Remember those heady days of the Green Rush a decade ago, when markets were small and it seemed everyone had a chance? Now it’s more of a mad rush to get some green in the form of investment capital.
The majority of states in the country now have some type of legal cannabis market. Businesses in those states operate in spite of regulations that are restrictive, confusing and make it very difficult to make a profit. Meanwhile, heavy tax burdens, differences in enforcement techniques and varying degrees of oversight are other factors that influence bottom lines in the cannabis industry.
Saturated markets are giving businesses trouble when it comes to their bottom line
Inflation also continues to be a prominent force across world markets. Sales of cannabis products have fallen as consumers adjust to inflation and post-COVID supply chain issues that are causing higher prices on necessary staples like food and gas. An oversaturation of cannabis flower is becoming a perennial problem in some states and another factor causing industry distress.
When cash flow slows to a trickle, companies of all sizes seek out investment funding to keep their momentum. But catching the eye of an investor group requires more than just sticking your hand out.
What Attracts Potential Investors?
A company is best positioned to attract those interested in cannabis investment opportunities when it appears serious about its growth plans. That means being well positioned with a solid upper-management foundation and so much the better if there’s an advisory board in place too. A company built with a diverse group of talent—ideally from consumer packaged goods companies—presents an attractive opportunity for investors.
Talent from the CPG space can help attract investors
Top-quality and industry savvy finance employees who maintain sound financial books and establish a solid banking arrangement are also important. If the company’s financial scenario is robust enough to provide confidence in case of an audit and the books are in good shape with auditable METRC logs investors will be far more inclined to put money on the line.
A cannabis company with full inclusion (or seed to sale) is often a smart choice for investment. The vertical integration of cultivation, processing/manufacturing and retail allows them to sell their own products while also stocking other brands’ products on the floors of their dispensaries. If their products are respected and the brand is held in high regard, even better. Similarly, a cultivation enterprise that can grow crops for multiple brands can also be very attractive. The ability to pivot and adjust production to reflect the market and consumer demands indicates a strong business foundation.
Despite the current headwinds and saturated markets, other chances for growth exist. When a local municipality finally decides to “opt-in” to adult-use cannabis sales, there’s opportunity for both established brands and startups. It’s a matter of being ready for those opportunities and having a plan to leap in whenever new licenses become available.
What Businesses Will Struggle to Attract Investment?
Culture is key here. Poor employee relations and weak cohesion across departments are indicative of deeper problems. Do people actually want to work for the business? Do they feel supported by human resources? A company with underdeveloped or non-existent workers’ compensation policies and a management team that is not respected by its employees is not going to look good in the eyes of potential investors.
Non-diversified cannabis businesses are also at a major disadvantage when seeking investors. Cultivators of one type of product or service are locked into a single operation geared to do one thing. Any changes to market whims or problems with the supply chain can wreak havoc on a business based around a single product.
Stick to Business Basics
The cannabis industry is unique, but the basics of running a business well enough for success still apply. Strictly adhering to the traditional methods that any successful organization follows is extra important in cannabis. Businesses that are active in their community and make a real effort to be involved will be held in higher regard by investors. They want to see cannabis businesses that are not just setting up shop to make a quick buck, but are dedicated to bettering their community. That indicates a relationship with customers that involves mutual respect and promotes business longevity and financial stability.
As a business owner, insurance is always a must. If you are interested in entering into the cannabis industry or you already have, it’s important to know what to expect when it comes to insuring your cannabis-related business.
That’s why we’ll be exploring what dispensary insurance is, different options for business owners and general advice regarding dispensary and other CRB insurance.
What is Dispensary Insurance?
Insurance for cannabis-related businesses refers to policies that protect the business against risk. This can include dispensaries, cultivation centers and testing labs – all of which require different levels of coverage and liability.
We spoke to Alexander Marenco, an insurance broker from Marenco Insurance, who explained what dispensary owners should know before seeking out insurance. Marenco says it’s similar to shopping for insurance for other businesess. “You need to have full details of the business and location to receive a quote.” He adds. “The applications will ask questions such as location, renovations, or improvements to the location, ownership information, payroll details, and sales or projected annual sales.”
How is Dispensary Insurance Different From Other Forms of Business Insurance?
Because non-hemp-derived cannabis is still considered a schedule one controlled substance under the Controlled Substance Act, cannabis insurance can be more expensive than regular insurance for non-cannabis businesses. Because of the risks associated with being considered a potential retailer of a controlled substance, liability policies and other options can cost a pretty penny.
The cash-only nature of the business makes insuring dispensaries more costly
Additionally, when asking Marenco about how dispensary insurance differs from other brick-and-mortar retail insurance, he says: “With more states increasingly legalizing medicinal and recreational marijuana, insurance carriers have started to open risk acceptability. However, since marijuana is still federally illegal, businesses will find it difficult to find multiple quotes from different carriers.”
Types of Insurance Available for Cannabis-Related Businesses
What kind of insurance is available for cannabis-related businesses? Let’s find out.
First off, it’s important to keep in mind that CRBs are at risk for a lot of things: workplace accidents, damage to property, theft, general liability and product liability. Plus, the fact that most dispensaries work on a cash-only business model until the Secure and Fair Enforcement (SAFE) Banking Act is approved by Congress, CRBs tend to handle big amounts of cash, further putting them at risk of theft and liability. CRB insurance can be as low as $350 and as high as $7,500 depending on the type of business and policy.
Here are some of the most common types of insurance for CRBs and what they cover:
General liability: third-party claims for bodily injury, property damage and reputational harm.
Commercial property: damage to a business-owned property.
Professional liability: third-party accusations of negligence and mistakes.
Workers’ compensation: employees’ medical bills and lost wages due to injury or illness.
Inland marine: damage or theft of business-owned property in transit.
Crop: costs from damage to seeds and plants.
With so many things to watch out for, insurance for cannabis businesses and dispensaries isn’t cheap. Here, Marenco says what CRB owners can do to keep their premiums as low as possible:
A smart safe like this one can help secure cash handling
“Premiums are primarily based on sales (actual or projected). After the term expires, the insurance carrier will conduct an audit for the prior term to confirm the information from the application. The audited discrepancy will adjust the next term’s sales figures. Dispensary insurance will typically be placed through an excess & surplus market which do not provide traditional discounts.”
So, in essence, the best thing a dispensary owner can do is be honest about their projections.
Navigating premiums can be a detailed process, as we learned when speaking to Jesse Giffith, an owner of Smokeless CBD and Vape: a chain of retail shops across the twin cities Minneapolis–Saint Paul, Minnesota:
“Our shops carry insurance that has been offered with a modified rate for vape retailers. This route was not as straightforward as some traditional retail insurance options, but may offer benefits, and a better fit for coverage than other dispensary insurance options.”
A Growing Number of Dispensaries Across America
With the growing legalization and normalization of adult use, medical and hemp-derived cannabis across the nation, it should come as no surprise that the number of dispensaries across the country grows exponentially.
In 2021, the cannabis market in the U.S. was valued at 10.8 billion dollars, with an expected annual growth of 14.9% annually. This is a sign of what’s to come. Cannabis may be an industry that’s been considered taboo for decades, but the growth shows the growing acceptance of the plant for medical and adult use reasons.
Insurance providers remain cautious as cannabis laws are still in flux.
With that growth comes a greater need for insurance providers, opening the door to the possibility that these two industries will grow in tandem. The future may bring a greater variety of options for coverage at cheaper prices. But for the time being, insurance providers remain cautious as the fate of federal and local cannabis laws are still in flux.
Are There Limited Carriers that Issue Dispensary Insurance?
Every CRB needs insurance, just like any other type of establishment, business or company. The issue within the cannabis industry is that there is still a limited insurance market, with insurers willing to provide insurance constantly exiting and entering the market. Plus, the overall capacity and variety of policies that cover different types of risks are limited. Lastly, it can be difficult to use CRB insurance when you read between the lines of the policy. Because cannabis with THC is still federally illegal (excluding hemp-derived cannabis products containing less than 0.3% THC), insurers can negate coverage when a loss or claim occurs.
Because of the complications that may arise even if you do have insurance, Marenco offers some advice for dispensary owners that are searching for the right insurance option for them: “Before shopping for insurance make sure you have all your licenses and are in full compliance with all regulations. Insurance carrier’s requirements from the state. Additionally, consider different coverage options.” He continues. “At a minimum, a business needs general liability insurance. Insurance companies can also consider covering business property including inventory, betterments, and improvements to a rented space, among others. When shopping for insurance make sure your agent reviews different coverage options.”
2022 brought more change and visibility to the cannabis industry than nearly any year before. Two of five legalization ballot measures passed, bringing the total number of states with legal medical or medical and recreational laws to 39. President Biden issued an executive order pardoning nonviolent offenders and directing a review into rescheduling cannabis. The Medical Marijuana and Cannabidiol Research Expansion Act was enacted. Cannabis arose prominently in legislatures across the country, with over 50 federal bills and hundreds of state-level measures introduced.
We’ve yet to see the full impact from Biden’s October 6 announcement
But as 2022 came to a close, only a handful of actions are being carried into the new year, and the industry faces more hardship and turmoil than it has since the inception of legalization. Legal cannabis retailers and cultivators in markets across the country continue to struggle with onerous regulations and competition from the illicit market, and oversupply in these markets is driving down prices as West Coast growers and manufacturers anxiously await interstate commerce.
Looking ahead to the coming year, industry watchers can anticipate certain issues and legislation: further investigation into cannabis’ classification on the Controlled Substances Act (CSA) from federal agencies, federal cannabis pardons coming to fruition, a follow-up from the Department of Justice’s technical report, and the reintroduction of high-profile federal legislation, like the Cannabis Opportunity Act (CAOA), the States Reform Act, Marijuana Opportunity Reinvestment and Expungement (MORE) Act, Harnessing Opportunities by Pursuing Expungement (HOPE) Act and the Secure and Fair (SAFE) Banking Act.
Below, we recap some of the big moments of 2022 and what to expect in 2023.
A Presidential Pardon for Simple Possession
On Oct. 6, President Biden made a historic announcement to “grant a full, complete, and unconditional pardon to all current United States citizens and lawful permanent residents who committed the offense of simple possession of marijuana in violation of the Controlled Substances Act” and “all current United States citizens and lawful permanent residents who have been convicted of the offense of simple possession of marijuana in violation of the Controlled Substances Act.” His executive order also encouraged governors to follow suit for cases regarding state offenses and requested that the secretary of Health and Human Services and the attorney general “expeditiously” review how cannabis is scheduled under federal law.
Biden signing his executive order back in October of 2022
The president’s strategic plan attempts to at least partly address some of the adverse impacts of the United States’ war on drugs on certain populations like low-income and Black and Latinx Americans. While an admirable and important effort, certain portions of his executive order will take much longer than others to yield tangible impact. A federal pardoning can take anywhere between two to five years, and the laws and duration of state-level pardoning vary—depending on the state and its governing practices. Additionally, since governors are not required to pardon individuals following the president’s executive order, some convicted persons may never see or be able to seek justice. And the most uncertain timeline relates to the review of cannabis’ classification on the CSA. Rescheduling or descheduling a substance under the CSA can be tedious and grueling, and, as seen with other substances, the process can range from four to ten years. However, the exercise is ongoing, and although results may not be shared in time for the 118th Congress, it is to be expected that the issue will be discussed at length in 2023 and beyond.
When it comes to legislation, there is no question that Majority Leader Chuck Schumer (D-NY) and Sens. Ron Wyden (D-OR) and Cory Booker (D-NJ) will reintroduce the CAOA in 2023. The comprehensive legislation aims to decriminalize cannabis by removing the drug from the CSA and tackles issues related to research, public safety, restorative justice and equity, taxation and regulation, public health and industry practices.
2. States Reform Act.
Sen. Schumer unveiling the Cannabis Administration and Opportunity Act
Another piece of legislation we anticipate seeing in the 118th Congress is Rep. Nancy Mace’s (R-SC) States Reform Act. Coming from a state without any cannabis laws, the freshman congresswoman introduced a measure that would federally decriminalize cannabis by fully deferring to state powers over prohibition and commercial regulation and regulate cannabis products like alcohol. In 2022, the bill received positive feedback from the industry and dominated the discussions during the Developments in State Cannabis Laws and Bipartisan Cannabis Reforms congressional hearing. With its bold cannabis sponsor, who will now serve as the House Oversight Subcommittee on Civil Rights and Civil Liberties chair, the States Reform Act will undoubtedly take center stage in 2023.
3. MORE Act.
Sponsored by Rep. Jerry Nadler (D-NY), the MORE Act will also be reintroduced in 2023; however, it remains to be seen how much attention the bill will receive. The MORE Act aims to decriminalize cannabis by removing the drug from the CSA and eliminating criminal penalties for anyone who manufactures, distributes or possesses cannabis. In the 117th Congress, Rep. Nadler served as the chair to the House Judiciary Committee and was able to advance his measure through the chamber with ease. But since the House majority has flipped, and Rep. Jim Jordan (R-OH) is likely to serve as the chair, getting the MORE Act to the floor for a vote may be challenging—especially given Rep. Jordan’s opposition to the cannabis sector.
The House passing the MORE Act back in 2020
4. HOPE Act.
The HOPE Act often flies under the radar, but this Republican-sponsored bill made headlines during the 117th Congress. Sponsored by Co-Chair of the Congressional Cannabis Caucus (CCC), Rep. Dave Joyce (OH), the bipartisan legislation aims to help states with expunging cannabis offenses by reducing the financial and administrative burden of such efforts through federal grants. Although it was not considered in the House, the language of the bill was heavily debated by the Senate, particularly toward the end of the year when the chamber was negotiating the final text for end-of-year must-pass packages, like the National Defense Authorization Act (NDAA), the Omnibus and the Continuing Resolution (CR). Alongside the SAFE Banking Act, the HOPE Act was one of the only cannabis bills that had a realistic chance of advancing as part of a larger legislative vehicle, so there is no question that the congressman will reintroduce the measure in the upcoming congressional session.
5. SAFE Banking Act.
And last, but certainly not least, is the most discussed cannabis bill this year: the SAFE Banking Act. The legislation aims to create a safe harbor for financial institutions to provide traditional banking services to cannabis businesses in states that have legalized the drug. It also allows cannabis businesses to access lines of credit, loans and wealth management. It has now passed in the House seven times, with bipartisan support. And although the SAFE Banking Act was debated by the House several times throughout the year, the Senate did not tackle the bill until November. By the time discussions for the bill’s language had taken off, Sen. Booker remained firm that he would only support a cannabis bill if it included criminal justice and social equity reform language. In an attempt to satisfy the senator’s demands, Majority Leader Schumer considered marrying the SAFE Banking Act and the HOPE Act as part of a larger package.
However, and much to the cannabis industry’s detriment, not only was the timeline for those bills a little too late, but Democrats were, unfortunately, unable to fix the money laundering and cash legacy concerns of Sen. Chuck Grassley (R-IA) and other Republicans.
Sen. Cory Booker (D-NJ) Photo: Nick Fisher, Flickr
After attempting to attach the SAFE Banking Act to multiple vehicles, retiring Congressman Ed Perlmutter (D-CO), sponsor of the legislation, and Sen. Schumer were unsuccessful in getting the bill over the finish line. In a final Hail Mary, Sen. Schumer attempted to include the language to the Omnibus, but compounded with the technical assistance report from the Department of Justice (DOJ) and ongoing media flurry, he and the Democratic party yet again came up empty-handed.
The question now is: who will carry the SAFE Banking Act and Rep. Perlmutter’s legacy in 2023? Many will look toward cannabis industry champions like Reps. Joyce, Mace, Earl Blumenauer (D-OR) and Brian Mast (R-FL). However, it would be worth considering other members of the CCC and some of the incoming freshmen, particularly those from a state with legal cannabis laws. It is also entirely possible that Sen. Jeff Merkley (D-OR) finds his own sponsor to carry his companion bill in the House since he has already announced that he looks forward to working on the legislation in the upcoming year. Regardless, it is highly likely that the SAFE Banking Act will be reintroduced in 2023 and considered throughout the year.
6. Other Measures
Other measures that are likely to reappear in 2023 are the Capital Lending and Investment for Marijuana Businesses (CLIMB) Act, Veterans Equal Access Act, the GRAM Act, Common Sense Cannabis Reform for Veterans, Small Businesses and Medical Professionals Act, VA Medicinal Cannabis Research Act and the Homegrown Act. Additionally, the passage of the Medical Marijuana and Cannabidiol Research Expansion Act and the advancement of many of these federal bills have opened the gates for new legislation related to medical and recreational cannabis, research, veterans’ access, financial services, criminal justice reform and social equity, and public health and safety to emerge.
For states with legal cannabis laws, bills related to enhancing the state’s medical or medical and recreational programs, preventing industry oversaturation and price gouging, expanding licensing opportunities, criminal justice reform, youth and advertising protections and impaired driving are likely to be introduced. States where cannabis ballot measures failed will likely see those measures resurface.
The continued growth of legalization across the country is all but inevitable. In the nearer term, the industry will focus on how to remain viable in the face of high taxes and oversupply in 2023. New Congressional leadership could lead to bipartisan cannabis legalization if enough members are willing to rally behind their colleagues who are pushing for cannabis legislation. While the road is long before we will see the full impact from President Biden’s Oct. 6 announcement, the action proves those in power cannot ignore the ever-growing numbers of Americans across party lines and demographics who agree that cannabis use should be legal and regulated.
Figure 1: Precision aeroponics at FarmaGrowers GMP Facility, South Africa
Every objective has to have a vision and a vector of where you want to go and what you want to achieve. “Winging it” is okay for an innovative artistic endeavor where creativity is spontaneous and one-of-a-kind art is produced. Unfortunately, that is not how one creates a top-quality cultivation operation.
Customers expect guarantees of consistency; quality assurance means a purchase is safe to consume. Medicinal products around the world require Good Manufacturing Practices (GMP) certification. These are really just SOPs that document repeatable procedures to guarantee that the most recent batch offers the same results as the first certified effort. This brief covers the importance of documented operating procedures for a successful grow business with high quality customer results.
Figure 2: The objective – trichome covered flowers, DanCann, Denmark
Almost nobody gets excited about discussing quality, but experienced manufacturers know that quality control reduces waste and improves operations. Everyone learns that they have to implement feedback, improvement and quality control procedures to guarantee profitability and longevity in any business.
So, what is an SOP? A standard operating procedure defines ‘a task’ to be performed ‘at a location by a person or a role on a specific schedule.’ These definitions will include role definition, responsibilities, personnel training, equipment & service procedures, material handling, quality assurance controls, record keeping, approved procedures & instructions, documentation, references and appendices, all of which define your business and how it is to operate.
Now, you might ask, we are just growing plants, is all this really necessary? The short answer is, it depends. If you expect to export globally, do business in Europe and other markets, get licensed by Health Canada or some day be approved to ship to other States, then yes. If you are a regional craft cannabis supplier, maybe not, but there are many tasks that are required to grow where a better documented process can benefit your operation and the quality of the product delivered to your consumers.
Figure 3: Flower maintenance, DanCann, Denmark
We provide a bulleted list of recommendations in the full white paper but to touch on a few highlights that every operator should keep in mind, SOPs define the following structures for your business.
Personnel training is done for ‘this task, in this way’ & ‘this role is responsible’
Job descriptions reduce misunderstandings and increase worker ownership in your facility. Documenting your activities minimizes task overlap and conflicts that can lead to no one executing on something that may be important but not urgent. You want to eliminate employees thinking “I didn’t know it was my responsibility.”
Consultants or visitors must be aware of and follow the same requirements as your employees if you are to maintain the quality of your grow. Specific training should be given to anyone that handles or works around toxic chemicals. Safety sheets are not just paper; They keep people alive.
Equipment & Service Procedures
Be direct and specific in your task definitions, i.e., “Use 5ml of soap, clean until no plant matter or debris remains.”
Figure 4: Full GMP certified facility, FarmaGrowers, South Africa
Ideally, grow facilities, equipment and access will be designed with cleaning in mind from the start. This is not always possible but it is the mark of successful manufacturing or production companies.
Cleaning, cleaning, cleaning: think sterile, food safety and consumer consumption protections. SOPs should define cleaning methods and materials. This cleaning is done on schedule and aligned to your preventative maintenance and calibration requirements. Precise results require precise structure for any long-term operation.
We recommend that you integrate pictures and videos in the instructions for your procedures and training so that nothing is left to chance or misinterpreted.
Material Handling, Containers, Labels, Quality Assurance
Personnel contamination/cross-contamination are the death of any grow operation. Do everything you can to limit stray or wandering plant material, dust or debris from migrating from one grow room or area to another. Isolation is a good way to limit outbreaks to a specific room to minimize losses.
Figure 5: Documented SOPs must be followed & reviewed regularly
If something nasty happens to one of your rooms. Good labeling enforced by your quality assurance team is a simple way to increase the likelihood that employees will do a task as intended. This adds to your repeatability as people change jobs or roles are redefined.
Approved Procedures & Instructions
Quality assurance is all about repeatability and intended outcomes. Documenting procedures and intended use enables every new employee to follow the experience of the masters and duplicate their success. Testing, sampling and logging your results along the way enables you to know that you are on schedule and on process, so you can predict your results every time.
Part of your continuous improvement approach will be to deal with exceptions that are not covered by your procedures. Learning about those exceptions and capturing your experience with an improved method will lead to better outcomes the next time around.
Documentation, References, Appendices
Figure 6: Flower sealed & ready for export, DanCann, Denmark
You’ve done all of this hard work to capture your operation, so you need a complete library of your reference work and approach that employees can access. It does your operation no good if you capture your methods and no one ever looks at them again. Training cycles and reviewing your defined procedures is key to a consistent high-quality result.
Hero Award
Standard Operating Procedures (SOPs), Good Manufacturing Procedures (GMP) and Good Agricultural & Collection Practices (GACP), are all terms that will become more familiar as cannabis production joins into one global market. Professional results will be required and national or international certifications will be the guarantees that any global customer can trust that a product meets the standards they expect.
We have many customers in North America and around the world. but DanCann Pharma is the most aggressive when it comes to meeting international standards and results. Producing flower that is so pure that no irradiation is required for export, the DanCann operation is fully certified for production throughout Europe and they are sold-out of capacity for the coming year. They are currently expanding their operations in Denmark and are a solid example to follow for a well-defined repeatable operation. FarmaGrowers in South Africa is a close second in this race with multiple export certifications of their own. The future looks bright for both of these global operations.
On December 29 just before the end of 2022, New York officially launched legal adult use sales in the state, but at only one location. The nonprofit dispensary Housing Works Cannabis Co. held a grand opening party complete with music, speeches from politicians and regulators and very, very long lines.
Chris Alexander, executive director of the New York Office of Cannabis Management (NYOCM), had the honor of making the first legal purchase, a pack of gummies and an eighth of flower, at the dispensary on the afternoon of December 29. “It’s been a lot of work that’s come to get us to this point,” Alexander told reporters on location. “We do have a lot more work to do, a lot more stores to open.”
New York originally legalized adult use cannabis in early 2021. Following almost two years of setbacks, missed deadlines and failed promises, the state just barely met one deadline: opening a dispensary in 2022. Governor Kathy Hochul has previously said that twenty stores would be doing business before the end of 2022. According to NPR, 36 dispensaries have been licensed, the NYOCM has another 139 licenses they need to issue and there are roughly 900 applicants that are still waiting.
To many in the cannabis space, New York is expected to become a massive boon to the country’s cannabis economy. It is just taking a bit longer than expected to materialize. Roy Bingham, CEO of BDSA predicts it will be the second largest contributor to growth in cannabis sales through 2026, just behind Florida. “With nearly 15 million residents over the age of 21 and tens of millions more tourists visiting the state annually, New York is one of the most exciting cannabis opportunities in 2023,” says Bingham. “Despite some expected growing pains in the early years, the market is expected to be the second largest contributor to sales growth through 2026, following Florida.” More dispensaries in New York are expected to open their doors in the early weeks of 2023.
In another second-place finish, New York follows New Jersey as the second state in the tri-state area to legalize adult use sales. New Jersey launched its market in April of 2022.
Potency Inflation: The Problem, the Causes and the Solutions
Sarah Otis, Quality, R&D Manager, Anresco Laboratories
Erik Paulson, Ph.D., Lab Manager, InfiniteCAL
THC potency inflation by third-party testing labs has been an escalating feature of the cannabis industry since its legalization. In California, market forces and lack of regulation have allowed potency inflation to intensify in both its flagrancy and its pervasiveness, particularly within the last year. Two third-party testing labs in California, InfiniteCAL and Anresco, discuss how the industry got to this point, the different methods that labs use to inflate potency, and steps that can be taken to combat it.
TechTalk: Avivatech
Shawn Kruger, Senior Vice President of Product & Strategy, Avivatech
The Laboratory Information Landscape in Cannabis Testing
James Brennan, Sales & Marketing Specialist, LabWare
Eugene Olkhov, Data Scientist, LabWare
This presentation will guide attendees through the data continuum in modern cannabis testing laboratories supported by various software solutions. The presenters will describe the business and regulatory benefits of laboratory informatics and system deployment options, challenges, and financial considerations.
The current flow of cannabis testing data
An overview of informatics solutions for cannabis testing labs
Laboratory informatics and regulatory compliance
The impact of digital transformation on cannabis testing data
TechTalk: MilliporeSigma
Cannabis Testing Regulations & Implications for Environmental Monitoring
Sarah Powell Price, Regulatory Expert for Food Safety & Cannabis for North America, MilliporeSigma
Anne Connors Weeks, Senior Field Marketing Manager, MilliporeSigma
Cannabis testing requirements are continuously evolving, as are analyte detection capabilities. This presentation provides a high level overview of the latest US cannabis testing regulatory landscape and how environmental monitoring is an essential component of safety and compliance planning.
With climate and cultivation methods explored, today, we cover the third leg in the primary stool, genetics. Some would say good genetics is all that you need and anyone can be successful with good genetics. We all know that this is not experience talking. Things can go wrong, even with great genetics. Here are some inputs how to pick great genetics so you have them on your side.
Hybrids & Strains
Seeds, the beginning of genetic performance
Everything successful cultivators grow is aligned to their consumer audience. This is hard to predict as the desires in your market will migrate over time as one variety will be highly popular and poof, it’s not, so constant change is necessary. Finding the right flower at the right time is the trick.
The first thing to decide in your pursuit of the ideal phenotype (or pheno-hunt) are your target customers. Assuming you’ve made the choice to go “top-shelf” for aeroponic or hydroponic flower, your variety selection comes down to filial breeder seeds or stable strains from suppliers you know.
Filial hybrids are developed by professional breeders. Two distinct inbred strains are repetitively crossed until their traits are highly consistent. At this point, these carefully inbred lines are crossed to selectively mix the two well defined sets of traits. Filial hybrids are stable and you can usually rely on the robust nature of these seeds.
Strains, on the other hand, are the cross of two strains but they may not be inbred stable filial strains. Sometimes this results in something amazing, but just as randomly, the traits can morph into something disappointing.
Our advice here is to pay the premium and start with high quality reliable stock.
Uniformity
Consistency? Will you grow one variety or multiple varieties per room and per harvest; will they grow well together? Do they grow and test out in a consistent manner (plant size, color, bud size & yield, tested terpene profiles, aroma, disease resistance or tolerance). Are you growing for top shelf flower or bulk extraction? I will focus this discussion on top shelf flower. Premium seeds from professional filial hybrids are not a guarantee, but they are designed to be stable and consistent in their growth and results targeting high performance.
High cannabinoids: 420Kingdom Grapes & Cream
Here, experience counts and reliable seed vendors tend to be well established with filial lines that are worth the investment. Once you acquire your genetics, how to leverage that investment?
Killer Genetics
What traits does your consumer want? Initial searches usually target THC or CBD levels and they evolve to special terpene profiles or pleasing aromas. Flower or bud shape, color, size, density, and stickiness are also traits that can differentiate your genetics. As a producer, you also want to target yield including tall or stretching genetics, or short and fast flowering, germination rates (sometimes they don’t) and percentage of likely hermaphroditing (seldom zero). The qualitative aspects (smoking characteristics) of your production flower that deliver a unique customer experience, both real and imagined, wrap up your brand experience.
So, as you can guess, one size does not fit all types of consumers. Very high yielders that are immediately targeted for extraction offer very different values than perhaps a smaller yielding very potent top shelf smokeable bud. It is a good strategy to plan for a handful of strains that you can bring to market so you have something that will hit the sweet-spot when you deliver your harvests.
Seeds
Seeds with documented guarantees from reliable sources eliminate the characteristic risk, and with the right testing reports, they guarantee no pathogens as well.
The challenge of seeds can be genetic variation, as discussed above, depending on the stability of the commercial breeder. This potential variance can lead to surprises and disappointment. Starting from seed also takes more time to germinate the seeds, exterminate the males, grow mother plants, take cuttings, and start the cycle. This can add 12-16 weeks to your go-green targets for your flower rooms. Be sure to integrate this cycle time planning into your production cycle.
Clones
Insourced clones are the fastest way to go green and move through veg to produce flowering plants and bud harvest. Clones are created by taking a branch cutting from a “mother” plant and typically “rooting” that cutting using an aeroponic cloning system. This clone process can take a few days or weeks depending on the grow environment and aeroponics process. A rooted clone maintains the genetic characteristics and phenotype of the mother plant.
The typical way smaller grow shops get started is through buying clones that are made from these rooted branch cuttings. The combination of mother plants, clones, and sometimes “veg” plants are gathered together in a “nursery”. Nurseries need to be stable for long periods of time to produce the veg growth necessary for cuttings. This time delay makes it harder for the nursery provider to keep the area sterile, without disease, and without pests. If the mothers carry a disease, they are likely to transfer that biologic over to the cuttings. If the media that the clones are grown in picks up root gnats, they will travel with the clones into your facility. The short answer is source your clones from professionally run operations. This trust is worth every penny.
Blue Dream clone array: AEssenseGrows
Insourcing clones allows you to avoid the cost and complexity of running a “nursery”, but this also moves the pest management and quality of mother stock and clones outside of your control zone. In other words, you depend on the clone supplier for both healthy plants AND availability. No clone available from your supplier means no flower in your grow rooms. Your production revenue depends on the reliability of your clone supplier in many ways.
In some grow operations, the nursery is extended to cover the vegetative growth stage of cannabis plants or “veg.” In other approaches, a flower room is occupied for an additional week or two for veg growth. We at AEssenseGrows are strong advocates of running all cloning and vegging activity in a vertical aeroponic nursery in parallel to your flower rooms
Mothers, clone, and veg stages all grow with a vegetative growth light schedule (18 hours on, 6 hours off). The typical process is to take a cutting from a mother plant, place that in an aeroponic “cloner” for 10-12 days until a healthy set of roots is formed for the cutting. That clone is then typically pinched off at the top of the plant at which point the veg stage can begin. Light intensity is gradually increased and the plants are typically vegged for an additional 2 weeks, at this point, you have a bushy veg plant that is ready for a 12/12 light cycle and flowering.
In aeroponics, all of this is done in nursery space. If you choose to use soil or grow media approaches, a series of increasingly larger buckets or rockwool cubes are needed to manage the veg stage and the transition to flower. This can be done in a dedicated veg room or for the first week or two in the flower rooms
Tissue Culture
Healthy Agent Orange mothers: Onyx
Another method for creating your young plants is tissue culture. This is the method of harvesting genetic material from an existing plant with desired characteristics. These genetic samples can be contamination free and even supplied by a genetic bank. A portion of these tissues are cultured in a gel grow tray and the plant will develop roots with a stalk that reaches upward for light energy.
These plant starts are hardened in a similar method to cloning and typically, these starts are grown into mothers that supply your cuttings for the clone cycle. This is an advanced method, so plan for research and development with expected delays to the front end of your sourcing cycle if you choose this path.
Strain Examples
Selecting the best genetics for your market is an art form. Many choices abound. High yielding dense classic strains are Blue Dream, Skittles, Sour Diesel and Girl Scout Cookies. Each of these deliver a typical 18%-24% THC content from fast growing, medium height high plants that yield dense buds. Very potent THC genetics that are popular currently are various “OG” genetics, Bruce Banner, various “Cake” genetics and Kush options. Variants of these run from 25% to 35% THC content.
This Chapter’s Hero Award
Every customer produces great results for their markets but we are very impressed by the genetic selections by 420Kingdom in the central valley of California. Jeffrey Thorn is the owner there and continues to impress with a range of high potency genetics that demand premium prices and sell out regularly in their highly competitive market.
With good genetics for your consumers, you are positioned to be successful. Advanced cultivation methods like aeroponics and hydroponics can give you a lift and the right environment and nutrition helps you tie this all together. Our next and last chapter will cover consistency and repeatability through Standard Operating Procedures (SOPs).
Affinity Bio Partners on Working with Zelira Therapeutics to Complete Enrolment for Diabetic Nerve Pain Drug Trial
It’s an exciting time in the medical cannabis community as Zelira, a global leader in the research, development and commercialization of clinically validated cannabinoid medicines, and Affinity Bio Partners, a leading, global clinical research organization, have completed enrollment for a diabetic nerve pain drug trial. The Institutional Review Board (IRB)-approved head-to-head trial read out is expected in Q1 of 2023. Two years in the making, the study’s clinical management, clinical trial site monitoring, subject recruitment, regulatory submissions and review and query of data have brought us to a pivotal point that could pave the way for how future clinical studies are conducted in the medical cannabis community. As someone who comes from traditional pharma and biotechnology industries, heading up a clinical study in the medical cannabis realm has been a significantly different, eye-opening and informative experience that reinforces the dire need for mainstream, medical cannabis education.
Difficulties of Enrolling Subjects in a Cannabinoid-Based Clinical Study
There are a number of reasons that enrolling a cannabinoid study is very challenging. One of the biggest challenges to overcome is creating educational clinical study material that will be approved by the Institutional Review Board while educating potential subjects who are interested in enrolling. In other words, one must fully understand the regulatory landscape that they’re operating in, and we all know cannabis is a tricky one, while still educating potential subjects.
When screening subjects, it is important to be able to thoroughly share facts regarding cannabinoids, terpenes and other ingredients utilized in the study material. Also, sharing information on the endocannabinoid system is important, and a must for subjects to understand. In addition, it is integral to share and contrast between the traditional pharmaceutical products versus the cannabinoid study drug. Meaning, most subjects understand and are familiar with pills and other treatments approved in the traditional FDA regulated pharmaceutical space. Therefore, you must ensure that you create a bridge between a study’s educational materials and the lack of mainstream education about cannabinoid-based therapies.
The Impact This Will Have on Future Cannabinoid-Based Clinical Studies
There is a lot of hope that by working on a study of this magnitude, that we will pave the way for many more companies to bravely enter the clinical trial space as it pertains to medical cannabis. Everything that is being performed in this Zelira clinical study is in accordance with all applicable laws and regulations. The team is utilizing an electronic patient reported outcomes and electronic data capture system to receive data directly from the clinical trial sites as they are seeing the patients. As more patients, groups, communities and organizations learn about this, we hope that other large players in the cannabis industry invest their money wisely and perform clinical studies on their formulated products. Companies are unable to make claims of product safety and efficacy legally without these clinical studies. As we approach 2023, it is time for us as an industry to begin forecasting future clinical studies that will help power the therapeutic benefits this plant has to offer in responsible, controlled settings.
Aeroponic & hydroponic systems can operate with little to no soil or media. This eliminates the pest vectors that coco-coir, peat moss/perlite and organic media can harbor as part of their healthy biome approach. Liquid nutrient systems come at the nutrient approach from a different direction. Pure nutrient salts (nitrogen, potassium, magnesium and trace metals) are provided to the plant roots in a liquid carrier form. This sounds ideal for integrated pest management programs, but cultivators have to be aware of water and airborne pathogens that can disrupt operations. I will summarize some aspects to consider in today’s summary.
The elimination of soil media intrinsically helps a pest management program as it reduces the labor required to maintain a grow and the number of times the grow room doors are opened. Join that with effective automation with sensors and software, and you have immediate improvements in pest access. Sounds perfect, but we still have staff to maintain a facility and people become the number one source of contamination in a grow operation.
Figure 1: Example of Pythium Infected & Healthy Roots
Insects do damage directly to plants as they grow and procreate in a grow room. They also carry other pathogens that infect your plants. For example, root aphids, a very common problem, are a known carrier of the root pathogen, Pythium.
Procedures
One of the most common ways for pests to access your sealed, sterile, perfectly managed facilities are in the root stock of outsourced clones. If you must start your grow cycles with externally sourced clones, it is strongly recommended that you quarantine those clones to make sure that they do not import pest production facilities into your operation. Your operation management procedures must be complete. If you take cuttings from an internal nursery of mother plants, any pathogens present in your mother room will migrate through cuttings into your clones, supply lines, and subsequently, flower rooms.
Start your gating process with questioning your employees and visitors. Do they grow at home or have they been to another grow operation in the last week? In the last day? You may be surprised by how many people that gain access to your grow will answer these questions in the affirmative.
Developing standard operating procedures (SOPs) that are followed by every employee and every visitor will significantly reduce your pest access and infection rates, and hence, increase your healthy harvests and increase your profitability. Procedures should include clothing, quarantining new genetics and cleaning procedures, such as baking or irradiating rooms to guarantee you begin with a sterile facility. This is covered more in the complete white paper.
Engineering Controls
Figure 3: Access Control: Air Shower, FarmaGrowers
Technology is a wonderful thing but no replacement for regimented procedures. Considered a best practice, professional air showers, that bar access to internal facilities, provide an aggressive barrier for physical pests. These high velocity fan systems and exhaust methods blow off insects, pollen and debris before they proceed into your facility. From that access port into your grow space, positive air flow pressure should increase from the grow rooms, to the hallways, to the outside of your grow spaces. This positive airflow will always be pushing insects and airborne material out of your grow space and away from your plants.
Maintaining Oxidation Reduction Potential (ORP)
ORP is a relative measurement of water health. Perfect water is clear of all material, both inert and with life. Reverse osmosis (RO) is a standard way to clear water but it is not sufficient in removing microscopic biological organisms. UV and chemical methods are needed in addition to RO to clear water completely.
ORP is an electronic measurement in millivolts (mV) that represents the ability of a chemical substance to oxidize another substance. ORP meters are a developing area and when using a meter, it is important to track the change in ORP values rather than the absolute number. This is due to various methods that the different meters use to calculate the ORP values. More on this in the white paper.
Oxidizers
Figure 4: AEssenseGrows Aeroponic Nozzles
There are two significant ways to adjust the ORP of a fertilizer/irrigation (fertigation) solution. The first is by adding oxidizers. Examples are chemical oxidizers like hydrogen peroxide (H2O2), hypochlorous acid (HOCl), ozone (O3) and chlorine dioxide (ClO2). Adding these to a fertigation solution increases the ORP of the fertigation solution by oxidizing materials and organic matter. The key is to kill off the bad things and not affect the growth of plants. Again here, the absolute ORP metric is not the deciding factor in the health of a solution and the methods by which each chemical reaction occurs for each of these chemicals are different. This is compounded by the fact that different ORP meters will show different readings for the same solution.
Another wonderful thing about automation and aeroponic and hydroponic dosing systems is that they can automatically maintain oxidizing rates and our white papers explain the methods executed by today’s automation systems.
Water Chilling
Another way to adjust ORP is to reduce the water temperature of the reservoirs. Maintaining water temperature below the overall temperature of your grow rooms is imperative for minimal biological deposition and nutrient system health. Water chillers use a heat exchanger process to export heat from liquid nutrient dosing reservoirs and maintain desired temperatures.
The benefit of managing ORP in aeroponic and hydroponic grow systems is highly accelerated growth. This is enhanced in aeroponics due to the effectively infinite oxygen exchanging gases at the surface of the plant roots. Nutrient droplets are sprayed or vaporized in parallel and provided to these root surfaces. Maximizing the timing and the best mineral nutrients to the root combustion is the art of grow recipe development. Great recipes drive superior yields and when combined with superior genetics and solid environmental controls, these plants will deliver spectacular profits to a grow operation.
Another Hero Award
Before closing this chapter, we have many cultivators that are producing stellar results with their operational and IPM procedures, so it is hard to choose just one leader. That said, our hats are off to RAIR Systems again and their director of cultivation, Ashley Hubbard. She and her team are determined to be successful and drive pests out of their operations with positive “little critters” and the best water treatment and management that we have seen. You are welcome to view the 7-episode walkthrough of the RAIR facility and their procedures here.
With an adverse regulatory environment, labor shortages, supply chain disruptions and the always-present threat of property damage and product recalls, cannabis operators are fighting an uphill battle to stay viable in today’s environment.
According to Politico, more than 20 of the largest publicly-traded cannabis companies lost about $550 million on revenues of nearly $4.5 billion in the first half of 2022. High taxes and barriers to interstate commerce continue to challenge the industry as well, while lenders and investors are demanding more detailed proof of future profitability. Those pursuing new capital must show how they will grow financially and present their risk management strategy for insuring themselves against losses.
Higher costs for fertilizer, building materials, packaging and more, along with rising inflation are hurting the industry’s bottom line as well, but the industry is hesitant to raise prices.
These challenges are expected to continue in 2023. However, the industry’s fast pace of growth, myriad opportunities for product development and increased access to insurance capacity offers the cannabis industry every reason for optimism.
Prioritize risk strategies
Cannabis facilities face hazards from the very components and systems required to cultivate plants, including high intensity discharge lighting, chemical exposures and butane in oil extractions. As a condition of insuring a property, underwriters are inspecting the equipment used in production and fire suppression systems.
Property policies typically don’t cover out-buildings for cannabis growers located near a hurricane or wildfire zone, and more carriers are limiting or excluding coverage for losses from large-scale natural disasters. Even coverage for crop losses from catastrophic events is limited and often prohibitively expensive.
Cannabis companies are shoring up their risk strategies and analyzing policies to ensure they’re aware of any gaps in coverage and planning how to address them. This includes adding cyber insurance, as cyber also remains a significant loss-driver in the industry.
Beware of new risks
The cannabis industry is introducing products to the market at a breakneck pace, causing new challenges to emerge. New products — such as THC-infused beverages, sugar-free cannabis tarts and cannabinoid-containing baking staples— require additional research and development for extraction, packaging, storage and distribution. And many products require refrigeration and bottling, adding complexity to distribution.
The continued growth of the cannabis edibles and beverages market is also driving companies to create new formulas, products, and strengths. But this innovation does add risk. States issued dozens of recalls in 2022 for marijuana edibles, including mislabeling and mold and salmonella contamination. These incidents have attracted the attention of plaintiffs’ attorneys, who have filed suits on behalf of consumers claiming injury from these mislabeled or contaminated products.
Invest in your staff
Although the number of jobs in the cannabis industry grew 33% between 2021 and 2022, and the need for new workers shows no signs of slowing, cannabis companies are experiencing high turnover rates and a skilled labor shortage. This is forcing operators to spend additional time and money to attract and retain employees.
Personalized benefits programs offer a partial answer. Personalizing benefits to meet individual employee needs results in positive employee experiences, helping build a workplace that attracts and retains workers. Many companies are adding health insurance and offering 401(k) plans, raising wages and adopting other worker-friendly practices to attract and retain workers.
Cannabis companies with solid risk management plans and advisors to help ensure their insurance policies cover exposures, will be well-positioned to overcome industry challenges, grow, and succeed in 2023. Here are four considerations to help develop a tailored strategy that will protect your bottom line, support your workforce, and build resiliency next year.
Be transparent with your broker. Let your broker know what changes you’ve made to the business, so there are no surprises during renewal. Review exposures and insurance needs at least 90 days prior to policy renewal, so your broker can identify the best options.
Prepare for a product recall. The odds of experiencing a product recall are high. Your first line of defense is your internal policies and procedures, and that includes thoroughly vetting your vendors and partners. Be thoughtful about the general liability and product liability coverage you purchase and ask your broker to clearly explain the differences in coverage.
Build resiliency within your company. With more carriers offering specialty coverages for the cannabis industry, now is the time to look at how best to protect your executives and build resiliency by insuring against director and officer liability claims, business interruptions and cyberattacks. Your broker can help identify the best policies for your company.
Establish solid employee benefits. The cannabis industry can have access to the same benefits as other industries, including 401(k) plans. Talk to your broker about taking your benefits program to the next level with highly personalized options that won’t break your budget.
Even amidst the challenges, there is every reason for optimism in the new year because of the industry’s fast pace of growth, myriad opportunities for product development and increased access to insurance capacity.
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