5 Key Point of Sale Features to Keep Your Dispensary Compliant
By John Garvey
A couple of recent incidents point to the uncomfortable fact that nobody in the cannabis industry is “too big to fail.” Last year, Sweet Leaf had all 26 of its Denver business licenses suspended for a looping scheme. In that scheme, employees were encouraged to sell up to the 1 oz. daily limit to patrons multiple times a day. Police witnessed one customer enter and depart a single location 10 times in one day. In time, they determined that the multi-million-dollar scheme was deliberate, and made over a dozen arrests.
No, seriously—it was a fiasco.
Denver administrative law judge Suzanne Fasing noted that the “unlawful sales resulted in the proliferation of illegal marijuana that supplied criminal drug-dealing.” The thriving cannabis chain lost all 26 of its Denver licenses, and a couple managers were sentenced to a year in jail.
We think few industry operators today would try to pull off something that blatant even if they thought they could. But that’s not the point.
“Cannabis may be laid-back but the cannabis industry is anything but,” points out Greentrepreneur. “Working in the industry comes with a laundry list of recordkeeping requirements that must be strictly tracked.”
The complexity of state and local cannabis regulations means dispensary managers have to be ultra-straight-laced—at least with regard to compliance. When a 100mg pack of gummies goes missing, you can’t write it off as “pilferage” like it’s a pair of alpaca wool socks. But a quality, cloud-based point of sale (POS) system with cannabis industry customizations can do plenty to protect you. Here’s how.
#1: Quality data management and access
Accurate, accessible record keeping is consistently cited in industry publications as one of the three most important aspects of running a cannabis operation of any size. Having strong day-to-day compliance without quality data management and bookkeeping is like having the proverbial house built on sand.
“In the eyes of regulators, it doesn’t matter what you did; it matters what you can prove,” Greentrepreneur states in the article cited above.
Many cannabis POS systems lack good auditing tools. When dispensary operators make inventory adjustments and reconciliations, they can be stuck doing a lot of manual data entry. This is miserable, but it’s also a liability because of human error. A good cannabis POS system will time stamp every sale, inventory adjustment and receipt, and assign each transaction to a team member.
As a dispensary operator, you should be able to access and export your own data. In some cases, vendors who want to export their data may have to maintain a license just to access their own data, or request if from a third party.
Metrc/Biotrack tracking and reporting that satisfies and complies with state & county authorities.
Data access and functionality allows dispensary operators to slice and dice data for marketing, cost planning, pricing and other needs.
#2: Flexibility and ease of operation across jurisdictions
Multi-location operators are often blindsided by issues arising because their software doesn’t support location-specific security needs. When local regulations change, you want system admins and power users to be able to make adjustments on the fly.
Some features crucial to dispensaries aren’t standard in retail POS software. A cannabis POS system should automatically alert your budtenders before daily sales limits are exceeded. They shouldn’t have to do the math or double-check a client’s transaction history in your system. Other common-sense safeguards that should be built into the system are disabling or disallowing after-hours sales and more rigorous safeguards against employee theft.
When a 100mg pack of gummies goes missing, you can’t write it off as “pilferage” like it’s a pair of alpaca wool socks.
The issue of overselling is especially complicated. For one, different state have different provisions on concentrates vs. flower. Many jurisdictions have a multiplier—for instance, the state may equate 1 gram of concentrates to 3.5 grams of flower. If you have a customer buying several categories of product in one transaction, do you want your busy budtenders doing the math?
This underscores the importance of having POS and inventory management systems designed specifically for the cannabis industry and can operate across multiple jurisdictions.
#3: PCI compliant credit card processing
Even if we wait a long time to get the federal green light for credit card processing and full banking privileges, PCI DSS (Payment Card Industry Data Security Standards) reflects data security best practices. That means they keep both you and your customers protected. Anthea’s dispensary POS solutions meet or exceed all federal compliance requirements.
The day the Fed lets the industry use conventional banking and credit card processing, your system should be ready. I mean, assuming you like to make money. That preparedness is one advantage of having a partner with experience in other regulated industries, such as alcohol.
#4: Compatibility and integration with other retail support systems
A lot of vendors want to be all things to all people. It can’t be done by a single vendor. Anthea provides dedicated retail front-end POS and CRM solutions. Beyond that, we facilitate best-in-breed ERP, accounting and seed-to-sale tracking solutions through partnerships.
The cannabis industry isn’t a place where you can be a jack of all trades. Vendors who provide business support services need to be rock-solid in their chosen specialties. and their solutions should integrate seamlessly with other systems. Without strong integrations among your front-end (POS and CRM) and back-end (accounting, ERP and seed-to-sale tracking) systems, you can wind up in a bad situation—or an ugly one.
- Bad: Best case scenario, you get stuck doing a bunch of manual data entry.
- Ugly: You run into compliance issues that can result in audits, fines, stress and even having your license compromised.
Traditional retail had some similar issues 10 – 15 years ago before evolving toward specialized, dedicated solutions.
#5: Customer engagement tools
Your CRM platform should allow you to leverage customers’ transaction histories. With mobile marketing in particular, that data is important if not essential to market effectively and draw in repeat business. You should be able to use data to qualify and automatically target customers. Detailed transaction histories let you promote product lines and specials to the customer segments they’ll most appeal to.
Other customer engagement tools you’ll want to consider when choosing among front-of-house retail solutions include:
- Customer kiosk and digital display integration
- Ecommerce integration
- Built-in email marketing
- A built-in points for dollars customer loyalty program
6 Weird, Outrageous and Entertaining Facts About Marijuana Policy and Rhetoric
By John Garvey
A lot of the history of cannabis prohibition reads like satire. It’s bizarre, muddled and, depending on how you look at it, sometimes quite funny. We wanted to capture a few special moments without revisiting topics that have already been beaten to death. Below are some of those events, as well as the heroes, villains and oddballs that played central roles.
1) Underdog! Meet the bane of drug policy hardliners and the first federally sanctioned medical cannabis patient.
Robert Randall was dealt a tough hand in 1972 when he was diagnosed with advanced, open-angle glaucoma. He was only 24, and doctors told him he’d be blind by age 30. Prescription meds didn’t effectively curb the disease progression, but he discovered one thing that did. (I’ll give you two guesses as to what that was.)
Glaucoma causes vision loss by damaging the optic nerve. Cannabis alleviates it by reducing pressure around the eye, and Randall began growing his own. When he and his wife were arrested in D.C. for misdemeanor cultivation, they contested the charge on grounds of medical necessity.
The case could have been another footnote in the history of cannabis prohibition. But Randall learned that UCLA was conducting federally funded research on marijuana and glaucoma. The head researcher, Dr. Robert Hepler, assessed Robert’s condition and his response to medical marijuana.
“Robert was at UCLA for 10 days of study, which conclusively demonstrated that without marijuana Robert Randall would go blind,” writes Robert’s wife Alice O’Leary Randall in Cannabis Now.
Marijuana in its natural form is one of the safest therapeutically-active substances known to man.
– DEA administrative law judge Francis Young
Randall was found not guilty by means of medical necessity, provided access to federal supplies of marijuana, and thus became “the only individual in the country allowed to legally possess marijuana for medical purposes.”
The Randalls founded the Alliance for Cannabis Therapeutics—the first medical cannabis non-profit. The Alliance supported dozens of state laws that relaxed strictures on medical marijuana. The Alliance was also the leading party in re-scheduling hearings that, at the height of the Drug War, nearly succeeded in removing “marihuana” from Schedule I of the Controlled Substances Act.
2) A DEA judge in 1988 recommended that the agency authorize medical marijuana.
DEA administrative law judge Francis Young, who presided over the re-scheduling hearings mentioned above, issued a strong recommendation that marijuana be re-scheduled. Young went as far as to state that “Marijuana in its natural form is one of the safest therapeutically-active substances known to man.”
Young dismissed arguments that allowing people access to medical marijuana would “send the wrong signal,” essentially claiming that it was callous and wrongheaded. In an extraordinary display of self-righteousness, DEA Administrator Jack Lawn dismissed the recommendation, questioning the motives of medical researchers, physicians and patients whose testimonies supported the ruling.[/vc_column_text]
3) A counterculture icon overturned the Marihuana Tax Act (sorta).
The Marihuana Tax Act of 1937 greatly limited any legally authorized use of cannabis and required people in possession to pay a steep tax. Most users couldn’t pay the tax if they wanted to because cannabis was illegal under a number of state laws, and the requirements for federal compliance were burdensome. So the act effectively criminalized cannabis. That’s background.
In 1965, counterculture icon Timothy Leary got busted with a small amount of undeclared cannabis in Texas—a violation of both Texas law and the 1937 Tax Act. A federal judge sentenced Leary to 30 years in prison. Leary, a Harvard psychologist, was an outspoken supporter of psychedelics, which probably motivated the harsh sentence.
For a brief period in the early days of the Nixon presidency, the federal government had
no enforcement powers over marijuana possession.
Leary contested the sentence in a case that wound up before the Supreme Court (Leary v. United States). He argued that compliance with the Tax Act would compromise his 5th Amendment rights by forcing him to admit to possessing an illegal substance. That made the charges under the Tax Act bunk (no pun intended). The Court agreed in the 1969 ruling, and overturned the law.
And so it was that, for a brief period in the early days of the Nixon presidency, the federal government had no enforcement powers over marijuana possession and in-country trafficking.
4) “Pot can make you gay.”
Depending on which side you listen to, Reagan’s drug czar Carlton Turner either claimed marijuana turned young people gay or, at least, suggested that it lead gay people to be more gay. The Newsweek reporter who wrote of this in October 1986 challenged him on the claim that one lead to the other, and his quoted response was that homosexuality “seems to be something that follows along with their marijuana use.”
Turner also floated the idea that cannabis can speed the progression of AIDS.
Turner might have been made to look more inept than he was, and the reporter herself said that the article headline (“Reagan Aide: Pot Can Make You Gay”) was “overdrawn.” But one has to marvel a bit at the way rhetoric evolves to justify policy.
5) The Gateway Theory is supported by very creative data management.
Author Dan Baum writes of the methodology behind the Gateway Theory in the book Smoke and Mirrors: The War on Drugs and the politics of failure:
“[T]he researchers looked in only one direction, asking heroin and cocaine users if they first used marijuana and predictably finding that a great many had. They didn’t ask, though, whether the addicts had first used alcohol, tobacco, or caffeine – any of which might also be described, under the study’s methodology, as the ‘gateway.’ More important, the researchers failed to track marijuana smokers on how many gradate to harder drugs. Whenever the question is asked that way, the percentage is in the single digits.” (153)
“Amount saved by California from 1976 to 1985 by reducing marijuana possession to a finable offense: $958,305,499.
“Percentage increase in California marijuana use during that time: 0%.”
– Smoke and Mirrors, 223
If you’re reading this, you probably didn’t need to be convinced that the Gateway Theory was fallacious. Still, it’s interesting to know about the methods used to arrive at it.
Gathering data with the intent of confirming a hypothesis? That’s against the rules! Sheesh.
6) We once had a relatively pragmatic, responsible drug czar.
Jimmy Carter’s mid-term drug strategy, drafted under then drug czar Peter Bourne, was a harm reduction approach. Bourne was plainspoken about this:
“Drugs cannot be forced out of existence; they will be with us for as long as people find in them the relief or satisfaction they desire. But the harm caused by drug abuse can be reduced. We cannot talk in absolutes—that drug abuse will cease, that no more illegal drugs will cross our borders—because if we are honest with ourselves we know that is beyond our power.”
Carter echoed this reasoning, backing the decriminalization of marijuana before Congress in 1977:
“Penalties against possession of a drug should not be more damaging to an individual than the use of the drug itself; and where they are, they should be changed. Nowhere is this more clear than in the laws against possession of marijuana in private for personal use. … Therefore, I support legislation amending Federal law to eliminate all Federal criminal penalties for the possession of up to one ounce of marijuana.”
Well, you know the rest of the story. It was all downhill from there as far as drug reform goes.
The short reign of Peter Bourne as drug czar stands as the high-water mark of technocratic, scientific, unemotional drug policy. It also stands as the high-water mark of drug-policy naivete.
– Dan Baum, Smoke and Mirrors: The War on Drugs and the politics of failure
Happy 4th! Enjoy your freedoms.
In today’s heady environment of legal, statewide cannabis programs, it’s easy to forget just how difficult it was for those of us involved in MMJ activism in the early days.
– Alice O’Leary Randall, pioneering medical cannabis advocate and spouse of the late Robert Randall
As the events above show, the U.S. isn’t exactly perfect. But it’s still a wonderful country. For all the heated rhetoric taking place on today’s political stage, an appreciation of history can grant a certain perspective: Things have been a lot worse.
Nobody here is advocating complacency. But they’re growing hemp again at Mount Vernon, we have an all-volunteer military, and Americans in over a dozen states can celebrate Independence Day by smoking a doob—no medical justification needed.
Setting politics aside, it’s a pretty good time to be American.
Talk to one of our reps to learn how our industry-leading point of sale and inventory management solutions can help keep your dispensary sprouting upward.
Thinking and Acting Strategically as the Legal Cannabis Industry Enters its Adolescence
It starts with having clarity about your exit strategy
By: John Garvey
Last July, shortly after Canada legalized cannabis, Canadian firm Aurora Cannabis (NYSE: ACB) acquired MedReleaf for CN$3.2 billion—or $2.3 billion U.S. A record-breaking cannabis industry acquisition, it signaled that the industry’s transition to adolescence. The number and value of acquisitions surged in 2018 and, barring catastrophe, the trend towards consolidation will continue well into the coming decade.
Five years from now, there will still be some boutique dispensaries, small-scale MIPs producers and growers in the cannabis industry staying profitable with a slow growth strategy. However, a large portion of cannabis retailers are looking at one of three exit strategies:
- Acquisition: Make sure your ducks in a row and position yourself for a profitable acquisition.
- IPO: Expand through acquisitions and position yourself for an eventual IPO.
- Growth without public financing: Shield your brand from acquisition without going public, relying on alternative corporate financial strategies for growth (private equity, M&A, employee stock ownership plans, etc.).
Too good to refuse
Having clarity about your exit strategy is a critical, often overlooked priority, regardless of how you currently feel about your business. Whatever the case, you might end up leaving a lot of money on the table if there are any ambiguities relating to your inventory, cash flows or compliance.
Many operators are at a point in their growth where they feel it might make sense to invest in enterprise-level software, including more advanced seed-to-sale tracking, labeling, CRM, time tracking and business intelligence capabilities. It’s a considerable investment, raising the question: At what point does it make sense to make that investment?
For those who have even begun toying with the idea, the probable answer is, “Yesterday.” It boils down to compliance, attractiveness (to investors), efficiency and quality of life.
We’ve previously written about the importance of compliance and integration between accounting, inventory tracking and other systems. While these are important to any heavily-regulated industry, we want to stress two things here:
I. Investors and prospective buyers want accessible, clear data
If you’re a cannabis touching business (a retailer, grower or processor), there’s a good chance you’ll get an offer on your license in the next three years that’s too good to refuse. Investing in ERP software that provides you better in-house access to data, generates reports and seamlessly tracks inventory in real time will put you in a strong negotiating position when that time comes. That data will inform your own valuation of your business and give you something to lean on when making counteroffers.
“99 percent compliance is not compliant.”
– John Torkelson, Senior Operations Manager at Point 7 Group
RCS has made cannabis industry specific customizations to NCR Counterpoint, our retail support solution for POS, CRM, inventory management and time tracking solution. Those customizations, including automated reports, low inventory alerts and security measures, improve your day-to-day operations and help position you for a profitable acquisition.
II. The right business management solutions deliver profits and peace of mind
Due to various regulatory constraints and stigma, cannabis operators have struggled to find satisfactory banking, point of sale and other business support solutions. While this is often discussed as a liability, it’s also a matter of being able to enjoy your business.
“I like manual data entry.” – Nobody, ever
Knowing you’re on solid ground and having your data where it belongs (instead of a courier bag stuffed full of receipts) just makes life better.
You’re not just investing in compliance, you’re investing in customer retention and a good night’s sleep.
Getting your baby off to college
The motivations that originally brought cannabis operators into this industry are probably as varied as Van Gogh’s color palette. For those who understood that some of the risks were overstated or misunderstood, it has been a great opportunity. Many in the industry have fared admirably in spite of the constant uncertainty.
Perhaps you were drawn to it because of a deep sense of purpose that comes with providing people a way to manage chronic illnesses, or providing a safer recreational alternative to alcohol.
Then there’s the excitement of being part of a new, dynamic industry. It continues to be a great conversation starter even as the industry has grown more accepted and conventional.
Whatever the case, the passion was there. That remains, but economic forces (including the entrance of big players in pharmaceuticals and consumer products) are pushing the cannabis industry inevitably towards consolidation. If you see your dispensary as your baby, you might liken it to a child ready to go off to college. Making sure your books are in order and that fewer details require your day-to-day attention is a good thing. It’s like making sure your kid knows how to do laundry and budget for groceries and entertainment before you send him or her off into the world.
Whether you do business with us or not, consider investing in enterprise level software with capabilities specific to the cannabis industry. If you want to remain a boutique, stand-alone dispensary or small chain, that may be beyond your needs. Either way, the right retail management software and hardware will improve your day-to-day life and profitability.
Contact us for an assessment of your cannabis POS needs. You’re not just investing in compliance, you’re investing in customer retention and a good night’s sleep.
Examining the Cannabis Industry with LivWell (Part I of II)
By John Garvey
This month we’re talking with our friends at LivWell Enlightened Health, one of the nation’s largest cannabis retail chains and cultivators, about the challenge, inspiration and oddities of … well, selling weed.
Three people from different departments were kind enough to share their insights and experiences with us. We’ll start by discussing what inspires them and then talk about the nuts and bolts of compliance and cannabis retail ops in part II.
I. James Bauer, Manager of Retail Compliance and Corporate Security
James Bauer, a former combat medic in the U.S. Army, returned with an injury from his second tour in Afghanistan in 2010 after serving with the 1-66 Armor Battalion, 4th Infantry Division. He transitioned into the cannabis industry after being honorably discharged in early 2013 and joined LivWell a little over three years ago.
“If there’s one lesson I learned during my tours of service that has helped me in the cannabis industry,” James says, “it’s: be prepared for anything.”
As of January, James oversees the entire Retail Compliance and Corporate Security department. Given that LivWell has 14 dispensaries in Colorado, one in Oregon, and several large grows in Colorado’s Front Range, it’s safe to say his knowledge of cannabis goes far beyond knowing the differences between Sativas and Indicas.
What lights you up about the cannabis industry?
“It’s important to me being a veteran because I see my buddies come home and from my observations, they’re prescribed 20, 30 medications. In my experience you take one medication for one problem but there’s three side effects and then you’ve gotta take three medications for those side effects. And next thing you know, you have like 20, 30 prescriptions. I’ve spoken with so many of our patients and customers who say that cannabis can help them in ways they feel are far superior to these more traditional kinds of medications.”
“I came home diagnosed with PTSD, they had me on all kinds of medications. And since I’ve gotten out and gotten into this industry that’s been one of the biggest game changers for me.”
“Obviously I’m biased here, but if we’re willing to send these guys to the other side of the world and put them through worst-case scenarios and nightmares, and in my opinion, I think it’s important for us as a country to give them anything and everything that’s going to help them get back to where they need to be. So me personally, I would say that’s one of the more enjoyable aspects of being a veteran and being in the cannabis industry.”
“So what lights me up about cannabis? Just being a part of the industry, and specifically being a part of LivWell, because we do strive to do it right, follow every single rule and be the example.”
II. Mandy Leseure, Retail Manager, LivWell Garden City
Originally from Illinois, Mandy has been with LivWell for two years at the Garden City location. She got into the cannabis industry by accident, which she laughs about to this day.
“When I applied to LivWell Enlightened Health I thought it was a health food grocery store. … So after I got called for an interview I started really looking into the company and making sure I had all my Ps and Qs straightened out. And then I realized it was marijuana.”
What gets you out of bed in the morning?
“I get to sell and talk to people about weed all day long. That is just the coolest thing that I’ve ever been able to do, to actually speak openly and honestly about what I believe this product can do for people that need help.
But it’s also just fun.”
Mandy interacts daily with people on both the medical and recreational side of the store, so she knows people who smoke or consume cannabis aren’t all party animals and concert-goers (although there’s nothing wrong with that!). Cancer patients and caregivers make up the largest patient segment at the Garden City location she manages—which is significant.
“We are the highest-volume store for the company,” she states. “We’re probably one of the highest-volume stores for the industry period.”
Mandy frequently speaks with patients and consumers who tell her that cannabis helps them cope with chronic pain, opioid withdrawal, anxiety, post-traumatic stress disorder (PTSD) and a laundry list of other things. Her oldest patient (adjusting for life expectancy because the patient is a different species) may be a 30-year-old elk who uses LivWell’s CBD pet tincture to manage arthritis.
“I was a flower person first, and I still am,” Mandy says. ”But I’ve really learned to appreciate CBD products in general. My favorite ones are tinctures and patches. I used both of them after my surgery because the painkillers they were giving me were making me sick. So I quit taking those and just started using tinctures and patches.”
“I fell in love with those and now everybody in my family uses them.”
III. Danielle Biddy, Systems Manager (IT)
Danielle moved to Colorado from Texas in 2013 to be part of the cannabis industry and soon found employment at LivWell, where she just completed her fifth year. She had never been in a dispensary before interviewing at LivWell.
What inspires you about working in cannabis?
“Mostly just seeing how many people actually use cannabis and how many people this is affecting. Scientists, artists, businesspeople, young adults, vets—it’s amazing to me how all these people are brought together over a plant. It was illegal for so long, it kinda blows my mind.”
The many challenges related to both public perceptions and the cannabis industry’s rapid growth are a call to arms for Danielle. The U.S. has come a long way in terms of accepting the industry as a legitimate business enterprise in the last five years. Still, she continues challenging herself with questions relating to those fundamentals:
“What can we do next to show people that this is a real industry, a viable product? How can we innovate and make this better as an industry, a product, as a whole?”
Anthea has been a big part of that at LivWell, helping to coordinate activities between departments, ensure compliance and keep things running smoothly at the point of sale.
“Being able to run it like a normal company has just made a huge difference,” Danielle says. “I mean we’ve just saved so much on labor costs and time management.”
“Our last system, it crashed on a daily basis. So having a system that’s reliable makes a huge difference. When the system goes down and you’re writing hand-written tickets that’s not good for business. The reliability of Anthea is just a huge weight off our shoulders.”
* LivWell Enlightened Health makes no claim regarding the health and medical benefits of cannabis
Cannabis Enterprise Business Solutions
Talk to one of our reps to learn how our industry-leading point of sale and inventory management solutions can help keep your dispensary sprouting upward.
Stay posted for part II of this blog where we’ll talk in more detail about the challenges of working with what may be the most heavily-regulated inventory in the country.
Waxing On Cannabis with Point 7 Group: Industry trends, challenges, opportunities and risks
by John Garvey
Today we’re talking with John Torkelson, Senior Operations Manager at Point Seven Group, a business solutions and consulting firm in the cannabis space.
John moved to Colorado from Illinois in 2010 after graduating from Columbia College with a degree in Arts Entertainment Media Management. As a cannabis consultant he does a little bit of everything: facility design, seed-to-sale tracking, compliance, extraction, pre-licensing, marijuana-infused products (MIPs) and operations management.
John’s experience in and understanding of the industry makes him a solid resource for those wishing to go into cannabis cultivation, extraction or retail. He’s helped design cannabis facilities in four states and helped dozens of aspiring cannabis industry pros navigate the licensure application process.
My start into the cannabis space was very organic.
“I actually had never seen a real-life, flowering cannabis plant before I moved out here,” John says.
“I didn’t really think I was going to get into the industry and then I came out here and got my [medical marijuana] card and it was like, ‘Holy s***, this is a real industry with young people, movers and shakers. This is really cool.’”
John grew up gardening with his mom and dad and entered the industry as an entry-level trimmer. In time he worked his way up to head R&D Grower for a Denver-based cultivator.
“I was kind of left to my own devices in a 10,000 square foot facility for a while and just got to pop seeds and look at new stuff and that was really fun,” he recalls.
From there he moved into the company’s larger production facility where he lead the implementation of the company’s clone division. They quickly scaled from selling a couple hundred clones a month to selling thousands of clones with A-list genetics at a time.
“There are plants with our genetics all over the state now, which is pretty cool,” he states.
John left that company a couple years ago and moved into cannabis consulting with Point7. The team at Point7 has almost three decades of collective experience in regulated cannabis markets, which is a lot for such a young industry.
Newbies: What you need to know
It’s a topic for a book (actually, a number of books by now), but here are a few key things to be aware of up-front if you want to start a marijuana dispensary, cannabis growing operation or extraction facility:
- Be aware of how competitive the pre-licensure application is, and …
- Be prepared to spend at least $5,000-$10,000 on the application process (sorry)
- Have in-state partners if you aren’t already in-state
- Have a clear exit strategy from day 1
- Have a compliance mindset from day 1
“I cannot stress enough that it is getting much more competitive from state to state.”
The competitive nature of the application process requires you to drop 4 – 5 figures just to get a license. People wanting to enter the industry are thirsty for information about legal issues including contracts; application and compliance costs; and how to put together partnerships.
Unless you’re ridiculously driven, detail-oriented, experienced and naturally competent across all these dimensions, you need someone on your team with considerable industry experience or an outside consultant. No point in giving yourself an arrhythmia.
“99 percent compliance is not compliant.”
“Compliance is no longer a grey area at all,” warns John. “These regulators and these inspectors, you have to be compliant. And having a good software partner that understands regulatory compliance at a state level and a municipal level is really, really important.”
Quality software with industry-specific features will keep the dogs at bay by helping you maintain clear records and channels of communication across your company. Do it.
Some states are responding to the industry’s rapid growth and consolidation by creating residency requirements. Missouri, for instance, will require 51 percent in-state ownership for cannabis operators. (Amendment 2 in Missouri, which would legalize medical cannabis, is likely to pass in November.) Other states have more stringent requirements. It’s generally a good idea to have local partnerships in most industries, although residency requirements make that all the more important in cannabis.
That said, regulators in newly legal states view a history of compliance in other states favorably. Consider an out-of-state partner or experienced consultancy if you’re pursuing a license in a newly-legal state.
Book a consultative call with John
We’ve noted in previous blogs that the cannabis industry is experiencing rapid consolidation, making exit strategy an important topic of discussion tied to compliance.
“Big Pharma companies, Big Ag companies that are used to running compliant and heavily-regulated businesses—they want that same level of confidence in the groups they’re buying out,” John says.
“If you have the state inspectors knocking on your door every other week because you can’t get your inventory put together at your dispensary, at your cultivation facility, that doesn’t look good to a potential buyer. If you have those dings on your record as an operator, that’s something people absolutely look at when they’re talking about investing in a company.”
As the price of flower continues to drop, how do you keep your product from becoming commoditized?
“As the margins drop and as more people are able to grow lots of cannabis I think we’re going to see a split between craft cannabis vs. the Anheuser Busch or Coors model, as we’ve seen in the alcohol realm. It’s the difference between Black Shirt Brewing in Denver or Renegade vs. Coors over in Golden.
“You’re never going to be able to keep up with their production but at the end of the day if you want whatever the hippest new flavor is, the big players aren’t going to have that. They’re going to have Blue Dream, they’re going to have Sour Diesel. The stuff that works and does what it’s supposed to do but that is one way to differentiate yourself is to have the new hot flower and stuff that only you have in the market.”
In a nutshell, good genetics, proprietary genetics, and generally growing high-quality cannabis are keys to keep your brand from becoming commoditized.
Green Ops: Energy resource management
A common point of discussion, both with regard to operating expenses and environmental impact, is the huge amount of energy it takes to grow cannabis indoors. What steps is the industry taking to reduce these financial and environmental costs?
“I think LED technology has really there in the past 18 months, at least for the [vegetative] side of things. I think that LEDs can absolutely do what you need in veg and they pull a lot less power.
Whoever comes up with the first really killer vegetative LED light is going to be a rich person in this industry.
John’s recommendation? Get a relationship going with LED companies and energy companies to identify rebate opportunities and other ways to save.
“As far as public policy, I think that what is exciting for me and what I’m seeing more and more talk of medical marijuana decreasing opioid addiction and overdoses.
“And as someone who unfortunately has lost two very good friends to opiate overdoses, it’s very encouraging to see that in these regulated states that have [legal cannabis] programs … we are seeing a decline in the amount of fatal opioid overdoses when medical marijuana is available. So that’s really exciting.”
It’s a fact: States with legal medical cannabis markets have lower rates of opioid use.
Getting cannabis into a water-soluble state—an aspiration among some chemists in the industry—will increase bioavailability and allow for more precise dosing. It could also make for a very interesting cup of coffee.
“I was just talking with someone that’s working on figuring out a way to get cannabis into a water-soluble state. When that happens it’s going to open up all kinds of different avenues to creating new products because cannabinoids aren’t water-soluble they’re fat-soluble. Figuring out how to get it so that it doesn’t separate out in a drink is really kind of the next step.
“There’s a lot of cool technology that’s happening around product development right now that’s gonna prove to be really interesting in the coming years.”
“We see more and more money and more technology come into the space every day which is really exciting. But if you don’t have someone on your team that understands the cannabis space and has seen this progression over a number of years you can get sold a bunch of snake oil. We’ve seen that happen time and time again with clients that end up buying stuff they really don’t need and then not really using the technology for what it is. It ends up being either a talking point for tours or it just kind of sits there and collects dust.
If you don’t have someone on your team that understands the cannabis space you can get sold a bunch of snake oil.
“We also try to work with our client groups to really spend money on what’s important and not spend money on what’s the newest, coolest thing out there.”
Scaling Extraction Operations
“I don’t think a lot of companies were really expecting to have to make machines so big so quickly. There are a couple companies that are tackling the idea of big machines— hundred liter machines, two-hundred liter machines. But the bigger the machine and the bigger the chamber, the thicker it has to be to contain that pressure.”
Again, every solution presents its own challenges. Ergo, you need a solid team with technical, financial, regulatory and marketing expertise.
“It’s really about efficiency. …
“People are looking to get more efficient wherever they can because as we’re seeing throughout the industry, the price of herb is going down. And so the only way that you can keep your margins is to get more efficient. There gets to a certain point where you can’t grow a pound for any cheaper.
“I don’t think we’re there yet … but when you take into account that people have to get paid and overhead is expensive and labor is expensive, whenever you can get a machine to do something for you in an automated way I think people are excited about that. But it comes at a price.”
The Future is Clear: The Future is Hazy.
… Er, you know what I mean
In time, the cannabis industry is going to become much like any other industry. Like it or not, Big Ag, Big Pharma, and other large industry efficiencies are entering the cannabis industry. As trademark protection, financial services and other legal protections are extended to the industry, investment in cannabis will only accelerate.
Cannabis Enterprise Business Solutions
Talk to one of our reps to learn how our industry-leading point of sale and inventory management solutions can keep the boogie man away from your dispensary.
… but the recent introduction of two cannabis reform bills gives the U.S. something to talk about.
by John Garvey
Canada just became the second country worldwide to legalize cannabis—an epic event for anyone interested in public policy or the cannabis industry. There’s no way to overstate the significance of this, but in terms of industry impact a couple developments here in America eclipse it.
There is, in fact, a whirlwind of legislative and other policy-related activity going on as I write. For the sake of not writing a book I’ll focus on two key developments: The STATES Act and the Marijuana Freedom and Opportunity Act.
(I also threw in a primer on the Tenth Amendment for fellow nerds)
The STATES Act
If passed, the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, co-sponsored by Sen. Cory Gardner (R-CO) and Elizabeth Warren (D-MA), will be to the cannabis industry something like the SpaceX Falcon Heavy launch was to private space travel. In terms of its impact on the U.S. cannabis industry, the STATES Act will be the most significant event since the historic passage of Amendment 64 in Colorado and Initiative 502 in Washington.
This is even bigger than the Cole Memo (which Attorney General Jeff Sessions rescinded to little effect) because it would grant the industry a much higher level of legitimacy and shield it from the whims of the current and future presidential administrations.
Here are some key points:
- While the act wouldn’t reschedule or deschedule “marihana” in the Controlled Substances Act (the CSA spells marijuana with an h), it does include reforms that I believe would be even more impactful.
- The act will improve access to banking services in several ways. Most notably, it states that facilitating transactions and providing financial services to licensed growers and dispensaries doesn’t constitute trafficking.
- The Department of Justice (DOJ) will no longer have power to seize assets and proceeds from legal cannabis operations.
- Legal cannabis operations will at last be able to secure federally protected trademarks.
- The act also removes industrial hemp from the CSA altogether. This would be a boon not only for the CBD market but for those wishing to develop commercialize any of hemp’s myriad uses including seed and grain production, building products, textiles, composites, antimicrobial topical medications and animal bedding.
The STATES Act reaffirms states’ responsibilities as well as rights. Nobody below 18 is to be permitted employment within the industry, nobody below 21 may legally purchase recreational cannabis and cannabis may not be distributed at “transportation safety facilities such as rest areas and truck stops.” Violation of these and other strictures would remain grounds for federal intervention. That’s worth noting in case opponents try to portray the act as too permissive.
Sen. Warren’s office published a summary of the background, purpose and provisions of the STATES Act in this one-page document.
Marijuana Freedom and Opportunity Act
Three weeks after the STATES Act was announced, U.S. Senator Chuck Schumer (D-NY) announced the Marijuana Freedom and Opportunity Act.
Above all, passage of the MFOA would provide advocates something they’ve been salivating over the mere thought of since 1971: rescheduling “marihana” to a less-restrictive place in the CSA’s inherently flawed controlled substances schedule.
The act contains a number of other provisions, some progressive and some conservative. These include creating a Marijuana Opportunity Trust Fund, authorizing $500 million for public health research related to cannabis, and additional funding for safety and enforcement programs.
States would retain every right to prohibit cannabis entirely. Well duh. We’re not trying to force anything down people’s throats.
Even centrist conservatives may balk at the Marijuana Opportunity Trust Fund, which would transfer the greater of $10 million or 10 percent of tax revenue from the industry into a fund for women or socially- and economically disadvantaged individuals. Some liberals will be peeved at provisions which assist state- and local governments in blocking people with prior cannabis convictions out of the industry.
The bill also authorizes up to $250 million in funding for highway law enforcement to develop advanced roadside diagnostics and strategies for flagging and prosecuting stoned drivers. Fine by me, but the far left won’t like it. The mere thought of driving 70 mph stoned scares the hell out of me, as it should anyone.
Whatever the MFOA’s likelihood of passing, I’m rooting for it.
Amendment X Primer: Way hotter than the iPhone X
Amendment X was put into place as one safeguard against an overbearing federal government. It helps define the relationship between the states and the federal government, significantly restricting the activities and scope of the latter (at least when the courts decide to uphold it).
Liberals and conservatives have alternately embraced and rejected the Tenth Amendment over the years. It bears special relevance to drug policy, however, because it places more of a burden on the federal government to justify intervening in state affairs. Under the Constitution, intrastate commerce is none of the federal government’s business. Ergo, advocates and lawmakers supportive of the cannabis industry have embraced it.
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
The recent change of administration in the White House wasn’t good news for the industry, and Jeff Sessions—Trump’s staunchly anti-cannabis Attorney General—has become like this absurd boogeyman. Yet although this likely deterred investment it didn’t undo the immense progress that has been made from 2012 to date.
As we discussed last month, fears about intellectual property law are also largely misplaced.
A lot of voters who favored cannabis legalization for decades never really thought it would happen and may still think the legal status of marijuana is tenuous. But nobody’s putting this genie back in the bottle. Whatever setbacks occur over the next decade, the industry will keep plowing forward. The short, medium and long-term outlook for legal cannabis are all fantastic.
P.S. Congratulations to our friendly neighbors to the north. We’ll break bread together again one day.
Terpene literacy is becoming all-important in the cannabis industry. Here’s a crash course.
By John Garvey
Have you ever seen someone sniff a nugget of cannabis like it’s a glass of Malbec? It happens. Just as a wine snob might try to pin down the region and type of grape a wine originates from, it’s easy to imagine weed snobs waxing on about a plant’s terpenes. (When we say “weed snobs,” we mean it in the most positive way possible).
Terpenes give cannabis its scent and flavor, so having budtenders equipped to discuss the aesthetic and medicinal properties of terpenes, along with labeling that includes terpenes, is a competitive advantage. Today’s competitive advantage, however, is tomorrow’s necessity. Your budtenders need to be able to give clients accurate, helpful information about cannabis terpenes.
We’ll focus here on why cannabis terpenes and terpenoids* are so important generally, cite a few useful examples, and direct you to resources for further learning.
*We’re using the words “terpenes” and “terpenoids” interchangeably. While they aren’t exactly the same, they’re a similar chemotype and industry professionals including breeders consider this acceptable for day-to-day discussion.
What are terpenes, anyway?
Terpenes are components of essential oils and give cannabis its odor. Conifer pines, citrus fruits, lavender, hops and black pepper all owe their distinct smells to terpenes. If you’re a cannabis industry professional you’re probably familiar with the term entourage effect. This refers to how terpenes and pytocannabinoids modify—and in many cases, enhance—each other’s effects.
An emerging class of cannabis connoisseurs care every bit as much about terpenes as cannabinoids. In April of last year, High Times reported that “The word terpene is searched about five times more now than it was two years ago.”
Cannabis terpenes are becoming more and more valued for their aromatic qualities, flavor and medicinal qualities. Terpene profiles are increasingly featured in descriptions of cannabis strains. Product labels are starting to list terpene concentration in addition to cannabinoid profiles.
A plant’s terpenes, rather than it’s cannabinoids, determine whether it’s a sativa or an indica. Because of its sedating effects, the terpene myrcene in particular is associated with indica. If you switched the terpenes from a sativa and an indica, leaving everything else intact, the original sativa would be in effect an indica and vice versa.
First-string terpenes and their effects
Terpenes have a variety of well-established effects in isolation and modify the effects of THC. There’s reason to believe certain terpenes compliment the beneficial effects of CBD as well (again, the entourage effect).
Terpenes “are quite potent, and affect animal and even human behaviour when inhaled from ambient air [in very low concentrations],” writes medical scientist Ethan Russo in the British Journal of Pharmacology. “They display unique therapeutic effects that may contribute meaningfully to the entourage effects of cannabis-based medicinal extracts.” (Russo, 2010)
A quick inventory of the effects of individual terpenes includes more psychiatric and medical benefits than you can shake a stick at. Some of these findings are based on robust scientific evidence and some are more preliminary, so they shouldn’t be used to make hard and fast medical claims. They can, however, help consumers make more informed choices.
- α-Pinene: Pinene is a bronchodilator, an anti-inflammatory and improves short-term memory. Like many other terpenes it also smells great. Because THC impairs short-term memory, the memory-enhancing effects of pinene may make it a valuable counterweight.
As the name suggests, pinene gives conifer pines their scent. If you’ve ever stuck your nose in a jar of weed and felt like you were in Golden, Colorado, it’s probably because of the pinene. (Unless you were actually in Golden, in which case you were lucky two times over).
- ß-Caryophyllene: Common to black pepper, caryophyllene is an anti-inflammatory and, like THC, a gastric cytoprotective.
So it’s good for your tummy.
- Myrcene: This is an interesting one because it’s believed to enhance the effects of THC—probably by allowing more of it to cross the blood-brain barrier. It’s also one of the predominant terpenes in hops. If you’ve ever heard the claim that drinking an IPA or eating a slice of mango (which is also myrcene-rich) enhances your high, this may be the reason.
Russo writes that “myrcene is a prominent sedative terpenoid in cannabis, and combined with THC, may produce the ‘couch-lock’ phenomenon of certain [strains] that is alternatively decried or appreciated by recreational cannabis consumers.”
It’s also worth mentioning that Odell’s Myrcenary IPA, one of the greatest beers ever made, is named after this venerable terpene. Just approach with caution: it’s 9.3 percent alcohol.
- Limonene: Largely responsible for the odor of lemons, limes, oranges and other citrus fruits, limonene is an anti-depressant and anxiolytic (that is, it reduces anxiety). For that reason, it likely compliments CBD, which is anxiolytic and counteracts the paranoia that THC can cause. Limonene can be detected in the bloodstream if inhaled in very low concentrations. It’s the second most common terpenoid in nature.
Additionally, limonene triggers apoptosis (cell death) in some types of breast cancer. This is exciting, but it doesn’t mean weed and lemon water cures cancer. Be sure to impress upon your colleagues that cancer treatment is a delicate subject with ethical dimensions that shouldn’t be taken lightly.
The most authoritative scientific paper on terpenes is a 2010 article in the British Journal of Pharmacology entitled “Taming THC: potential cannabis synergy and phytocannabinoid-terpenoid entourage effects.” The author, Ethan Russo, is a senior medical advisor to GW Pharmaceuticals (NASDAQ: GWPH). Russo helped popularize the term entourage effect, and the FDA is likely to make medical history next month by approving GW Pharma’s cannabis-derived anti-seizure drug Epidiolex. So it’s legit.
This is a technical scientific paper, but an educated layperson can read it in one sitting and learn a lot. Roll up your sleeves—here’s the link.
For a quick, visual overview, Leafly published a great infographic featuring six of the most prevalent and well-understood cannabis terpenes. It’s worth printing it off in poster size both for display and as a quick reference. Take a look.
THC myopia is a thing of the past. Cannabis consumers, patients and researchers have come to recognize the value of the plant’s chemical diversity. In Russo’s groundbreaking paper he endearingly referred to cannabis as “this venerable plant,” in a nod to the therapeutic implications of phytocannabinoid-terpenoid synergy.
Stick that in your pipe and smoke it.
Russo, E. B. (2010). Taming THC: potential cannabis synergy and phytocannabinoid-terpinoid entourage effects. British Journal of Pharmacology, 1344 – 1362.