Commercial real estate took a dive last year as companies began to work from home, but changing regulatory environments have opened doors to a new industry in need of property: cannabis. Growing rapidly at both the medical and adult use levels, cannabis businesses have been eager to move into vacant buildings, quickly buying up space as more states adjust their laws regarding cannabis.
Cannabis businesses cannot go at it blindly, however. Legal cannabis firms of all sizes – from the smallest startup to the biggest enterprise – will face regulatory challenges, traceability requirements, process control standards and, ultimately, the right technology to keep them moving forward in this promising industry.
Use data to keep track of plants, patients and regulations
As a highly regulated industry, cannabis companies could be investigated at any time. Regulatory authorities may, at the very least, request proof that they are compliant with state restrictions. Cannabis enterprises will only be able to quickly and easily provide that proof if they have immediate access to accurate historical data. With that information, they can generate the necessary reports at a moment’s notice and maintain a reliable audit trail.
Historical data is also useful for both growers looking to evaluate why certain plants are more successful than others and for sellers looking to improve their customer experience. By tracking everything from mother plants to clones, growers can build a strong genetics profile and gain a powerful competitive edge. Historical data also aids sellers, who can use it to enhance their digital storefronts and keep track of customer information, shopping history and other details that could improve the e-commerce experience.
In addition to customer details, sellers must also keep track of patient information when selling in a medical-only environment. Prescriptions need to be carefully managed to ensure that patients only receive products that they have been approved to purchase and use.
Utilize process control to foster scalable and repeatable processes
Process control is another vital component that every cannabis grower, manufacturer, processor and distributor must possess. They need scalable and repeatable processes to prevent steps from being bypassed, ensuring that every finished product matches the same high-quality standards. If there are no stopgaps in place, steps could be missed if employees are rushing to meet a deadline or simply think that a particular test or check isn’t needed. Those kinds of mistakes can be hugely detrimental to any cannabis company and may waste product, diminish profits and turn off customers.
Similarly, visibility and control over inventory is a top priority for any business, but it reigns supreme in the cannabis space. Managers should always, at all times, know where the product is as it moves throughout the warehouse, or risk costs and waste. By directly tying scanners and barcodes to the right technology, organizations can ensure that all product is accounted for and easily located using real-time data.
Build a foundation for scalability
Cannabis businesses don’t have the time to manually keep track of these aspects, and it wouldn’t even be possible as they grow and expand their operations. As they evolve, so too will the list of software requirements that are needed to operate smoothly, reliably and efficiently.
Cannabis processors have traditionally invested in seed-to-sale technology, relying on barcodes to track products throughout their lifecycle. While it is critical for cannabis enterprises to keep a strong level of control over lot tracking, this type of software is very limited. Cannabis firms would therefore be better served by an ERP solution with a single data source that provides centralized, real-time access to vital business information.
ERP technology can also help cannabis businesses better manage their production schedule, material requirements planning, accounting, purchasing, inventory management and document generation. The key, however, is to choose the right technology, avoiding ERP solutions that rely on customizations and bolt-ons, which will impede an organization’s ability to scale. Cannabis businesses should instead use technology that makes all of its features, enhancements and extensibility available to all customers, ensuring that every user has access to the same benefits.
Remediation of delta-9 tetrahydrocannabinol (d9-THC) has become a hot button issue in the United States ever since the Drug Enforcement Agency (DEA) released their changes to the definitions of marijuana, marijuana extract, and tetrahydrocannabinols exempting extracts and tetrahydrocannabinols of a cannabis plant containing 0.3% or less d9-THC on a dry weight basis from the Controlled Substances Act. That is because, as a direct consequence, all extracts and tetrahydrocannabinols of a cannabis plant containing more than 0.3% d9-THC became explicitly under the purview of the DEA, including work-in-progress “hemp extracts” that because of the extraction process are above the 0.3% d9-THC limit immediately upon creation.
The legal ramifications of these changes to the definitions on the “hemp extracts” marketplace will not be addressed. Instead, this article focuses on the amount of d9-THC that is available in the plant material prior to extraction and tracks a “hemp extract” from the point it falls out of compliance to the point it becomes compliant again and stresses the importance of accurate track-n-trace protocols at the processing facility. The model developed to support this article was intended to be academic and was designed to follow the d9-THC portion of a “hemp extract” through the lifecycle of a typical CO2-based extract from initial extraction to THC remediation. A loss to the equipment of 2% was used for each step.
For this exercise, a common processing scenario of 1000 kg of plant material at 10% cannabidiol (CBD) and 0.3% d9-THC by weight was modeled. This amount, depending on scale of operations, can be a facility’s total capacity for the day or the capacity for a single run. 1000 kg of plant material at 0.3% d9-THC has 3 kg of d9-THC that could be extracted, purified, and diverted into the marketplace. CO2 has a nominal extraction efficiency of 95%, meaning some cannabinoids are left behind in the plant material. The same can be said about the recovery of the extract from the equipment. Traces of extract will remain in the equipment and this little bit of material, if unaccounted for, can potentially open an operator up to legal consequences. Data for the initial extraction is shown in Image 1.
As soon as the initial extract is produced it is out of compliance with the 0.3% d9-THC limit to be classified as a “hemp extract”, and of the 3 kg of d9-THC available, the extract contains approx. 2.8 kg, because some of the d9-THC remains in the plant material and some is lost to the equipment.
Dewaxing via Winterization and Solvent Removal
Dewaxing a typical CO2 extract via winterization is a common process step. For this exercise, a wax content of 30% by weight was used. A process efficiency of 98% was attributed to the wax removal process and it was assumed that 100% of the loss can be accounted for in the residue recovered from the equipment rather than in the removed waxes. Data for the winterization and solvent recovery are shown in Image 2 and 3.
Two things occur during winterization and solvent removal, non-target constituents are removed from the extract and there is compounded loss from multiple pieces of process equipment. These steps increase the concentration of the d9-THC portion of the extract and produce two streams of noncompliant waste.
Decarboxylation & Devolatilization
Most cannabinoids in the plant material are in their acid form. For this exercise, 90% of the cannabinoids were considered to be acid forms. Decarboxylation is known to produce a mass difference of 87.7%, i.e. the neutral forms are 12.3% lighter than the acid forms. Heat was modeled as the primary driver and a process efficiency of 95% was used for the conversion rate during decarboxylation. To simplify the model, the remaining 5% acidic cannabinoids are presumed destroyed rather than degraded into other compounds because the portion of the cannabinoids which get destroyed versus degrade into other compounds varies from process to process.
Devolatilization is the process of removing low-molecular weight constituents from an extract to stabilize it prior to distillation. Since the molecular constituents of cannabis resin extracts vary from variety to variety and process to process, the extracts were assumed to consist of 10% volatile compounds. The model combines the decarboxylation and devolatilization steps to account for complete decarboxylation of the available acidic cannabinoids and ignores their weight contribution to the volatiles collected during devolatilization. Destroyed cannabinoids result in an amount of loss that can only be accounted for through a complete mass balance analysis. Data for decarboxylation and devolatilization are shown in Image 4.
As the extract moves along the process train, the d9-THC concentration continues to increase. Decarboxylation further complicates traceability because there is both a known mass difference associated with the process and an unknown mass difference that must be calculated and justified.
A two-pass distillation was modeled. On each pass a portion of the extract was removed to increase the cannabinoid concentration in the recovered material. Average data for distilled “hemp extracts” was used to ensure the model did not over- or underestimate the concentration of the cannabinoids in the distillate. The variables used to meet these data constraints were derived experimentally to match the model to the scenario described and are not indicative of an actual distillation. Data for distillation is shown in Image 5.
After distillation, the d9-THC concentration is shown to have increased by 874% from the original concentration in the plant material. Roughly 2.2 kg of the available 3 kg of d9-THC remains in the extract, but 0.8 kg of d9-THC has either ended up in a waste stream or walking out the door.
Chromatography – THC Remediation Step 1
Chromatography was modeled to remove the d9-THC from the extract. Because there are several systems with variable efficiency rates at being able to selectively isolate the d9-THC peak from the eluent stream, the model used a 5% cut-off on the front-end and tail-end of the peak, i.e. 5% of the material before the d9-THC peak and 5% of the material after the d9-THC peak is assumed to be collected along with the d9-THC. Data for chromatography is shown in Image 6.
After chromatography, a minimum of three products are produced, compliant “hemp extract”, d9-THC extract, and noncompliant residue remaining in the equipment. The d9-THC extract modeled contains 2.1 kg of the available 3 kg in the plant material, and is 35% d9-THC by weight, an increase of 1335% from the distillation step and 11664% from the plant material.
CBN Creation – THC Remediation Step 2
For this exercise, the d9-THC extract was converted into cannabinol (CBN) using heat rather than cyclized into d8-THC, but a similar model could be used to account for this scenario. The conversion rate of the cannabinoids into CBN through heat degradation alone is low. Therefore, the model assumes half of the available cannabinoids in the d9-THC extract are converted to CBN. The entirety of the remaining portion of the cannabinoids are assumed to convert to some form of degradant rather than a portion getting destroyed. Data for THC destruction is shown in Image 7.
Only after the CBN cyclization step has completed does the product that was the d9-THC extract become compliant and classifiable as a “hemp extract.”
Throughout the process, from initial extraction to the final d9-THC remediation step, loss occurs. Of the 3 kg of d9-THC available in the plant material only 2.1 kg was recovered and converted to CBN. 0.9 kg was either lost to the equipment, destroyed in the process, attributable to the mass difference associated with decarboxylation, or was never extracted from the plant material in the first place. All of these potential areas of product loss should be identified, and their diversion risk fully assessed. Not every waste stream poses a risk of diversion, but some do; having a plan in place to handle waste the DEA considers a controlled substance is essential. Without a track-n-trace program following the d9-THC and identifying the potential risk of diversion would be impossible. The point of this is not to instill fear, instead the intention is to shed light on a very real issue “hemp extract” producers and state regulators need to understand to protect themselves and their marketplace from the DEA.
According to a press release published earlier in October, Metrc has won the seed-to-sale traceability software contract for West Virginia. The West Virginia Department of Health and Human Resources, Bureau for Public Health, Office of Medical Cannabis (OMC) made the announcement on October 21.
According to that press release, the main focus for the state’s traceability program is “helping OMC regulators ensure no illicit cannabis products are sold in the medical cannabis market, and also that no legal medical cannabis products are sold unlawfully.”
Regulators in West Virginia are still on schedule to open the medical cannabis market as soon as next year, according to Jason Frame, OMC director. “This is an important step to make certain medical cannabis is available only to West Virginians with serious medical conditions and to prevent diversion of products in West Virginia,” says Frame. “While the COVID-19 pandemic has put many industries across the country on hold, we’re proud to say that it has not stopped West Virginia from meeting its deadlines and laying the groundwork for a safe, regulated medical cannabis market.”
Regulators at the OMC are still working on scoring processing and retail license applications. The OMC says they will begin the process of issuing patient cards in the spring of 2021.
The cannabis supply chain – from seed to sale – is rife with intricacies including regulations and compliance. It requires coordination from multiple vendors responsible for different aspects of the end product. And as the industry either grows or retracts, use of data is vital to right-size supply to demand, enhance operational efficiencies and boost cost effectiveness.
However, there’s an industry-wide, data-management vulnerability among many cannabis companies, and it’s this: many are using spreadsheets in different aspects of data collection, management and analysis. This becomes a shaky foundation on which to manage processes, especially for applications like quality management. And to be fair, it’s not just this industry, but arguably cannabusinesses have more on the line in light of the ever-changing regulatory environment.
Many cannabis companies have some systems in place for order processing, inventory management, production management and the like, but they often still use spreadsheets to fill the intelligence gaps among various systems that don’t talk to one another. Managing supplier quality often falls into one those gaps.
The Problem with Spreadsheets
Most businesspeople understand spreadsheets. They know how to build and use them. Spreadsheets are incredibly powerful tools that are used to run more business processes than perhaps any other software product in the world. When a cannabis business first starts out, spreadsheets offer an affordable data management capability. But there comes a time when the business will need a more sophisticated, end-to-end enterprise solution.
Consider a recent incident in which the use of spreadsheets went terribly wrong. The British Government recently misplaced nearly 16,000 COVID-19 test results due to an Excel spreadsheet error. As a result, potentially infectious people may not have been notified by contact tracers that they should self-quarantine.
In the ERP space, spreadsheets have been an issue since the 90’s, but this recent incident serves as a reminder that an overreliance on spreadsheets is still alive and kicking. One of the problems is that spreadsheets are often pushed beyond their intended use. Microsoft Excel has become the software Swiss Army Knife. There’s a development environment inside the software, and the system is often used as a database, not just as a calculation engine.
Companies outgrow spreadsheets when the volume of data fields increase, multiple users need access to the data, iron-clad audit trails are needed and when processes become more complex.
There’s also a breaking point. Cannabis companies may enter a dangerous zone of “too many spreadsheets,” when data security and integrity are at risk. Interestingly enough, this also happens in large companies, as they often have a mish-mash of on-premises legacy systems, acquired systems and new cloud-based systems – and spreadsheets are then used as the data consolidation tool for all these applications.
Applicability to the Cannabis Supply Chain
Visibility into the cannabis supply chain requires detailed track and trace capabilities across many suppliers. Anything left out means guesswork and more opportunities for mistakes. In other words, cobbled-together spreadsheets are the last thing cannabis businesses should rely on. Aggregating data into a spreadsheet from various systems and paper-based processes invites errors and can result in insights that are weeks or months out of date. Worse yet, there’s no drilldown capability when questions arise and no easy roll-up of information for decision-making.
When supply chain quality must be sustained, the role of a common and integrated cloud platform for quality and ERP cannot be understated. Such a platform can capture sales, operations, inventory and purchasing data, and also integrate with production and quality control. This makes your quality processes and data integral to ERP and eliminates the data fragmentation, control and auditability issues associated with spreadsheets. In addition, companies can leverage operational insights from data reporting and analytics to find areas where they can enhance productivity, optimize inventory, improve planning accuracy and build better forecasts.
Moving to the Cloud
Modern cloud ERP provides this type of seamless platform. It’s easier to implement and does not consume as many IT resources as traditional on-premise ERP systems. Better yet, the more recent versions of cloud ERP are built using low-code technology which enables business users to customize screens, modify workflow processes, build their own apps and embed AI without needing expensive IT consultants or waiting for busy IT staff.
In other words, the flexibility that’s been the lure of spreadsheets is now available in cloud ERP, but the system utilizes proverbial governance guardrails that keep business users from swerving off the road and completely wrecking the system. For example, templates for apps and workflows are provided as a starting point. Business rules and “drag and drop” customization capabilities offer guided options, clearly defining what can and cannot be changed.Rootstock will be presenting during the Cannabis Quality Virtual Conference episode, Supply Chain Quality, on October 27. Click here to learn more
And as a result, quality steps aren’t skipped; audit trails remain intact and data is protected with rock-solid security permissions and data backups. And unlike spreadsheets, new ERP systems are designed for multiple users and remote access via mobile devices. In short, with the latest generation of ERP, companies can leverage the best of both worlds – an end-to-end cloud platform that provides data integration across an organization’s operation and the flexibility and ease-of-use of spreadsheets.
Supply Chain Case in Point
One customer we worked with previously coordinated its supply chain via email and Excel spreadsheets. It cut and pasted requisitions into individual supplier spreadsheets and emailed those out, and it kept a master spreadsheet to keep track of all supplier performance. Team members had to sift through spreadsheet columns and rows to find information they needed.
Today with a cloud platform, the company built an online community so processes could be automated and conducted via real-time connection and communications. Another immediate benefit was the customized supply chain dashboard. All relevant data across their entire supply chain was displayed in one place and in a user-friendly manner.
The dashboard showed production forecasts over a certain period of time. The company could detect whether the supply chain was on track or having issues with certain suppliers. It could see planned requisitions and monitor them until fulfillment was complete. It could also monitor the performance of various suppliers, whether they had on-time deliveries or not – and trace back items received. The company essentially has a snapshot of the overall health of its supply chain and all the underlying activity.
Let’s face it. 2020 has been a difficult year, but perhaps it’s the year that companies finally forego spreadsheets and enlist an industrial-strength cloud platform.
Cannabis laws are changing at a rapid pace across all 50 states and around the world. Currently, Cannabis is legal in 11 states for adults over the age of 21, and legal for medical use in 33 states.
Across the nation, many states have been struggling to enact a viable medical and potential adult use cannabis system since Initiative 59 and the “Legalization of Marijuana for Medical Treatment Initiative of 1998.”
Unfortunately, the program has been continuously impacted by the federal government’s presence, first with the passage of the Barr Amendment by Congress overturning the early legalization progress and continuing to delay the onset of the first medical sale at a dispensary until 2013. The federal government continues to exert influence and control over the program expansion including adding Congressional riders on every proposed update including the latest “Safe Cannabis Sales Act of 2019.”
In Washington DC for example, 18 organizations including the National Cannabis Industry Association (NCIA), the ACLU and Law Enforcement Action Partnership petitioned the US House and Senate Financial Services Subcommittees to remove the rider given that “[the] Current law has interfered with the District’s efforts to regulate marijuana, which has impacted public safety. Without the ability to regulate marijuana sales, the grey market for marijuana flourishes despite the need and want of the District leadership and residents alike to establish a regulatory model.”
States with limited availability of medical cannabis, possession laws or with the ability to legally gift up to one ounce and the constant pressure by the federal government, the grey market has expanded with public safety and the safety of these pop-up businesses put at risk. The current state health and safety laws require a seed-to-sale tracking system and testing at independent labs for all medical cannabis, however the grey market consumers are afforded no such protection. The District of Columbia is unique in the US cannabis landscape as it grapples with the local government trying to provide clarity, safety and equity to a medical and adult use community, but it is hampered by what it can and cannot control through federal influence.
As the United States continues to recover from the effects of the COVID-19 pandemic, control and use of tax revenue will move to center stage in all these communities and the cannabis tax revenue will return to focus.
Cannabis tax revenue has shown a massive disparity between projection and reality. In 2018, California projected upwards of one billion dollars in cannabis tax revenue, but in reality was only able to recover a third of that amount. California in response continues to increase the excise tax and even proposed changes to taxes dependent on the amount of THC, creating new pressure on producers, in-part pushing some back into the grey market.
During the pandemic, Colorado enacted emergency rules to extend cannabis sales online. Allowing customers to pay for cannabis via the web and then pick up their purchases at the store. In a testament to what is considered a “critical businesses” the cannabis industry is given opportunity to expand during the pandemic, but still hampered by severely limited access to standard e-commerce options as credit card merchants still remain concerned that cannabis sales are illegal under US federal law. Alaska, Massachusetts, Michigan, Illinois and Oregon also allowed online sales and curbside pick-up, but remain limited in sales as federal banking and access to credit is limited as the Secure and Fair Enforcement (SAFE) Banking Act remains in limbo.
Overarching technologies such as DNA tracking that provide a clear indicator that the cannabis is produced and tested from legal sources, can be proven safe and protects local legal businesses’ products against out of market cannabis would provide such clarity.
As the country moves forward from the COVID-19 health crisis, all legal and safe ways to rapidly restart the economy will be needed, the cannabis economy will be no exception. We should be looking to this emerging market right now to help safely drive revenue and taxes into our states.
In a press release published last week, the Oklahoma Medical Marijuana Authority (OMMA) announced they have awarded their seed-to-sale traceability contract to Metrc, a national company with contracts for the same service in 14 other states.
According to OMMA Interim Director Dr. Kelly Williams, working with Metrc will help them protect public health, by expediting recalls. “The seed-to-sale system will greatly expand our compliance capabilities and improve the effectiveness and speed of any future recall efforts,” says Dr. Williams. “It will also allow us to detect unusual patterns that may indicate product diversion.”
Metrc has begun work towards their rollout of the system, which they expect to have ready by February 2021. “We know that businesses will have many questions in the coming weeks, and we will answer them as quickly as possible,” says Dr. Williams.
Oklahoma legalized medical cannabis in 2018 and the market has expanded considerably. There are more than 300,000 patients and almost 10,000 licensees. It has the highest number of dispensaries per resident in the country.
Jeff Wells, CEO of Metrc, says Oklahoma has done a good job so far in developing one of the fastest growing markets in the country. “We’re honored Oklahoma selected Metrc to implement the state’s first cannabis tracking system,” says Wells. “With one of the fastest growing medical cannabis markets in the United States, the OMMA has done a tremendous job developing this new industry, and we’re excited to support its ongoing success. We look forward to working with state regulators and licensees to launch our system and ensure cannabis products are safe and secure for patients.”
One of the biggest challenges that cultivators, processors and distributors face in doing business is the requirement to track the product at every step in the production process, from seed to sale. When you add the wide range of label sizes and requirements across the supply chain, labeling can feel overwhelming. While business systems such as METRC, BioTrack, MJFreeway and others are key, integrating accurate and secure barcode labeling with those systems will streamline the end-to-end process while meeting traceability requirements. Here are some things to consider, no matter what role in the cannabis supply chain you play.
Cultivation: Where Tracking and Labeling Starts
It’s crucial to implement accurate labeling processes from the beginning, whether growing for a customer or your own vertically integrated operation. The cannabis industry is faced with strict labeling regulations for a variety of cannabis products. Start with a labeling system that can integrate with METRC, BioTrack, MJ Freeway or other seed to sale software solutions. Your barcode labeling solution should also include label approval requirements, so you have role-based access and transparency with label changes and print history in case of issues or recalls. Whatever cannabis labeling regulations your business faces, label design software helps you create compliant cannabis labels throughout the supply chain, from grower to consumer.
Radio Frequency Identification (RFID) Labeling
Select regulations require growers to leverage RFID technology to track the location of the plants in their grow houses. RFID technology also enables accurate real-time inventory analysis and helps reduce manual labor costs, as well as errors that can occur with manual counting. To accurately encode RFID tags with variable plant data, be sure you are using a barcode labeling system that can enable easy RFID tag encoding that integrates data from all your business systems. Fastening RFID tags to plants across your grow house floor enables quick and easy location tracking, and RFID reading removes the need for a manual line of sight and allows hundreds of tags to be read at the same time, speeding up shipping and receiving.
After a plant is cultivated, a certain percentage is sent to a lab to be tested to ensure its proper strain, weight and compound makeup. After your product has been lab tested, leverage the data from your certificate of analysis to accurately display on your cannabis product labels, including:
Pass/fail chemical testing
Final date of testing & packaging
Identification of testing lab
Cannabinoid profile & potency levels
Efficiently display lab testing results on product labels with the use of a QR code for the consumer to review the independent lab’s certificate of analysis
Processing and Production: Tracking and Labeling After the Plant Has Been Harvested
A lot of information needs to go on a cannabis label. Whether you’re producing pre-rolls, packaged flower, edibles, beverages, topicals or cartridges, your labeling software must have the capability to create a wide variety of label sizes with barcodes that encode a large volume of data, while also being fully compliant and showing consumer appeal.
Your cannabis labeling software should do the following for you:
Support database integration to populate variable data from METRC, BioTrack, and other systems
Import high-resolution artwork and leverage with dynamic barcodes and variable data
Contain barcode creation wizards for 1D & 2D barcodes
Automate weigh & print
RGB/CMYK color matching
Feature secure label approval processes, label change tracking and print history
Offer WYSIWYG (What You See is What You Get) printing
Automatically trigger printing directly from scales and scanners when cannabis is weighed
Integrate labeling with your seed to sale software solution to automatically trigger label printing by an action in your seed to sale system or by monitoring a database. By integrating your label printing system with your seed to sale traceability system, you can expect to minimize errors, increase print speeds and maximize your ROI. Your business system already holds the variable data such as product names, license number, batch or lot codes, allergens, net quantity, cannabis facts, warning statements and more. By systematically sending this data to the right label template at the right time, labeling becomes an efficient and cost-effective process.
Distribution: labeling for consumer and industry demands
The ability to manage and distribute inventory efficiently is critical in the cannabis market. Warehouses and distributors need to ensure proper storage, handling and traceability of product, from the warehouse to the truck.
Leverage your labeling software to easily create:
Case & pallet labels
If you use the same data for your documents and labels, consider moving document printing into your label design software for greater efficiency. An advanced label creation and integration software enables label and document printing standardization by allowing multiple database records to be on one file. That means when new documents or labels come into your database, your software can seamlessly integrate.
Dispensaries can benefit from integrated seed to sale labeling for traceability, speed to market
Whether you’re a small outlet or a large dispensary, you benefit from integrated barcode labeling that starts from the beginning of the process. How? When barcode labeling software is integrated with seed to sale software, product is fully traced throughout the entire process, from tagging each plant at cultivation to identifying the consumer at point of sale, and accurately communicating that data back to METRC, BioTrack and other critical systems. Some dispensaries do package raw flower onsite, which many times means manually weighing, recording and entering the weight on the label, which is a time consuming and error-prone process. Integrating weigh and print functionality with barcode software enables dispensaries to use the action of weighing raw flower to automatically trigger the label print job. The variable weight is then accurately and automatically populated on cannabis flower package labels, creating an accurate and efficient on-demand labeling process for dispensaries. With efficient labeling processes, time spent creating, correcting, approving and printing labels will be reduced, getting product on the shelves faster.
Back in late 2016, the Oregon Liquor Control Commission (OLCC) legalized delivery for cannabis products. Since then, dispensaries could offer a delivery option for their customers to purchase cannabis products without leaving the comfort of their home. Up until quite recently, that market was dominated by a handful of dispensaries who also conduct business at their physical location, offering delivery as an option while conducting most sales in-person.
Enter Pot Mates. Founded in 2018 by Hammond Potter, the company embarked on the long regulatory road towards licensing and beginning operations. On April 20, 2020, Pot Mates opened for business, starting their engines to take on the fledgling cannabis delivery market in Portland.
Pot Mates is a tech startup through and through. The founders are former Apple employees. Hakon Khajavei, the chief marketing officer at Pot Mates, founded Blackline Collective, a business and marketing consultancy, which is where he joined the Pot Mates team. The other co-founder of Pot Mates and chief technology officer, Jason Hinson, joined after serving in the US Navy as an electronics technician maintaining satellite communications networks.
With the sheer amount of regulations for cannabis businesses, coupled with the new delivery-based business model, Pot Mates had to focus on technology and automation from the get-go.
Not Just an Online Dispensary
For the cannabis companies already offering delivery in the Portland metro area, their websites seem to mimic the in-person dispensary experience. They offer dozens of products for each category, like concentrates, edibles and flower, making a customer pour through options, all at different price points, which can get confusing for the average consumer.
Pot Mates does things a little differently. “Our start up process was thinking through how do we make this the best experience possible, how do we get rid of the unnecessary junk and how do we do things that only an online dispensary can do,” says Khajavei. They have flat pricing across the board. In each category, almost every product is priced the same, moving away from the common tiered-pricing model. This, Khajavei says, removes the decision barriers customers often face. Instead of choosing the right price point, they can choose the delivery mechanism and effect they desire uninhibited by a difference in cost.
It all comes back to focusing on the simplest way for someone to buy cannabis. “Shopping online is just very different,” says Khajavei. “Our process focuses on the customer journey and limits the number of products we offer. We have a mood system, where we tag our products from reviews to typify moods that you experience with different products.” All of that requires a lot of back-end technology built into their website.
The Long Regulatory Road
Technology has been a strong suit for Pot Mates since they opened their doors, and well before that too. Making the decision to be an online-only delivery cannabis company pushed them to pursue a very unique business model, but regulations dictate a lot of the same requirements that one might see in dispensaries.
The same rules apply to them when Pot Mates submitted their license application. You need to have a signed lease, extreme security measures, detailed business plans, integrated seed-to-sale traceability software (Metrc in Oregon) and much more. “During the months leading up to getting our license, we were able to iron out a lot of the regulatory details ahead of time,” says Khajavei. A lot of that was about security and tracking their products, which is why technology plays such a huge role in their ongoing regulatory compliance efforts. “We built in a lot of automation in our system for regulatory compliance,” says Khajavei. “Because of our technology, we are a lot faster.”
In the end, their licensing process through the state of Oregon as well as the city of Portland took about nine months. Once they had the license, they could finally get down to business and begin the process of building their website, their POS system, their inventory and reaching out to partners, producers, distributors and growers.
For any cannabis company, there are a number of regulations unique to their business. “We need to report every product movement in house through Metrc,” says Khajavei. “Every time something is repackaged it needs to be reported. We focus so much on our technology and automation because these regulations force us to do so.” But delivery companies are required to report even more. Pot Mates needs to report every single movement a product makes until it reaches the customer. Before the delivery can leave the shop, it is reported to Metrc with an intended route, using turn-by-turn directions. It complicates things when you make two or more deliveries in one trip. Reporting a daisy chain of deliveries a vehicle makes with turn-by-turn directions to regulatory authorities can get very tedious.
As far as regulations go for delivery parameters, they can legally deliver anywhere inside Portland city limits. “It is our job to figure that out, not the customer’s job; so we don’t have any distance limits, as long as it is residential,” Khajavei says. “We programmed customized technology that allows us to handle really small orders.” Without a minimum order policy or a distance limit, Pot Mates can reach a much bigger group of consumers.
Launching in the Midst of a Global Pandemic
Luckily, the Pot Mates team received their license just in time. About two weeks after they submitted their application, Oregon put a moratorium on any new dispensaries.
They went forward with their launch on April 20 this year, despite the coronavirus pandemic impacting just about every business in the world, including their marketing efforts tremendously. With cannabis deemed essential by the state, they could operate business as usual, just with some extra precautions. What’s good for PotMates is that they don’t need to worry about keeping social distancing policies for customers or curbside pickup, given the lack of storefront.
Advertising Cannabis in a Pandemic is No Easy Task
“The marketing aspect is where covid-19 really hurt us,” says Khajavei. “There are so many regulations for cannabis companies advertising already. Unlike other products, we can’t just put up advertisements anywhere. We have to follow very specific rules.” So, in addition to the normal marketing woes in the cannabis industry, the team then had to deal with a pandemic.
Pot Mates had to scrap their entire marketing strategy for 2020 and redo it. “We wanted to begin with a lot of face-to-face marketing at events, but that didn’t quite work out so well.” Without any concerts, industry events or large gatherings of any kind, Pot Mates had to pivot to digital marketing entirely. They started building their SEO, growing their following on social media, producing content in the form of blogs and education around cannabis and the local laws.
On an Upward Trajectory
Obviously, the short-term problem for a new cannabis company is reaching people, especially during the COVID-19 crisis. “We have a good trajectory though, we know we are growing our business, but we still have a ways to go,” says Khajavei. It doesn’t help that social media companies have nonsensical policies regarding cannabis. Their Facebook page was recently removed too.
But the bigger issue here is kind of surprising when you first hear it: “It’s not even a matter of customer preference, a lot of people just have no idea that delivery is even legal.”
It’s pretty evident that cannabis delivery has not really gone mainstream yet. “We’ve told people about our business in the past and a common answer we get is, ‘Oh my gosh, I didn’t even know we could get cannabis delivered.’” It’s never crossed their mind that they can get cannabis delivered to their home. It’s an awareness problem. It’s a marketing problem. But it’s a good problem to have and the solution lies in outreach. Through educational content they post on social media and in their blog, Khajavei wants to spread the word: “Hey, this is a real thing, you can get cannabis delivered.”
As the market develops and as consumers begin to key in on cannabis delivery, there’s nowhere to go but up. Especially in the age of Amazon and COVID-19 where consumers can get literally anything they can dream of delivered to their front door.
Moving forward, Pot Mates has plans to expand as soon as they can. Right now, they’re limited to Portland city limits, but there’s a massive population just outside of Portland in towns like Beaverton, Tigard and Tualatin. “We are so close to these population centers but can’t deliver to them now because of the rules. We want to work with OLCC about this and hopefully change the rules to allow us to deliver outside of the city limits,” says Khajavei. In the long term, they plan to expand out of state, with Washington on their north border being first on the docket.
To the average person, one would think launching a delivery cannabis business in the midst of a global pandemic would be a walk in the park, but Pot Mates proved it’s no easy task. As the market develops and the health crisis continues, it seems the Oregon market will react positively to the nascent delivery market, but first they need to know it is even an option.
This year, many issues have gotten put on a shelf as the world has dealt with the COVID-19 pandemic. The legalization of cannabis in many states has been one of those issues. But this time on pause has given the industry a chance to identify how it would like to move forward as an emerging market that has many benefits across medicine, from mental health to the economy.
For many of these reasons, cannabis use is coming out of the shadows and there has clearly been a shift in recent years from cannabis being an illicit item to becoming a boutique product in many circles. The transition of cannabis’ image from that of the stoner in his parent’s basement to the “it” consumable for the jet set has as much to do about science as it does sophisticated branding.
Approximately 24 million Americans in 2019 have used cannabis, about 10% say they consume it for medical purposes based upon a growing body of evidence supporting the use of medical cannabis for a number of conditions. There are also economic reasons why legalizing cannabis makes sense including increased revenue for the government, job creation and more.
As cannabis becomes legal across America—11 states have adopted laws allowing for recreational use, while 22 others permit only medical cannabis—it’s finally becoming the sprawling business its proponents have long envisioned.
And this has moved the mainstreaming of cannabis in today’s society from a taboo illicit drug to now being openly discussed at dinner tables.
First of all, our hats need to be taken off to the cannabis advocates who over the last 20 years have shaped an emerging industry, educating society and the government on the benefits cannabis can offer based on science.
The global cannabis community has collaborated with regulatory bodies to establish compliance and regulations as a starting point to help the general public understand sourcing products from legal entities is a safer way to get quality product to consume that is not compromised from unregulated producers.
In addition, technology advancements within the cannabis space have led to sophisticated track and trace solutions of raw materials and products through the supply chain. The data captured within these systems allows cannabis brands to tell a compelling authentication story to end consumers based on scientific facts.
This all leads to an emerging market that has open transparency, full traceability and establishing trust with consumers. The early master growers now work hand in hand with designer laboratories, perfecting and protecting their IP. A sophisticated supply chain has been put in place so consumers know where their cannabis was grown and by whom. Consumers understand which strains have been harvested and what hybrid models have been created. This is certainly no longer a bag of weed you purchased from a neighborhood friend, but a complex, innovative industry with established brands that have celebrities, ex-politicians and well know business executives involved now and the advocates that has been leading the charge for over 30 years are still the backbone to educate the masses on the benefits cannabis and hemp will bring to mankind over time.
As if the cannabis industry doesn’t regularly go through enough rapid change, with COVID-19, cultivators, processors and dispensers of all sizes are trying to do more with less. Lower operational headcount and unpredictable production volume, along with a rapidly-changing supply chain – make eliminating manual steps a necessity. Labels include barcodes or various barcode symbologies to help companies manage inventory, identify products and ultimately ensure that the right products get to the right customers at the right time. By eliminating manual steps in your labeling environment, you can address these issues through automation, scalability, efficiency and accuracy: benefits that will last through the pandemic and position you well for the recovery period.
Automation of many kinds is being implemented from seed to sale including barcode label printing automation. Integration of labeling software and seed to sale traceability systems including METRC, BioTrack, Leaf Data and others enables streamlined barcode label data population and high-volume label printing to counteract the decreasing operational headcount and eliminate manual touchpoints.
Print automation can be defined as “a centralized technology that replaces the manual process of triggering a print job within a labeling environment.” Look for a labeling software solution that allows you to:
Completely automate your label printing process
Print to a greater number of printers
Initiate printing directly from any business system
By integrating your label printing system with your seed to sale traceability system, you can expect to minimize errors, increase print speeds and maximize your ROI. Your business system already holds the variable data such as product names, license number, batch or lot codes, allergens, net quantity, cannabis facts, warning statements and more. By systematically sending this data to the right label template at the right time, labeling becomes an efficient and cost-effective process.
One of the most important considerations for cannabis cultivators, processors and dispensers is to invest in solutions that can grow and pivot quickly as the business changes. Whether you are responding to temporary requirements or changes, or your business needs to scale up quickly to respond to a spike in demands as a result of COVID-19 or to prepare for coming out of this pandemic. Whatever your needs are, think about short-term and long-term goals for sustainable business solutions. Scalability includes:
Printing to a greater number of printers
As needs and automation requirements change, and your printer inventory has the possibility of increasing, make sure your labeling design software can be licensed per simultaneous user, with cost-effective, multi-user networking licenses. That way, you don’t run the risk of paying for more printers as you grow or going over budget with each additional printer.
Print documents and labels from the same application
If you use the same data for your documents (like order receipts, bills of materials or packing lists) and labels, moving document printing into your label design software makes sense logistically. An advanced label creation and integration software enables label and document printing standardization by allowing multiple database records to be on one file. That means when new documents or labels come into your database, your software can seamlessly integrate.
Efficiency and accuracy
In a time where responding to the changing market needs to happen very quickly, where costs are being scrutinized and when errors cannot happen – you need to set up your labeling environment to have high levels of accuracy and control. With increased accuracy you will reduce waste, eliminate returns due to mislabeled product, efficiently track product and gain more efficiencies that will save you money and time.
Cutting manual steps out of the process
Removing manual steps in your printing process is a sure-fire way to gain efficiency and accuracy in your labeling environment. Look for labeling software features that allow you to add variable data from a device to your labels automatically, which limits the human interaction with your labels and in turn helps minimize human errors. Other efficiencies include:
Increased print speed within your labeling environment
Reduced label waste
Collection of data from several devices such as:
On-demand color labeling
On-demand labeling is specifically helpful in the cannabis labeling world because of all the regulations you must comply with. Each state has its own regulations, which means each label throughout the cannabis supply chain must be compliant with whichever state they are located. With on-demand labeling, cannabis companies print labels as needed and make changes as they go without the risk of wasting obsolete pre-printed label stock. This is beneficial as pre-printed labels often have large minimum order quantities. On-demand labeling also helps companies maintain better control of their own branding and graphics.
With on-demand labeling, label information can be populated by using pre-approved label templates in order to save you time with the variations of cannabis labels. This gives you the ability to print the specific label you need without having to waste your pre-printed label stock, or spend time switching out your pre-printed label stock in your printer.
Cannabis cultivators, processors and dispensers are faced with many obstacles during these challenging times due to COVID-19 – ensuring workers are safe, keeping operations at 100% capacity with potentially fewer people, creating contingency plans that may be changing daily. In an environment that is changing very quickly, consider how labeling solutions can evolve. You may also need to lean more on your partners than you ever have in the past.
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