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Waxing On Cannabis with Point 7 Group:  Industry trends, challenges, opportunities and risks

Waxing On Cannabis with Point 7 Group: Industry trends, challenges, opportunities and risks

Cannabis Business, News, POS System

Waxing On Cannabis with Point 7 Group: Industry trends, challenges, opportunities and risks

by John Garvey

John Torkelson
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.

Cannabis Plant
A flowering cannabis plant grown under John’s care. (I mean damn, the guy has a green thumb—I can barely keep a cactus alive.)

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

Pre-licensing

“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.

Compliance

Cannabis Plant“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.

Partnerships

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

Exit strategy

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.”

Lemon Sorbet cannabis plant
Lemon Sorbet: One of John’s creations. Yum.

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.

Opioids

“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.

Innovation

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.”

Shiny objects

“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.

The G7 of Cannabis? We’re working on it…

The G7 of Cannabis? We’re working on it…

Cannabis Business, E-commerce, Events, POS System

 Recap and discussion of the Cannabis Technology Workshop

by John Garvey
Some of the most experienced operations managers, IT professionals and service providers in the cannabis industry came together at Anthea’s Cannabis Technology Workshop, held July 19 in Denver. The purpose of the workshop was to exchange ideas and insights in a young industry with higher than average risks as well as returns. Participants included competitors as well as business partners and friends.

Three overarching themes emerged during the course of 11 presentations by industry leaders:

  1. Business Partnerships: “Find the right partner.“ A healthy business partnership is about having a team that understands your operation, that can adapt to changing strategies or regulations, and provides personalized, on-going support and training. It’s all about trust.
  2. Data Availability and Integrity: Using data to guide decisions about inventory forecasting, manufacturing and marketing isn’t a competitive advantage, it’s a necessity. As importantly, it’s a security issue and a compliance issue requiring your A game.
  3. Consolidation: “Plan for growth, or plan an exit strategy.” The cannabis industry is feverishly consolidating. Good data will enable you to pursue effective growth strategies and also make you more attractive as an acquisition to other entities.
Jake from CPShop talking at Cannabis Workshop
Anthea table at Cannabis Workshop

After the event I sat down with Jack Oxton, Retail Solutions Advisor at Anthea, to discuss key takeaways as well as his own outlook on the cannabis industry. I think I know a lot about the industry, but he can run circles around me. He’s excited to be supporting cannabis retailers for several reasons: the opportunities, the challenges and the impact it can have on a patient’s quality of life.

“I think as more and more research comes out and more medical uses are found, the Schedule I classification is going to change,” Jack says. “And this will be one of the largest opportunities in a long time.

“Beyond that I’ve had firsthand experience with family members who are on chemotherapy or have had other debilitating illnesses that have found a lot of comfort in cannabis. And before they had that option they were taking really heavy opiates like OxyContin and stuff. The difference in quality of life is astronomical. That’s something that I’ve always felt really strongly about.”

Jack expanded on the three themes mentioned above, drawing from his own knowledge and that of our partners.

1. Finding the right partner is paramount.

Annie Iselin speaks about industry trends at the Cannabis WorkshopWhat do you want in any business partnership?

  • First, you want someone who is trustworthy, competent and accessible. Ideally, this is also someone who believes in what you’re doing beyond the purely business rationale.
  • Second, if your partner has any role in compliance, security, accounting or managing data, they need to have experience working in regulated industries.

NCR Counterpoint, for instance, has specialty solutions for alcohol, tobacco and firearms sales. When you’re working in a heavily-regulated industry, experience and specialization matter a lot. When MJ Freeway had a series of operational disruptions and security issues ten months ago, a lot of people learned this the hard way.

  • There are also issues such as whether your partner offers the right suite of services for you, whether those solutions are integrated and whether your partner is reliable and available when needed for support.
  • Finally, it’s valuable to have people who take a personal interest in the business and regulatory environment. In Colorado, cannabis regulations vary widely by locality, making this a practical consideration as well as a cultural one.

Jack loves finding ways to overcome challenges unique to the cannabis industry, but acknowledges that they’re weighty:

“Even in Colorado, just from city to city there might be significant differences in the way you have to either restrict your sales or report on those sales. Or maybe there’s specific hurdles you have to jump through to offer online ordering or something of that nature.“

2. Consolidation

Anthea entered the cannabis market at a tumultuous time, Jack recalls. “Consolidation was happening on a dramatic scale here in Colorado where they issued a freeze on new licenses and it just turned into crazy acquisition wars.”

“With the 280E tax code I think a lot of people found out really quickly that it was tedious, it was a tremendous amount of paperwork and compliance concern, tremendous amount of back-end work to barely break even in a retail dispensary environment. If you don’t have a vertical supply chain where you’re producing your own goods … it’s really, really hard to turn a profit with the tax codes and the inability to claim cost of goods.”

The 280E tax code, banking issues and other challenges undoubtedly drove consolidation and reaffirm how important good enterprise-level software is.

“I don’t think there’s anyone left who’s just kind of idling at this point,” continues Jack. “They’re either preparing themselves to be acquired or they’re preparing to grow.“

Documentation and compliance. Whichever path you’re on, you need it. We also touched on this in our April blog.

Email us to receive information on the next Anthea  Cannabis Technology Workshop.

3. Data Integrity: Integration is key

Andee Williamson speaking at Cannabis WorkshopWhether you’re actively expanding, preparing to expand or positioning yourself for an acquisition, data integrity is hugely important. If your retail solutions aren’t both good in themselves and well-integrated with one another you won’t have data integrity.

Traditional retailers have moved away from using a single piece of software to manage all their operations towards using very tightly integrated, specialized solutions. This is much needed in the cannabis industry.

“I think there’s a lack of proven retail platforms in the industry and when we started exploring the market … we found that there really wasn’t any enterprise level software that was available.

Poor integration means that you can’t trust the data you’re collecting or that you have to enter a lot of data manually. Either way, you’re going to be miserable.

With good integration between systems, you can use data from your retail transactions to make marketing and manufacturing decisions.

Quality enterprise resource planning (ERP) and business intelligence tools allow you to effectively quantify demand or get far more accurate forecasting. These things have been widely adopted by traditional retail today, but they’re just finding their way into the maturing cannabis industry.

The right ERP system integrates sales, accounting, inventory and compliance. It’s secure, meaning customer data and your reputation are secure.

Trying to do seed-to-sale tracking, accounting, managing staff, ecommerce, on-site point of sale, digital marketing and other business functions with a single software solution is untenable. Having separate solutions that are poorly-integrated presents its own headaches. Poor integration means that you can’t trust the data you’re collecting or that you have to enter a lot of data manually. Either way, you’re going to be miserable.

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.

Canada Beat Us To It!

Canada Beat Us To It!

Cannabis Business, News, POS System

… but the recent introduction of two cannabis reform bills gives the U.S. something to talk about.

by John Garvey

Toronto Sign and Arch in CanadaCanada 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.

Crime Scene Do Not Cross

  • 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.

Map of USAStates 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.”

Conclusions

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.

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.
Will Intellectual Property Law Upend the Medical Cannabis Industry? (IP, CBD, OMG!)

Will Intellectual Property Law Upend the Medical Cannabis Industry? (IP, CBD, OMG!)

Cannabis Business, POS System, Web Tips

by John Garvey

As if cannabis industry professionals and advocates don’t have enough to worry about, the rumor mill has been running hot. The prospect of intellectual property law creating a medical cannabis oligopoly dominated by “Big Pharma” is keeping a lot of people up at night. Epidiolex, the drug developed by GW Pharmaceuticals (NASDAQ: GWPH) has heightened this fear, even as it strengthens the case for removing marijuana from Schedule I of the Controlled Substance Act.

Purple Cannabis Plant
Frankenweed?

The US Patent and Trademark Office has indeed issued dozens of cannabis-related patents. Most of these relate to cannabis processing, individual products like lozenges, growing techniques and the like. (Here’s one: “Packaged frozen cubes of cannabis juice puree with added decarboxylated cannabis material,” Patent No. 9,956,174). Some patents, however, relate to how derivatives of cannabis (most notably, CBD) can be used in medicine. That understandably worries people.

“This is our concern, Dude.” – The Big Lebowski

GW Pharmaceuticals holds some of the most noteworthy medical cannabis related patents. These make intellectual property (IP) claims on the use of plant-derived cannabinoids for the prevention and treatment of specific medical conditions. And GWPH will use IP to protect its products, including Epidiolex, which the FDA will likely approve any day now.

Is this a big step forward in the treatment of severe epileptic illnesses such as Dravet Syndrome or could it transform medical cannabis into another clunky industry dominated by a handful of giant, politically-connected firms? A lot of that hinges on IP law, which is unfortunately confusing as hell.

Here’s a helpful rundown.

The Skinny

Deferring to the opinions of several law professors and lawyers, I’ve drawn three basic conclusions summarized below. The following paragraphs will give more detailed information for the skeptical and the curious.

A.   Plants can be patented, but only if they’ve been significantly altered through selective breeding or genetic manipulation.
B.   Naturally-occurring plants and plant compounds cannot be patented or trademarked.
C.   Industry professionals have been proactive about keeping special interest groups from abusing intellectual property law.

Legal mumbo jumbo (Disclaimer: It’s actually rather interesting)

Writing for his excellent CannaLaw blog, IP lawyer John Mansfield recently explained how intellectual property law relates to the cannabis industry. The relevant laws include the Plant Variety Protection Act, Plant Patent Act and the Patent Act. Mansfield, in spite of being a lawyer, speaks plain English:

“For [Plant Patent Act] protection, the Patent and Trademark Office requires that a variety be new, nonobvious, and have some de minimus utility, among other things. These requirements are common to all U.S. patents, and are the subject of extensive statutory and case law interpretation. In addition, a patented plant must differ from known plants by at least one distinguishing characteristic which is more than that caused by different growing conditions or fertility.(emphasis added)

Law professor Craig Nard confirms:

“[E]ligibility for patent protection does not depend on whether the substance is living or nonliving. Rather, the key question is whether the inventor has altered nature’s handiwork to the extent the resulting invention can be deemed a nonnaturally occurring substance.”

Nard does warn that individual cannabis strains may become the subject of legal controversy, but not the plant itself or its (naturally occurring) components.

Old Guy with a MustacheHands off my stash!

Q: How do you ensure nobody swoops in with a patent attorney and claims ownership of a cannabis strain that was already in use when Nirvana was touring?

A: An insane amount of documentation.

“Cannabis is in danger of going the way the rest of agriculture has gone: toward monoculture, centralization, and restrictive patenting,” states the The Oregon Cannabis Project (OCP), a nonprofit. This danger it the organizers’ call to arms.

The OCP believes that existing patents on cannabis are already too broad and that the industry must take significant measures to protect diversity in the cannabis market. So that’s what they’re doing.

“The OCP’s aim is to have a comprehensive set of genetic data for all cannabis varieties that are either naturally occurring or which have been previously available to the public,” explains the CannaLaw blog. “Either one of these conditions renders such varieties unpatentable.”

The OCP looks like it means business. At least four labs have contributed data on hundreds of strains. If you’re wondering whether your favorite strain safe, you can view the open-source database here. At the request of a “concerned citizen” I checked on a few. Sure enough, I scored three for three: Island Sweet Skunk, Durban Poison and Golden Goat are all “safe.”

Baseball Ump calling safe as player slides into home
Yay home team!

If you take nothing else away from this, remember that the novelty requirement is key for receiving a patent. Being the first guy to hire an IP lawyer entitles you to nothing if you haven’t done something value-added.

Rolling it all up

Given the restrictions on patenting living things and naturally-occurring compounds, as well as the cannabis industry’s proactive approach to documenting genetic and chemotypic information, nobody’s going to land an outright patent on weed. CBD, THC, CBN, limonene, myrcene, alpha-pinene, etc, are unpatentable. In fact, given the industry’s ethos about open sourcing valuable IP, the business case for patenting an individual strain—regardless of its characteristics—is arguably far-fetched.

The only clear exception is if a firm like Syngenta or GWPH were to genetically modify a strain of cannabis to make it extraordinarily pest resistant or require, say, 50 percent less water. If they pull that off, more power to ‘em.

The prospect of the USPTO interpreting patent law in a restrictive manner is concerning. Still, only a (highly unlikely) worst-case scenario would wreck the industry. A restrictive IP policy could limit people’s ability to make medical claims—however well-established—and may limit patient access to non-pharmaceutical forms of cannabis. Whatever the case, flower, concentrates and MIPs with diverse properties will likely remain easy to obtain from the recreational side of the industry.

Maybe it’s better to be neurotic than complacent. Industry professionals should continue with initiatives to keep the market open and diverse, but they shouldn’t catastrophize over US Patent and Trademark law.

The Growing Importance of Terpene Literacy

The Growing Importance of Terpene Literacy

Cannabis Business, Just for Fun, News, POS System

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).

Cannabis nuggets next to fruitTerpenes 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.

*Note that 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).

Pine Cone on a treeTerpenes “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.

Myrcenary beer in a glass next to the bottleRusso 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.

Oranges on a treeAdditionally, 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.

 

Further learning

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.

Cannabis plantThis 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.

References

Russo, E. B. (2010). Taming THC: potential cannabis synergy and phytocannabinoid-terpinoid entourage effects. British Journal of Pharmacology, 1344 – 1362.

4/20 Musings

4/20 Musings

Cannabis Business, Just for Fun, POS System

Not all news is bad news, but for the maturing cannabis industry there is every kind of news and lots of it.

By John Garvey

Today is the fifth 4/20 holiday since recreational cannabis was legalized in Colorado and Washington with the historic passage of Amendment 64 and Ballot Initiative 502. If you’re operating a cannabis dispensary, you may remember in vivid detail the song you were listening to and the exact spot you were standing when you heard the news. In a way it’s surprising how much it still feels like the Wild West. It was, and still is, an exciting and chaotic time in cannabusiness—a time of both opportunity and looming challenges.

Colorado’s rollout of legal cannabis has been considered a success story by objective measures such as tax revenues, a modest decrease in teen pot use, and reduced arrests. The eight other states that have chosen to legalize recreational marijuana have had varying degrees of success.

“You are freaking out, man.”

Take California. The first state to legalize medical marijuana and one of several states to legalize recreational sales in 2017, California is in an interesting and unique position.

Oddly, the state with the “first mover advantage” now faces some of the greatest implementation challenges. Marijuana Business Daily has been reporting extensively on California’s legalization rollout. It threatens to become a fiasco due to supply shortages when testing regulations take effect this summer. Growers and distributors will be hit hard by state excise taxes if they’ve failed to include them in their cannabis sales transactions. Newly-legitimized dispensaries must contend with competition from a thriving black-and grey market. And only one in three municipalities is allowing legal cannabis operations.

The point is, while proponents of cannabis legalization and cannabis entrepreneurs may be happy with the progress of the last five years, most of the hard work lies ahead from a business standpoint.

The Cannabis Industry isn’t going anywhere, but dispensaries and vendors that aren’t investing in infrastructure and compliance will.

Some things you can’t help. If you’re in a newly-legal state your MIPs vendor might go out of business at any time. Banking in the cannabis industry is practically a three-ring circus with security risks and fees other retailers don’t have to think about. While the legal environment is obviously more supportive than it was five years ago, regulatory compliance may feel like you’re trying to hoist a piano up a flight of stairs. And so forth.

Consolidation is occurring on a much more expedited scale in the cannabis industry than in other industries. Those who are expanding are the ones investing in infrastructure. Regardless of whether you intend to expand or stay put, consider the implications of this.

Even if your exit strategy is to be acquired, having your ducks in a row will greatly strengthen your position. Data integrity and compliance makes due diligence easier and reduces liability for prospective buyers. (Any unknowns will reduce a prospective buyer’s valuation of your dispensary.)

Not to mention, reliable business partnerships, inventory tracking and point-of-sale systems just make your day-to-day life easier.

Fortunately, those things are our jam.

Business operations: Point of sale capabilities, seed-to-sale inventory tracking, security and marketing.

If you’re running a medical or recreational cannabis dispensary, you have enough plates spinning in the air without worrying about whether your point of sale system is going to bonk out. Additionally, you’re probably aware that a quality POS system does a lot more than credit card processing, so there’s much to consider.

For instance, a POS system in any industry should be PCI compliant, have fast processing times and offline transaction capabilities in case your internet service is disrupted. You probably want a combination of experience and industry specialization (consider the MJ Freeway fiasco). It’s also ideal to have as many business needs as possible handled by a single partner.

Now consider this:

Retail Control Systems has been working with a lauded POS and retail management system—NCR Counterpoint—since 1987. That’s nearly a decade before the California Compassionate Use Act took effect. We have a Tier 1 PCI compliant data center. And we have the framework in place to allow you accept credit and debit cards as soon as the Federal Reserve allows the industry access to conventional banking services.

Anthea RCS, directly and through partnerships with vendors like NexTec, handles everything from seed-to-sale inventory management to physical security measures like security cameras. NCR Counterpoint can also generate dozens of retail reports specific to your dispensary’s objectives and flag suspicious activity like excessive NO SALE transactions and comps.

(For more info on Counterpoint, visit our website or our parent company blog here.)

Data security: check. Reliability: check. PCI compliance: check.

With all your cannabis business solutions taken care of, you can focus more on what matters to your customers.

… Like terpenes!

Happy 4/20!!!

3 Must Have Features of a Cannabis POS System

3 Must Have Features of a Cannabis POS System

Cannabis Business, E-commerce, POS System

by Ryan Parks

It’s hard to believe that medical cannabis was legalized over 21 years ago in California and recreational cannabis has been legal for over 5 years in Colorado and Washington. With a relatively new industry, business owners are questioning whether they should opt for a retail point of sale system that has been around for a long time or a system with a shorter history that has been purpose built with features for the cannabis industry? Why not have a business management solution that does both?

Anthea, powered by Retail Control Systems, is built on the backbone of NCR’s industry proven hardware and software. NCR was founded in 1884 and Retail Control Systems has been in the game since 1987. With all that experience what features should you expect from your solutions provider and what features will speed up your day to day operations?

Security & Compliance

Security cameras on a wall staring at two women on the streetSecurity is a key feature in all retail and it is especially important in the Cannabis industry. With several recent security breaches plaguing the industry, the software security should be at the top of your mind.

  • Level 1 PCI/DSS Data Center: being a certified Level 1 service provider is one example of RCS’ commitment to strong security.
  • Closed Loop Reporting: Keep analytics and customer details secure while providing marketing automation with NCR Customer Connect.
  • In Depth Audit Trail – Log Aggregation: detailed insights into transactions. Every action is time stamped, logged, and aggregated for compliance reviews or audits.
  • Built in compliance reporting: ensures you provide the governing body of your state with the information they need, when they need it.

Reliability

Your business management solution needs to be reliable and notify you immediately if anything is amiss. Whether it is April 20th or the Friday before Thanksgiving, RCS is available for support. With a few key features Anthea will hopefully prevent the need to call.

  • Real Time Operational Alerts to Mitigate Risk: NCR Smart Alerts mitigate risk by notifying key managers via text message in real time about possible issues.
  • Tracking: Anthea tracks the true cost of your goods sold, tracks sales by customer, by strain and by plant. With reliable tracking you will never run low on product or miss a transaction
  • Server Uptime and Offline Ticket Entry: RCS’ data center boasts a 99.9% uptime with redundant systems that allow you to keep selling no matter what.

Feature Rich Integrations

Woman and man sitting at a table with a laptop and a phoneEven a well thought out point of sale system will need some customization. Make sure your POS solution has everything you need or can be customized the way you want.

  • Microsoft Power BI: With the Power BI add-on, you no longer need to create spreadsheets of your data by hand. Power BI is a suite of business analytics tools with connections to hundreds of data sources including Microsoft SQL that powers Anthea.
  • Foyer Live: Foyer Live is a part of Anthea and has the capability of; touch screen ordering, queue management, concierge order management, and digital signage.
  • Axis Cameras: Premier cameras with DVR functionality, people counting, zone mapping, and advanced HD clarity that minimizes bandwidth usage while maintaining crystal clear picture quality.
  • Your Specific Integrations: RCS has a staff of developers that can help customize the system to fit your businesses specific needs.

In conclusion, make sure your software and hardware are at a level that can grow with your business, it’s better to invest in a quality system now. The last thing you want is to replace everything in a couple years when your business expands.