibility of test results. Moreover, the system effectively manages the outcomes of various Quality Control (QC) samples to guarantee accurate test results. By comparing the test results of QC samples with the samples being tested, the system can identify any analytical errors and enable lab managers to fix them, enabling labs to uphold quality standards.
The cannabis industry has experienced swift expansion as a result of cannabis legalization in multiple states across the United States. This has brought about various advantages, such as increased demand for cannabis products and the creation of new employment opportunities and tax revenue. However, the industry has faced challenges such as the issues of THC inflation and lab shopping. Dishonest producers and labs take advantage of the lack of standardized industry practices to deceive regulators and consumers. To address this issue, it is crucial to establish industry-wide testing standards that ensure consistency and accuracy across all labs. State agencies must also take prompt action to penalize labs that provide false THC values. Additionally, educating consumers about the misconceptions surrounding high THC levels and potency is important to combat this detrimental trend in the industry. Implementing cannabis lab testing software can help reduce the potential for human error and guarantee the authenticity and reliability of lab data.
This nascent but fast-growing industry holds remarkable promise for medicine and the economy, which can only be realized if proper safeguards are put in place and malpractices are stopped in their tracks.
By Abraham Finberg, Rachel Wright, Simon Menkes No Comments
On March 31, 2021, New York legalized adult-use cannabis with the passage of the Marijuana Regulation & Taxation Act (MRTA). Perhaps the most controversial portion of the Act was Section 493(1)-(3), which established taxes on the potency of cannabis products sold by distributors to retailers. Many cannabis advocates condemn this tariff, arguing that it increases the effective tax rate to such a high level that legal cannabis businesses can no longer compete against the illegal operations. A movement to repeal this tax and substitute a flat tax of 20% is gaining momentum.
Potency Tax Rates & Official Projected Total Tax Percentage
The three potency taxes are:
Edibles (food & beverages): $0.03 per mg of THC
Concentrates (vapes & resins): $0.008 per mg of THC
Flower (loose flower or pre-rolls): $0.005 per mg of THC
The THC tax accrues when cannabis is sold from a distributor to a retailer and is paid to the State by the distributor. If the distributor is also a licensed retailer, such as a microbusiness, the tax accrues at the time of the retail sale.
Along with the state excise tax of 9% and the local excise tax of 4%, the New York Office of Cannabis Management has projected a total tax burden of 20% on an average cannabis purchase.
Potentially Higher Total Tax Percentage
Critics of the potency tax say that it drives the total tax rate much higher than official estimates. In a recent study by the Cannabis Service Team of New York law firm Barclay Damon LLP, tax attorney Jason Klimek (Klimek is also chair of the Tax Committee for the New York State Bar Association’s Cannabis Law Section) provided an analysis showing an effective total tax percentage of 31%-41% on a typical cannabis purchase.
Potency Tax Likely to Result in Higher Tax Rates Down the Line
Rachel Wright will be discussing taxes and more on October 17 at the CQC in New Jersey. Click here to learn more. In addition to possibly burdening legal cannabis businesses with higher taxes, a major problem with a potency tax is that it is product-based, not price-based. This means that, if the retail price of a cannabis product is forced down by market conditions, the potency tax remains the same and effectively becomes a higher percentage of the sales price than it was before.
Because legal cannabis businesses are competing with illegal businesses which pay no taxes, it is likely that legal prices will be forced downward in order for those businesses to compete. This is what has taken place in California, as well as in other states with a strong illicit market. It is much harder for legitimate cannabis operators to remain competitive if they’re saddled with a potency tax. Critics of the potency tax point out that, of the 38 states in which cannabis is legal, only Connecticut has a potency tax.
Increased Costs of Compliance and Other Issues
The potency tax requires producers to pay significant lab expenses for testing of products. Plus, the tax burdens small cannabis producers with higher record-keeping and personnel costs just to manage the process.
Another concern is that today’s testing equipment is not accurate enough to provide a precise measure of THC and thus a precise tax calculation. One recent report by a New York cannabis law firm showed how current testing could result in a variance in taxation of 35% as well as in a retail user consuming 35% more THC than expected:
A lab may have a Measure of Uncertainty (MU) of 3% with a confidence interval of 95%, meaning that there is a 95% chance the true value [of THC] will be within ± 3% of the stated value. Under these hypothetical facts, a farmer that produces 1,000 pounds of cannabis that tests at 20% total THC has a product that may actually range from 17% to 23%. In terms of taxes owed, the difference would be a range of $385,560 to $521,640. Presumably, the farmer would be taxed at whatever percentage is reported on the label, but would be able to choose the percentage on the label, so long as it fell within the MU… This results in at least two problems. The first problem is that the government may be shortchanged in its tax collection. Second, there is a public health concern resulting from underreporting… if a farmer is incentivized to report the lower percentage, that could result in a consumer consuming approximately 35% more THC than expected.
State Legislators Take Action
On March 6, 2023, Assembly Majority Leader Crystal Peoples-Stokes (D) and state Senator Jeremy Cooney (D) announced Senate Bill S4831 which would replace the potency tax with an increase in the state excise tax, from 9% to 16%. Combined with the local excise tax of 4%, New York would then have a total “flat tax” of 20%.
Cooney commented, “Replacing the potency tax with an increase in the excise tax will allow licensed operators, including social equity operators, to sell competitively-priced products and be less susceptible to undercutting by illicit market prices without sacrificing revenues.” The bill is currently in the Senate Budget and Revenue Committee.
New York’s potency tax has come to be seen by many as a burden to adult-use cannabis companies. Many believe it results in increased taxation and costs of compliance and leaves the nascent legal adult-use cannabis industry in a less competitive position vis-a-vis those companies that operate illicitly. In addition, the variability of the laboratory measurements used in the calculation of the potency tax opens the door to confusion regarding the correct amount of tax owed to the state and could lead to consumers absorbing significantly higher doses of THC than expected.
Businesses that are in favor of substituting an increased rate of excise tax for the potency tax should contact their state legislative representatives and urge support for Senate Bill S4831.
Spring is a time of renewal, growth and planting. While many gardeners focus on traditional crops, there is a growing community of cannabis enthusiasts who are also embracing the opportunity to cultivate their own cannabis plants.
Research from New Frontier Data reveals that approximately 3 million people worldwide grow their own cannabis at home, resulting in a staggering yield of approximately 11 million pounds of smokeable flower each year. This number is projected to reach 15 million pounds annually by 2030. Amidst all the excitement around planting and growing, it is essential not to overlook the indispensable foundation of all cannabis plants: the seeds.
The Power of Cannabis Seeds
Affordable and versatile, cannabis seeds provide growers with the ability to cultivate specific strains tailored to their health and wellness needs. These seeds are typically the size of a peppercorn, characterized by an ovular shape tapering to a pointed end. While seeds can vary in color and striation, they typically exhibit a brown hue. Unfertilized seeds, on the other hand, appear off-white and are considerably smaller in size.
Economic Impact
These tiny powerhouses enable growers to cultivate customized strains, while also contributing to the economic growth of the global seed market.
The global cannabis seeds industry was valued at $1.3 billion in 2021, according to Allied Market Research. Experts predict that this figure will surge to $6.5 billion by 2031. Notably, North America accounted for more than 80 percent of the global seed market in 2021.
Benefits for Home Growers
According to New Frontier Data, 70 percent of home growers purchase seeds and cultivate cannabis for the sheer enjoyment of the process while 52 percent find it to be a convenient option. In addition to these advantages, numerous research studies highlight the multiple health benefits of growing one’s own crops, including reduced stress levels, decreased anxiety and increased exposure to the outdoors. Some innovative chefs have even begun incorporating cannabis seeds into their culinary creations, further expanding the versatility and appeal of these seeds.
Seed Safety Considerations
Given that cannabis seeds form the foundation of the entire cannabis industry, it is crucial to understand the various options for obtaining them. One increasingly popular method is through online seed banks, such as Rocket Seeds. However, it is important for those new to purchasing seeds online to thoroughly research the legalities surrounding these transactions. Cannabis seeds are subject to legislation similar to other cannabis products such as flower, concentrates and edibles. The legality of purchasing seeds varies depending on the state in which one resides. It is vital to check local legislation before making any decisions. In states where adult use cannabis is legal, buyers only need to be 21 years or older to order seeds online. Conversely, in states where adult or medicinal use is not permitted, purchasing seeds online remains completely illegal.
Purchasing Seeds Online
Selecting a reputable online seed bank is critical. Ensure that the chosen seed bank has positive customer reviews, offers quality customer service and provides germination guarantees. Researching the available strains, payment options and shipping policies is also essential. It is advisable for beginners to start small by purchasing only a few seeds at a time. Prior to planting, conducting thorough research is necessary, as there are numerous variables to consider and a steep learning curve to navigate. Fortunately, abundant resources are available to assist in this journey. For example, we offer valuable advice on getting started. Additionally, individual seed manufacturers, as well as online resources and apps like Seedtracker, provide guidance and support.
Continued Growth
The U.S. legal cannabis market is projected to exceed $31.8 billion in annual sales by the end of 2023, according to leading cannabis research firm Brightfield Group. Furthermore, they anticipate that within five years, the market will surpass $50 billion in annual sales. Amidst this flourishing industry, it is important to recognize that seeds form the backbone of this expansive market.
As the cannabis industry continues to thrive and expand, it is crucial to acknowledge the fundamental role played by seeds. These tiny powerhouses enable growers to cultivate customized strains, while also contributing to the economic growth of the global seed market. By recognizing the benefits of growing one’s own cannabis and taking proper precautions when purchasing seeds, individuals can partake in this exciting and rapidly growing industry while savoring the rewards of their own harvests.
History has shown that if companies fail to innovate when new technology emerges, even household name brands with enormous market share can squander their success if they are blind to anything that could ever unseat them from the top.
Kodak developed digital camera technology in the 1970s but didn’t envision a world where the film market wasn’t dominant. Toys R’ Us failed to adapt to the changing retail landscape, and Amazon became the chief source of online toy sales. Blockbuster famously laughed Netflix out of the room when the now-$149 billion behemoth sought to sell for a measly $50 million.
A “knockbox”-style unit for producing prerolls
Brands in the cannabis landscape can also fall victim to this same misstep. New technologies are driving the industry forward, yet many brands are still standing by sub-par processes. Whether due to misplaced beliefs around automation or an unwillingness to invest, cannabis brands could suffer the same fate as many of these bygone-era brands.
The Financial Argument: Automation Reduces Overhead
The financial argument for automation is at the top of the list of motivators for most cannabis businesses. A great example of this is with pre-roll production. For cannabis brands still employing a “dexterous approach” to their pre-roll manufacturing, staying afloat to keep up with demand is a constant battle. Rebel Spirit, currently the number one pre-roll brand in Oregon, was burning through eye-welling amounts of money in labor costs to produce 300,000 pre-rolls per month. With a crew of 22 full-time pre-roll manufacturers, the team at Rebel Spirit quickly realized their process was unsustainable, and they were headed for an economic crisis if they didn’t cut costs.
The Blackbird atuomated system
They were using a knockbox-style unit which they had modified themselves in an attempt to force it to fit their needs. But this “semi-automated” solution simply wasn’t working. Rebel Spirit then turned to our team at RollPros to clean up and fully automate their production process, helping them to create quality pre-roll at scale with a fraction of the labor costs. (We are the Vancouver, WA-based designer and manufacturer of the Blackbird automated joint rolling system.) For them, it wasn’t a matter of greed, as some opponents of automation sometimes claim; it was simply a choice of going out of business or not. In competitive markets like the Beaver State, where every dollar counts, the case for automation was a no-brainer.
The Remote Argument: Automation Reduces Risk Of Human Error
It’s a basic concept: the more human interaction in your processes, the more risk for error. We, as flawed humans, are simply not capable of being as precise or consistent in our work as a machine can be. Consider the cultivation process. Most experienced cultivators will tell you that growing cannabis is easy, but growing quality cannabis is very difficult, with a lot that can go wrong.
Enter one of the most valuable automation tools for cannabis cultivators – automated irrigation systems. With your irrigation systems and nutrients on autopilot, cultivators can ensure plants get the ideal mix of nutrients regardless of whether you are on-site, remote or facing a staffing crunch. Sensors can provide real-time data so that water, nutrients or even light can be adjusted as needed. In many cases, even these adjustments can be automated. (Think AI hasn’t entered the cannabis space yet? Think again!) Sure, there is always a potential for issues no matter how advanced a system you use. But when you compare this to a farmer using a manual watering and nutrient system, there are far fewer opportunities for mistakes. Does a human feel the difference between .94 gallons of water and 1 gallon of water? No. But a well-calibrated irrigation system can tell the difference and even alert you if it goes outside of whatever tolerance limits you set.
When the cost of flower is high, human errors that lead to damaged or inferior product are often overlooked. But when flower prices drop as markets mature, success versus failure can be balanced on a knife-edge, and cultivators can’t afford to make mistakes.
The Skynet Argument: Automation Increases Productivity Without Taking Your Job
Whether AI is coming for our jobs or will destroy human creativity as we know it has been argued ad nauseum since the release of AI tools like ChatGPT and Midjourney. The good news? Automating your business doesn’t mean enlisting the T-1000 from Terminator 2 to terminate your 9-to-5. Think of automation as Arnold Schwarzenegger telling you to come with him if you want to live.
The Green Vault automated packaging system
The truth is that any task that needs to be completed frequently or on a set schedule is ripe for automation. Automation eliminates tethering your most talented employees to cog-in-the-machine work that wastes their time and abilities. Freeing them up to focus on more high-value tasks like customer service, marketing, or new product development will likely make your business more profitable long term, and make your employees happier with their work.
No industry has been spared from the impacts of industrial automation, says Amar Olgeirsson, CEO and founder of Green Vault Systems, but, “labor is typically not reduced as a result of automation.” Instead, “production is increased, and workers’ value increases because of higher production in terms of units produced per labor time. By increasing worker efficiency, companies and corporations are able to pay their workers a higher salary,” says Olgeirsson.
The Performance Argument: Automation Guarantees Consistent Quality Every Time
Expansion across state lines means consumers know they can buy the same quality product whether they buy it on the East Coast or West Coast. You know that you can buy your favorite Red Blend wine whether you’re in Denver or Atlanta and expect to enjoy the same tasting glass (barring any unintended oxidization). If a customer purchases that same glass of wine, and it doesn’t meet their expectations of what it should be (it’s inconsistent with the last time they had it), a brand is essentially breaking a promise to that customer. When a customer doesn’t get what they want and expect out of a product, they’ll quickly move on to a competitor. Consistency builds loyalty… inconsistency destroys it.
A preroll infusion automated system
The cannabis industry is notorious for producing inconsistent products. It’s not surprising, considering the near-total ban on state-to-state commerce, (thanks federal government!) And, of course, the variation that can occur from crop to crop, batch to batch or facility to facility. There are so many variables to just the cultivation process; the amount of light a crop gets, the type and dosage of nutrients, the growing medium that’s used, the amount of air flow in the facility… The list goes on, and that’s just the first of many processes needed before a product ends up on shelves! It’s nearly impossible for humans to manually manage and ensure consistency of all these variables without the help of some level of automation.
Nohtal Partansky, ex-NASA-JPL engineer and CEO of Los Angeles-based Sorting Robotics, teamed up with fellow NASA Jet Propulsion Laboratory colleagues Cassio Santos and Sean Lawlor to found their firm that creates next-generation hardware and software for cannabis industry producers.
“Automation in the cannabis industry plays a crucial role in maintaining product consistency by reducing human error and standardizing processes across cultivation, extraction, and packaging,” says Partansky. “If brands are going to expand across states, consistency is a requirement if customer loyalty is ever going to be a market driver for sales.”
The Contamination Argument: Automation Limits Human Error & Contamination Risk and Improves Product Safety
Our industry demands very strict safety standards. Our customers deserve safe products, but beyond that, the testing requirements mandated by regulations in most markets are very, very strict. Each and every human touchpoint in your processes carries with it additional contamination risk. Even with stringent protocols, mold, mildew and other unwanted crits can more easily venture their way into final products as the human variable increases.
Automation minimizes these risks and improves the safety of the product for consumers, and reduces the risk of recalls or other regulatory issues. Consider that for many cannabis businesses in hyper-saturated, competitive markets, a significant product recall can be the end of the road. Automating production processes provides a reliable and consistent solution in an industry that demands the highest safety and quality standards.
“The new and burgeoning Cannabis industry and its consumers are no exception and possibly benefit it more than other industries. The medicinal qualities of Cannabis products make consistency, quality, safety, and traceability paramount to the consumer. Cannabis products are most often consumed by ingestion into the lungs which means product cleanliness and quality are essential to safety. Chemically derived oils and extracts would not be possible without automation equipment. Again, industrial automation is a huge benefit to the Cannabis space, to the producers, their employees, and maybe most importantly to the consumer”.
Amar Olgeirsson, CEO & Founder, Green Vault Systems
Olgeirsson’s take on products created on specialized automation equipment? “Products produced on purpose-built machinery are more consistent and of a higher quality which lends itself to better oversight, enhanced traceability, and improved product safety.”
The Physical Argument: Automation Eliminates Tedious & Overhead-Heavy Tasks
In an increasingly competitive marketplace like cannabis, streamlining processes and reducing the liabilities that come with human labor – like being sidelined from Carpal Tunnel – is key. Let’s consider the trimming component of the post-harvest process. Manual trimming is monotonous, low-paying for workers, and an unrealistic way to harvest cannabis at scale. Also, it’s hard to be successful when team-wide prescriptions for night-time wrist splints are a threat.
The Mobius M108S Trimmer
Leaning into “hand-trimmed” as a differentiator for your brand? Many connoisseurs will argue that hand-trimmed bud is superior because buds stay aesthetic and trichomes aren’t lost. That may have been true in the early days of automated trimming machines, but with today’s crop of super-sophisticated trimming technology, it is now nothing more than a myth. (Yes, myths and misled traditions can be difficult to overcome in our industry, but I digress…)
The Mobius M108S Trimmer, for example, allows operators to reduce the staff required to process thousands of pounds of product every year without compromising quality. It’s next-gen tech not found on traditional trimmers can produce hand-trim quality buds with minimal trichome loss.
When flower prices are high, especially in the case of newly-legalized markets, it can be easy for operators to overlook the cost of trimming, and pay their employees higher wages to offset the physical risks to their bodies. But what about when product prices inevitably fall once the post-legalization honeymoon period wears off? It’s unrealistic (and unethical, I believe), to pay employees minimum wage while putting their health and safety at a significant risk. In the above example, at some point, your operations will grow to a point where hand-trimming will dig you further into a fiscal hole every time you harvest.
The Future Argument: Automation Isn’t Going Away (and Your Competitors Know It)
Automation could cause you to lose people, just not in the way you might think. Ultimately, competitors in any space will invest in new technology to streamline people, processes and tools to establish a competitive advantage. This investment puts them in a better position to attract talented employees that stick around for the long term.
Automation is like a boat motor in the 21st century, and companies that don’t use it are paddling against the current. Sure, you can use a wooden oar, but your competitors know paddling is too much work and will strap a motor to theirs. The truth is that companies that drag their feet out of stubbornness or inability to see how the current situation could ever change will often find their employees jumping ship to go elsewhere.
An automated vape cart filling system
“I strongly believe that automation not only propels our industry forward but also sets the stage for a more profitable future in cannabis production for those that embrace technology rather than fight it,” says Ryan Hoitt, CEO, developer & founder of Vape Jet in Portland. “I can confidently say that it enables businesses to fine-tune operations, improve product quality, and achieve unmatched consistency.”
Saying that you will eventually be forced to automate sounds harsh, but it’s largely true. As soon as your competitors deploy automated processes, they gain an advantage. If you don’t do the same, it will become more difficult to compete, stay profitable and stay in business.
The Consumer Argument: Automation Provides Consumers More Options
Automation isn’t going away, and it’s certainly not a fad like pogs or planking. Automation drives lower production costs, which means lower-priced products for consumers. This process has been behind the dramatic increases in global living standards and population growth since the birth of the Industrial Revolution and is not likely to change anytime soon.
Automation allows producers to manufacture a broader range of products and focus on providing the consumer with more options. Consumers want to be in control of their purchasing decisions, and companies that deliver variety will be the ones to reap the rewards.
Embrace the Future with Automation
History has shown us time and again that failure to innovate can lead even the most prominent brands to fall victim to their inability, or unbelief, in the necessity to evolve. Automation is a no-brainer in crowded and competitive markets.
No doubt, the future of the cannabis industry will trend toward automation. Businesses embracing it will have a significant advantage over those that do not. Companies that drag their feet in the face of disruptive automation risk resigning to the same fate as those brands that underestimated technology at the expense of their own existence. No industry is immune from disruption, and there will be dynamic entrepreneurs who will come along and see to it. Embrace the change, embrace automation and technology, and you’ll increase your chances of winning in the cannabis industry!
As the cannabis industry experiences a significant shift toward general acceptance and mainstream adoption, new modes of operation are popping up everywhere. The evolution and expansion of the industry beg for constant innovation, and the integration of NFTs and cryptocurrencies as payment options is at the crossroads between tech and cannabis.
Crypto and NFTs have grown in popularity in recent years. Non-fungible tokens are an interesting asset in the art and collectibles world, while cryptocurrency has made a name for itself by providing a unique kind of financial independence. More and more payment processors are embracing these new payment methods, and the cannabis industry is also slowly welcoming them.
In order to fully understand the cannabis-crypto connection, Swaroop Suri, founder of Melee Dose, a cannabis brand that’s been embracing NFTs and crypto as payment options, shared some insights. Their innovative approach to creating unique cannabis experiences with technology and creative branding makes them a pioneer of this movement.
What’s Happening with Cannabis and NFTs?
NFTs and cryptocurrency are exciting developments in an industry that carries the reputation for having a rocky relationship with the banking industry. The legal gray area surrounding the connection between cannabis businesses and the banking industry has given way to an onslaught of challenges, with many banks shunning cannabis because of its federally illegal status. While traditional banking can limit cannabis companies’ access to basic financial services, the decentralization that’s characteristic of blockchain opens up many doors.
In recent years, different brands have tested the waters by using cryptocurrencies and NFTs to enhance marketing and offer alternate payment options. While it’s still early in the game, trends are starting to appear.
Bitcoin quickly became one of the more popular cryptocurrencies
One of these trends is using NFTs in marketing and branding, creating unique digital assets that can be collected. This gives an air of exclusivity, creates more immersive experiences, and helps forge a brand identity. NFTs are often a great tool to engage with customers and create a sense of community.
Melee Dose recently started integrating NFTs from Bored Ape Yacht Club (BAYC) into product packaging and branding. This has allowed the brand to offer unique experiences, foster community engagement, enhance storytelling and demonstrate adaptability to an ever-changing world.
“This collaboration merges the worlds of fashion, art and technology, providing our customers with exclusive “IRL” products incorporating digital assets and driving brand affinity”, says Swaroop Suri. “By embracing the digital revolution and connecting with the influential BAYC community, we aim to redefine consumer experiences and build lasting relationships with our audience.”
Crypto Payments Aren’t Futuristic Anymore
Payment is another trend to look out for. Cryptocurrencies are becoming more accepted in many big industries, including cannabis. With traditional banks limiting access to banking services, crypto allows cannabis companies to offer decentralized and secure payment options.
Cryptocurrency offers more enhanced privacy than traditional payment methods, which is great for those who want to stay under the radar. Lower transaction fees are another plus, as a decentralized system is more flexible. The speed of crypto payments is also an enticing feature, as payments are usually processed more quickly than traditional payment methods.
Swaroop Suri, Founder of Melee Dose
So, how are brands accepting crypto as payment? Is it safe? Melee Dose started accepting cryptocurrency payments on their e-commerce store by partnering with Coinbase Payments, a leader in the crypto industry with a strong reputation and ease of integration.
Cryptocurrency may seem perilous to those who don’t know much about it, but siding with the right company can help ease those fears. Addressing concerns about crypto volatility, Suri “opted for a feature provided by Coinbase Payments that allows for immediate conversion of cryptocurrency payments into our local currency, ensuring stable revenue despite market fluctuations.”
By working closely with reliable payment partners like Coinbase Payments and implementing necessary features, companies like his are able to successfully overcome crypto roadblocks, providing customers with increased flexibility and convenience.
The Future of Crypto, NFTs & Cannabis
The future of integration between cannabis, crypto and NFTs is exciting and always on the move, meaning there are opportunities constantly arising and challenges ahead we have yet to tackle. As cannabis legalization continues to evolve, we might expect changes in regulatory frameworks that impact how cryptocurrency is used in the industry. While we can’t say what those changes might be, the fact that NFTs and crypto have become mainstream indicates a clear adoption, as the industry finds ways to integrate them. From blockchain integration and creative marketing to payment options and immersive experiences, they are here to stay.
Swaroop Suri and his team might’ve gotten in on the game early, but they know the future is expansive: “It’s possible that NFTs could become a significant part of cannabis marketing strategies in the future,” He says. “The cannabis industry can use NFTs in various ways, such as tracking crops and using intellectual property to promote products through packaging artwork, which is what our team at Melee Dose has accomplished.”
NFTs won’t stop there. “There is a possibility to use NFTs for establishing VIP programs that offer exclusive discounts and access”, Suri says. “The ownership of an NFT could grant special privileges and perks to customers when shopping with an e-commerce company, fostering a deeper connection with the brand and community and leading to customer loyalty in the long run.” NFTs offer diverse possibilities for cannabis brands to improve their marketing techniques and get creative.
When it comes to crypto payments, brands will surely continue to add crypto as an option in addition to merchant processors. Highly-regulated industries like cannabis can find many benefits in crypto, as experienced by Suri: “Accepting cryptocurrency can mitigate some of these issues by providing an alternative payment option that is not subject to the same restrictions as traditional payment methods.”
Final Thoughts
The excitement surrounding crypto and NFTs is understandable, and as the cannabis industry introduces new opportunities for those who are at the intersection of these two global forces, companies everywhere are changing their relationship with technology.
There are other brands hopping onto the this train as well. Household cannabis brands and popular companies like Plain Jain, Highland Pharms, American Green and Pharma Hemp are just some of the many that have begun accepting crypto as payment.
As the industry continues to evolve and grow, staying ahead of the curve and embracing technology with critical thinking and environmental consciousness is key. As a new, dynamic and exciting space with as many opportunities as it is filled with challenges to tackle down the road surrounds us, the one thing we know for sure is that this is just the beginning.
2023 has so far been a productive year for the New Jersey Cannabis Regulatory Commission (CRC), the government body tasked with overseeing the state’s medical and adult use cannabis markets. The licensing process since New Jersey first launched its adult use cannabis market has been slow, but intentional and systematic.
When the state first launched adult use sales in April of last year, only thirteen dispensaries in the Garden State had their doors open for customers. A little more than a year has passed and now 27 dispensaries at this time have opened their doors for adult use customers.
Holistic Solutions, a dispensary based in southern NJ
The CRC has been a busy body this year, issuing hundreds of conditional licenses to microbusinesses and standard licensees (temporary licenses awarded to applicants giving them the green light to obtain local approval, find real estate and apply for a conversion to an annual license). Of the annual licenses they have awarded in 2023 so far, 18 have gone to cultivators, 12 to manufacturers, 35 to retailers and one laboratory. That’s an additional 65 cannabis businesses given approval to start operations.
Just last week, Holistic Solutions, based in Waterford, New Jersey, announced that they started serving adult use customers. Holistic is New Jersey’s first Black woman-owned cannabis licensee, with Suzan Nickelson at the helm. “We are thrilled to have the opportunity to serve adult-use customers at Holistic Solutions,” says Nickelson. “Our mission has always been to provide education and access to natural healing solutions, and we are excited to continue that mission for all of our customers.”
The Cannabis Quality Conference takes place in New Jersey this year, October 16-18, 2023. Click here to learn more.Valley Wellness, the first independently owned dispensary to open in the state, also opened its doors to adult use customers last week in Somerset County. “While the market is expanding, it takes cannabis companies months, if not years, to open,” Sarah Trent, owner of Valley Wellness, told reporters. “So we expect our product selection will remain stable and similar over the next year or so. That said we are anxious to add new products made from local New Jersey growers and manufacturers.”
With all these new licensees and a larger marketplace comes tax revenue the state is eager to see. Back in March, legislators in the state approved a bill that would allow cannabis businesses to deduct ordinary business expenses on their state tax return that they are prohibited from deducting on their federal tax return, the dreaded 280E tax code that cannabis stakeholders know as a painful thorn in their side. Governor Murphy signed that bill into law yesterday, which should lessen the massive tax bills that cannabis businesses in the state are accustomed to seeing.
As the state’s cannabis market continues to blossom, a large number of those new licensees are expected to come online before the end of the year.
The agenda will feature breakout sessions, keynotes and panel discussions that will help attendees better understand the cannabis markets in the region and provide insights on best practices and business strategies. The conference will begin with a number of pre-conference workshops on Monday, October 16:
The Seed to Sale Safety Workshop
Food Safety Auditor Training
CP-FS Credential Review Course
The Food Safety Culture Design Workshop
The conferences will run all day Tuesday, October 17 and throughout Wednesday, October 18. The full agenda is expected to be announced in the coming weeks. Notable speakers include:
Tahir Johnson, Founder, Simply Pure
Steven M. Schain, Esquire, Attorney at Smart-Counsel, LLC
Jay Czarkowski, Founding Partner, Canna Advisors
Michael Kramer, Quality Assurance Director, Wana Brands
Casey Leaver, Director of Regulatory Compliance, Vicente LLP
Sumer Thomas, Director of Regulatory Affairs
Rachel Wright, Managing Partner, ABFinWright
Ernest Toney, Founder, BIPOCann
Victor Guadagnio Jr., Co-Founder, Canna Remedies NJ
The Cannabis Quality Conference and the Food Safety Consortium are co-located this year, taking place in the same venue and at the same time. Registered attendees get full access to both conferences.
Registration options are available for full conference passes for both the Cannabis Quality Conference and the Food Safety Consortium as well as all pre-conference workshops.
Event Hours
Monday, October 16: Pre-conference workshops, 8 am – 6:30 pm (ET)
Cannabis Industry Journal is a digital media community for cannabis industry professionals. We inform, educate and connect cannabis growers, extractors, processors, infused products manufacturers, dispensaries, laboratories, suppliers, vendors and regulators with original, in-depth features and reports, curated industry news and user-contributed content, and live and virtual events that offer knowledge, perspectives, strategies and resources to facilitate an informed, legalized and safe cannabis marketplace.
About the Cannabis Quality Conference & Expo
The Cannabis Quality Conference & Expo is an educational and networking event for the cannabis industry that has cannabis safety, quality and regulatory compliance as the foundation of the educational content of the program. With a unique focus on science, technology, safety and compliance, the “CQC” enables attendees to engage in conversations that are critical for advancing careers and organizations alike. Delegates visit with exhibitors to learn about cutting-edge solutions, explore three high-level educational tracks for learning valuable industry trends, and network with industry executives to find solutions to improve quality, efficiency and cost effectiveness in the evolving cannabis industry.
The cannabis industry is the latest target for cybercriminals. Why? Because many cannabis operations employ less than 100 workers and few are equipped with sophisticated IT systems and knowledgeable on-staff IT personnel, so they are often easier to exploit.
Add the all-cash nature of the business, along with the large amounts of protected health data and personally identifiable information medical dispensaries may store and the industry’s shift toward operational automation to increase yields and lower labor costs and you’ve got an industry that’s extremely vulnerable and a prime target for cyber extortion.
Safeguard your corporate networks and internet connections by encrypting information and using a firewall.
Take the cannabis businesses in Ontario that lost millions after a local distributor was hit by a cyberattack and was incapable to process or deliver orders to local retailers. In another cyberattack, hackers stole $3.6 million that an Australian medicinal cannabis firm intended to send to an overseas contractor.
A still prevalent tactic is for hackers to target workers with email-based phishing scams that enable the installation of malware or ransomware to obtain protected health information to sell or lists of high-profile clients to extort.
While there’s a lot to fear and be on the alert for, there’s also a lot that cannabis businesses can do to both reduce their risk of an attack and proactively protect themselves.
Six hallmarks of a strong cyber-defense program:
Assess the risk. One place to start building a comprehensive approach to cybersecurity is to conduct an appropriate cyber vulnerability or risk assessment of your cannabis business. This exercise can reveal gaps, but it also helps prioritize your effort and develop a vision for your goal state.
Train and test. Train employees on the importance of cybersecurity. Make sure employees undergo phishing training and conduct refresher courses at least annually. Then, test them. Are employees retaining the information shared in training? Send simulated phishing emails and track performance to determine if training hits the mark.
Secure the perimeter. Safeguard your corporate networks and internet connections by encrypting information and using a firewall. If your employees work remotely, consider use of a Virtual Private Network (VPN) to allow them to safely connect to your network from out of the office.
Engage protective tools. In addition to using antivirus software and keeping all software updated and patched,multifactor authentication (MFA) and endpoint detection and response (EDR) are crucial for maintaining a secure network. Most carriers require MFA for remote network access, on email, and to protect privileged user accounts. EDR monitoring of devices connecting to the network is also increasingly a minimum requirement for insurance coverage.
Develop a backup strategy. A solid data backup strategy makes companies less susceptible to ransomware attacks by allowing organizations to restore operations. Perform frequent backups — every day if possible — and consider leveraging cloud solutions along with storing backups in an immutable state off-site or off-network.
Build an incident response plan. Cannabis companies should have a plan for responding to an attack, a system for validating what happened and the resources to remediate the issue.
What if a breach occurs?
Even with a great incident response plan in place, the road to recovery from a cyberattack is a complex and rapidly evolving landscape. Should we communicate with the threat actor? Should we pay the ransom demand? How do we capture forensic evidence? What are the laws guiding notification of impacted employees or clients? When an organization has armed itself with a cyber insurance policy, they not only transfer much of their risk, but they often gain access to a carrier panel of specialized response providers that include breach coaches, forensic investigations firms and privacy attorneys.
In addition to leveraging the specialized post-breach expertise offered by carriers, insureds should also consider familiarizing themselves with and leveraging any pre-breach resources provided, which often include no-cost external vulnerability scans, employee awareness training and discounted technical security solutions.
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In a letter of support for AB 766, the FSCC stated, “This culture of nonpayment that has emerged in California’s cannabis market leaves businesses across the entire industry and supply chain – as well as ancillary businesses that support legal cannabis operators – with outstanding balances and unpaid invoices sometimes totaling hundreds of thousands of dollars…This ballooning debt bubble in the cannabis industry will only continue to grow without proper oversight, putting the entirety of the state’s supply chain at risk of collapse and impacting state revenue decline even further.”
The number and amounts of unpaid cannabis product invoices have ballooned over time and have driven California cannabis vendors to take such extreme measures. Collections and outstanding receivables are a symptom of an industry struggling under heavy taxes and competition from illegal operations that pay no taxes whatsoever, and which now account for over 60% of all cannabis sales within the state.
