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inside this
issue. contents:
18.
Q4 2017
potency and profit Korova maintains a whole new standard for cannabis-infused treats.
Editor-In-Chief Jamie Solis associate Editor Ashley Bennett Editorial Benjamin Adams coordinator Editorial David Branfman, Esq., Contributors Devon Brown, Hilary Bricken, Jasen T. Davis, David Edmundson Emily Manke, Meital Manzuri, Michelle Mabugat, Nicole Potter, Addison Herron-Wheeler photographers Jon Gilhooley, Tonya Perme, Eric Stoner, Steve Terrebonne Art Director Steven Myrdahl Production Michelle Aguirre Manager
Northern Success
Graphic Designer Nathan Hernandez
Cannabis news in Canada is constantly trending—here’s what you need to know about the future of cannabis taxes in the country.
sales director Joe Larson
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Account Alex Brizicky, Eric Bulls, Executives Kim Cook, Molly Clark, Chantal Jura, Monte Lee, Lee Moran, Casey Roel, Garry Stalling, Ryan Tripp, Shayne Williams, Vic Zaragoza
Natural Remedy
14.
general Manager Iris Norsworthy
Cannabis is more mainstream than ever, and it is increasingly being reported as an effective replacement for many pharmaceutical drugs.
The Gift that Keeps on Giving The holidays are here, and there are numerous reasons why cannabis businesses can benefit from giving back to their communities.
12.
office Manager Mikayla Aguilar digital content David Edmundson manager INTERNS Sophia Rybicki, Tyler Schultz Distribution Cruz Bobadilla Manager Publisher David Comden
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22. CBD Legality Keeps Mainstream Stores Uncertain
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24. Tips for Opening Cannabis Dispensary in California
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n e w s
bytes
Study Reveals that Californian Consumers Purchased $681 Million of cannabis in Three Months A new study from BDS Analytics based on data gathered from Californian dispensaries shows that between April and June 2017, Californians spent $681 million at legal cannabis dispensaries. The same study shows that 55 percent of purchases were for dried cannabis flower, with indica strains being the most popular choices. Although licensing has yet to begin for California’s recreational cannabis businesses, sales data shows that California already resembles states that have legalized recreational
CBD is an increasingly Popular Replacement for Traditional Medicine In the biggest survey on cannabidiol (CBD) consumption to date, results show that not only do women consume CBD products more often than men, but that once consumers tried CBD, women were more likely to discontinue their use of 6
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traditional medicines. In a new survey conducted by the Brightfield Group and HelloMD, 55 percent of CBD consumers were women, while men preferred more THCdominated products. “We are seeing an exponential rise in the interest of CBD products from our patient community—particularly among women,” said Dr. Perry Solomon, chief medical officer of HelloMD. “While we still have much to learn about CBD, we cannot ignore this one fact; the majority of those using CBD product today receive great benefit.” The study found 80 percent of CBD consumers agree that CBD is “very or extremely effective,” and 42 percent of CBD consumers quit taking other medications, like Tylenol or Vicodin, altogether.
cannabis. This is because there is typically a greater variety of products available at cannabis dispensaries in states that allow both medical and recreational cannabis. The second most popular form of cannabis sold in California was concentrates, totaling 25 percent of sales during the same three-month period. The California market comprises 34 percent of legal cannabis sales in the United States, despite not having licensed recreational cannabis businesses until January 1, 2018.
First Medical Cannabis License Awarded in Colombia FCM Global, a Colombianfunded producer of medical cannabidiol (CBD) extracts, has been awarded Colombia’s first license to legally export low-THC cannabis oil extracts for medical and research purposes. The export license complements FCM’s existing regulatory approvals to legally cultivate, process and manufacture low-THC cannabis oils and extracts. “We are proudly aligned with Colombia’s vision for becoming a regional leader in the medical cannabis industry and greatly appreciate the continued trust placed in our efforts by
the Colombian government. FCM believes that cannabis is the medical science market of the future, with enormous potential to generate breakthrough research and disruptive innovation,” said FCM founder and CEO, Carlos Velasquez. As the first Colombian company to receive the complete set of licenses required, FCM is well-positioned to create CBD extracts at a low cost and distribute them to domestic and international markets with legalized medical and research frameworks in place.
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The amount of money, in millions of Canadian dollars, that was recently invested in a joint venture between Canopy Growth Corporation and a Danish cannabis company called Danish Cannabis ApS: (Source: Newswire.ca)
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The amount of money, in Canadian dollars, that Canadian Prime Minister Justin Trudeau proposed as a tax-per-gram of cannabis once legalization takes effect in 2018: (Source: Bloomberg)
The amount of money, in millions of dollars, that the Californian medical cannabis industry sold in cannabis flower during the second quarter of 2017: (Source: Forbes)
375
The percentage of people in Germany who said they support recreational cannabis legalization:
The amount of money, in millions of dollars, that San Franciscobased cannabis delivery platform Eaze has raised in new funding for recreational delivery: (Source: TechCrunch)
1
The estimated percentage of cannabis businesses in the U.S. that are owned or founded by women: (Source: Kind Colorado)
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57.5 (Source: MAFOInstitut)
The amount of money, in millions of dollars, that was collected in recreational cannabis sales in Nevada during its first month of legalization in July:
271 (Source: USA Today) 8
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The amount of money, in millions of dollars, that one Pennsylvanian medical cannabis cultivation permit is selling for: (Source: The Philadelphia Inquirer)
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9
Time to Regulate Canadian industry experts react to newly proposed cannabis tax by Benjamin M. Adams
C
anada’s relationship with cannabis is evident as the nation is set to become the first advanced, industrialized nation to legalize and regulate cannabis and the second nation after Uruguay to legalize cannabis as a consumer product. Businesses are reacting to a recent proposed tax that would impose a C$1-per-gram tax on cannabis, as the details of the new regulated market emerge. On April 13, Prime Minister Justin Trudeau introduced Bill C-45 to legalize recreational cannabis on a federal scale in Canada. The bill amends the Controlled Drugs and Substances Act, and it repeals item 1 of Schedule II. It creates a strict legal framework controlling the production, distribution and sale of cannabis. The second reading of C-45 was passed on June 8. The bill’s companion, C-46, amends Canada’s Criminal Code. On October 4, Trudeau announced a C$1-per-gram excise tax on cannabis C$10 ($7.98) a gram or less. Cannabis over C$10 per gram would be taxed at 10 percent. The tax revenue would be split 50/50 between federal and provincial governments.
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There is already a thriving, caring cannabis community that’s been operational for decades. We don’t need to reinvent any wheels here. We just need to stop criminalizing a large portion of peaceful Canadians. need to reinvent any wheels here. We just need to stop criminalizing a large portion of peaceful Canadians.” In Dunsdon’s experience, not all existing companies are optimistic about the newly proposed tax. “I do not think businesses are reacting positively toward the proposed $1-a-gram tax,” Dunsdon said. “This assumes a lot. It assumes that all grams will be the same price. Is all coffee the same price? Is all chocolate the same price? The only tax that makes sense is one based on a percentage. Percentages do not make assumptions about price deltas and product quality.” The cost per gram dramatically affects the tax rate, as some pointed
Mary Jean Dunsdon
out. DOJA is one of Canada’s coveted licensed producers, and the company expects to benefit from selling premium cannabis under the new tax proposal. “DOJA is a cannabis lifestyle brand that grows premium handcrafted strains that will range in price from $10to $15-per-gram, which under the tax proposal would incur a 10 percent tax,” Jeff Barber, CFA, chief financial officer of DOJA told CULTURE B2B. “Contrast that against a low cost supplier selling at $6-per-gram, a $1-per-gram tax would be equivalent to approximately a 17 percent tax. Relatively speaking, I believe the tax proposal benefits premium producers.” Many questions remain about the details of the recreational market’s supply chain. Access to Cannabis for Medical Purposes Regulations (ACMPR) outlines the current process to obtain cannabis for medical purposes. “If the ACMPR-licensed producers are able to directly supply the recreational market, there is a better chance [that] the federal government’s July deadline for legalization can be reached,” Barber added. “Some provinces are currently carrying out public consultation on cannabis legalization, so to expect all Canadian provinces and municipalities to have cannabis regulation and distribution ironed out in nine months would be highly optimistic.” The regulated, reinvented market is coming whether businesses are ready or not. The new system, in many ways, will eventually resemble how alcohol is regulated in Canada. c
After allowing hemp cultivation in 1998, Canada has seen its hemp industry grow as more people are seeing the plant’s potential to produce environmentally friendly products. At Hemp 2017: Coming of Age, Canada’s leaders in the hemp industry will get together to discuss the commercial growth of hemp and celebrate hemp’s “coming of age” in Canada. Hemp has a rich history in Canada, and it’s fitting that Canada’s 150th anniversary is also going to coincide with the celebration of Canada’s hemp industry. The event features a panel of industry professionals who will speak on topics such as increasing funding for Canada’s hemp industry and a look into the hemp industry in different parts of the world, such as India and Europe. (Tyler Shultz)
Hemp 2017: Coming of Age – Canada’s National Hemp Convention
Mary Jean “Watermelon” Dunsdon is owner of The Licorice Parlour stores on Commercial Drive and Granville Island in Vancouver, British Columbia and star of the digital cooking series Baked: Cooking with Mary Jean. Dunsdon, armed with her extended expertise in business and cannabis, ran for city council in Vancouver as a candidate under Sensible BC, a provincial party. Dunsdon explained to CULTURE B2B that while Canada’s cannabis industry is set up for success, there are real concerns being expressed by existing businesses. “Canada is very well-positioned for a recreational market come July 2018,” Mary Jean Dunsdon told CULTURE B2B. “We practically have one in place already. There is already a thriving, caring cannabis community that’s been operational for decades. We don’t
WHEN: Tues, Nov. 14-Thurs, Nov. 16 WHERE: Ottawa Marriott Hotel, 100 Kent St, Ottawa, Canada WEBSITE: www. hemptrade.ca
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Cannabis Business Executive Convention
In partnership with Cannabis Business Executive, a media company serving the cannabis industry, the inaugural Cannabis Business Executive Convention (CBEC) will take place in the beginning of January in Washington D.C. Designed by the industry, for the industry, the CBEC is the place for attendees to network, drive growth and advance business goals. As the cannabis industry’s go-to event for networking, education and advocacy, the convention is expected to attract over 3,000 investors, medical researchers and industry decision makers. Three tracks are available at the convention, featuring topics on business development, operations and production, science and technology. The convention will also have a keynote lecture presented by physician and author David Casarett, MD, who has talked about what mainstream medicine can learn from medical cannabis for TEDMED. (Tyler Shultz) WHEN: Wed, Jan. 10Fri, Jan. 12, 2018 WHERE: Walter E. Washington Convention Center, 801 Mt Vernon Pl NW, Washington, D.C. WEBSITE: www. cbec2018.com
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Give Smart
How to get the most out of your holiday giving by Emily Manke
T
he holiday season is here, and like most people, you might be frantically shopping for holiday gifts for your friends and family. But as you’re desperately searching for appropriately appreciative and inexpensively priced gifts, it hits you. As a business owner, you know that the New Year also means that you must start working on your 2017 taxes. Fortunately, now is a great opportunity to both get ahead on your taxes and also to take into account those in need. Whether your business is in the cannabis industry, or elsewhere, now is the time to start thinking about 2017 taxes. One way to ensure you will save on taxes, and feel fulfilled, is to donate to a 501(c)(3) nonprofit. Very few
endeavors can allow you to do some good while saving some money, but with a little common sense, you can do just that. >>
In addition to the altruistic benefits of donating to charity, you can receive a tax benefit as well. If you itemize your deductions, you can deduct the amount that you donated as a deduction against your taxable income.
Kim Walker of Kim Walker, CPA, runs a full-service public accounting firm in Las Vegas, Nevada that specializes in doing taxes for cannabis businesses. CULTURE B2B reached out to Walker, who explained the tax benefits of giving to philanthropic organizations. “In addition to the altruistic benefits of donating to charity, you can receive a tax benefit as well. If you itemize your deductions, you can deduct the amount that you donated as a deduction against your taxable income. And depending on your tax bracket, that will net you a benefit of anywhere from 10 percent to 40 percent,” Walker told CULTURE B2B. Good for your soul, good for your pocket book, and that’s not all giving is good for. Donating to a charity publically can also be a smart public relations move for businesses. Cannabis is still a budding industry, and any thing new startups can do to help establish their image as conscientious is in their favor. Having a cannabis company’s logo on a banner at a local marathon for cancer research, or at a fundraiser for an environmental charity, is good for the industry as a whole, in addition to your business’ reputation. Greg Butcher is founder of Bigger Picture, a marketing agency out of Seattle, Washington that has worked with a number cannabis clients over the years. CULTURE B2B chatted with Butcher to gain his insight into the many benefits businesses can
gain through giving back to charity. “There’s plenty of research pointing to the fact that consumers would rather do business with organizations that support a worthy cause,” Butcher explained. “That’s true of any business, and the cannabis industry is no different. However, cannabis-related companies need to be especially careful when executing any type of cause-marketing in order to ensure that their brand message is properly aligned with a specific cause and that there is no perceived conflict of interest.” Strategic cause-marketing is beneficial to the beneficiary, because it brings positive attention to various causes, as well as providing direct financial support to causes that are in need. Butcher continued to explain other benefits businesses can gain from altruism. “In addition, cause-marketing helps reveal a little more of a back story on an organization and what’s important to them. Ultimately, the partnership has to be authentic and it has to be a good match. Causes such as environmental conservation and animal–related nonprofits would both be areas that I would consider investigating for a cannabis client.” Butcher concluded. So this year, make sure to put a couple of local or national charities on your holiday gift list. You can feel good about it in your heart, your bank account and for your business. c
online cannabis buying habits
{
jan. 2016 - april 2017
13% 13% 14% 14% 17% 16% 14% TUES.
WED.
THURS.
FRI.
TRANSACTIONS BY DAY
SAT.
42%
6PM - 12AM
{
33%
FRI. - SAT.
MON.
42%
of transactions occur between 6pm and midnight
SUN.
16% 12% 3%
4% 10% 14% 23% 19%
12AM-3AM 3AM-6AM 6AM-9AM 9AM-12PM 12PM-3PM
3PM-6PM
6PM-9PM 9PM-12AM
TRANSACTIONS BY HOUR Source: greenRush
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13
Endless Potential Pharmaceutical drugs are being replaced with medical cannabis in record numbers by Benjamin M. Adams
C
annabis-based medicine is quickly replacing potentially harmful pharmaceutical drugs, and recent data confirms it. Cannabidiol (CBD)related sales have tripled since 2014, according to the latest mid-year CBD Report from the Hemp Business Journal, in tandem with opioids falling out of favor. The CBD Report used data from BDS Analytics and New Frontier Data, and found that total U.S. CBD sales rose from $108.1 million in 2014 to $358.4 million in mid-year 2017. Financial experts suggest that those who are wise are investing in stocks and exchange traded funds (ETFs) linked to cannabis biotech companies, ancillary businesses and cannabis-touching companies. Patients are replacing dangerous drugs with all forms of medical cannabis, according to a recent study published in the April 2017 issue of the peer-reviewed International Journal of Drug Policy. It was the first study to specify the classes of drugs that are being replaced with medical cannabis as a substitute. Researchers looked at the selfreported substitution of cannabis instead of prescription opioids, benzodiazepines and antidepressants. Researchers surveyed 271 respondents with an online survey consisting of 107 questions on patterns of abuse and cannabis substitution. Sixty-three percent of the survey’s respondents reported that they use cannabis as a substitute for prescription drugs. Patients reported using cannabis as a substitute for alcohol (25 percent), cigarettes
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I think that patients honestly believe the assertion that cannabis is safer than prescription opioids. We’re in the middle of a massive opioid overdose crisis in North America . . . More and more people are finding that cannabis can interrupt that cycle of dependence.
(12 percent) and illicit drugs (three percent). The patients all received their cannabis from the massive Canadian licensed producer Tilray. Vice President of Patient Advocacy at Tilray, Philippe Lucas, is also lead author of the study. “We found that these are the three primary reasons that people say that they are using cannabis as a substitute. The number one reason is less adverse side effects. The second one is that patients stated that they believe cannabis is safer in comparison to opioids. And finally, better symptom management from cannabis compared to prescription drugs,” Lucas told CULTURE B2B. “Once again, the focus is really on prescription opioids.” North America is currently in the grips of an opioid epidemic at crisis levels. In Ontario, Canada, the nation’s most populous province, one in eight young adult deaths are a result of the opioid crisis. “I think that patients honestly believe the assertion that
cannabis is safer than prescription opioids,” Phillipe explained. “We’re in the middle of a massive opioid overdose crisis in North America . . . More and more people are finding that cannabis can interrupt that cycle of dependence.” All patients involved in the study had received a physician’s authorization to access medical cannabis. Lucas shared that cannabis should be considered at three different points when considering treatment options. “The use of cannabis should certainly be based on the level of efficacy that we know of and the level of potential harms, be it a first-line of treatment rather than a third- or fourth-line,” Lucas said. “Physicians and patients, I believe, should be considering the use of cannabis before they start looking
at the use of other drugs that are potentially more dangerous, more deleterious—since four out of five people who are injection drug users start out using opioids through prescriptions.” The second point in which cannabis and cannabis-based drugs should be considered is for use together with opioids, for those who need it. “I think that the second part of the cycle is that for those who are already on opioids and are finding them effective, but are worrying about increasing their use,” Lucas added. “Cannabis as an adjunct therapy has been shown to repotentiate opioids. So it makes the pain-relieving effects of opioids more potent and to reduce opioid cravings through an opioid-sparing phenomenon that’s been found in research. For those who are already
on opioids, it can be a way to ensure that they don’t tip over into that pattern of abuse.” The third way cannabis can play a role in a therapeutic process could be to help those who have already become addicted to opioids. “There’s a growing amount of research showing that cannabis, by reducing the craving for opioids and studies of methadone treatment, can actually increase the success rate of those seeking opioid replacement therapy like methadone or Suboxone,” Lucas said. Prescription opioids could wipe out a generation of unknowing addicts in North America. The Tilrayfunded research study confirms the argument that patients are replacing dangerous drugs with medical cannabis. c CULTUREB2B.com
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photos by Steve Terrebonne
Unrivaled Potency Korova CEO Steve Adkins shares how making infused desserts has made his company a leader in edibles by R. Scott Rappold
S
ome infused edible companies cater to the novice, with bitesized candies as low in strength as 2.5 milligrams, a popular trend known as microdosing. At Korova, you might say they go in a different direction. The Black Bar brownie packs in 1,000mg of THC— so potent that it is “recommended solely for those with extreme pain and a high tolerance.” The Oakland, Californiabased company is clearly onto something. Since launching in 2011, it has become one of California’s largest edibles companies, with 55 employees and selling 25,000 edibles each week. The motto is “unrivaled potency,” with the three-eyed cow logo you’ll see in more than 1,000 California medical cannabis dispensaries. Korova’s success is further proven in New Frontier Data’s report “Cannabis On-Demand: Evolving Trends in California’s Medical Market.” The company’s famed Black Bar is listed as the number one edible product by unadjusted retail value in the entire state of California. >> CULTUREB2B.com
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We don’t encourage people to eat the whole thing. It says on the package you can always eat more but you can’t eat less. “Dosing You Can Rely On” The company was founded by Joe Gerlach, who saw something lacking on dispensary shelves. “It was people making their own [edible] and putting it in plastic baggie written on it with a Sharpie,” said Steve Adkins, Korova’s CEO. “The quality of the products, the inconsistency of dosing, was something [Gerlach] thought he could do better.” The name Korova came from the bar where hooligans drink drug-laced milk in the film A Clockwork Orange, a favorite of Gerlach’s. It’s also Russian for “cow.” The cow in the logo is wearing the hat from the
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movie. And the third eye, well, maybe you should eat some Black Bar, give it a while and then ponder that. From the beginning, the cookies and brownies were made from scratch, with professional packaging and lab testing to ensure the product met the hefty potency claims. “It’s really dosing you can rely on. When you eat an edible from Korova, you’re going to feel it,” said Adkins. That said, the company does sell edibles with potency as low as 150mg, which is still sure to knock the socks off most cannabis enthusiasts.
Medical to Recreational In some states, edible makers are required to have products divided into pieces by potency. California does not, so a consumer eating a Korova bar decides how much to break off (assuming, of course, they’re not interested in ingesting 1,000 milligrams in one sitting.) Adkins said Korova’s customers will eat the 1,000mg brownies in small pieces and put the rest back in the freezer, stretching their $50 over days or weeks. It’s why the Black Bar is the most popular product, followed by the 500mg Fifty One Fifty Bar. “We don’t encourage people to eat the whole thing. It says on the package you can always eat more but you can’t eat less,” he said. Whether Korova will continue to be able to make them
FLOWER AS A PERCENT OF TOTAL CALIFORNIA ON-DEMAND SALES -16% JAN. 2016 FEB. 2016 MAR. 2016 APR. 2016 MAY 2016 JUNE 2016 JULY 2016 AUG. 2016
It’s really dosing you can rely on. When you eat an edible from Korova, you’re going to feel it. like that is up in the air as California draws up its first cannabis regulations. Will edibles have to be divided into 10mg doses? Will something as potent as the Black Bar even be allowed? Amid the uncertainty, Korova is plunging ahead on new initiatives. The company plans to be part of the recreational market, even as Adkins hopes for an exemption
SEPT. 2016
to allow Korova to continue to sell the 1,000mg bars in medical dispensaries. Korova has licensed its product to manufacturers in Nevada and Arizona. The company even plans to launch its own line of cannabis flower next year. “We definitely have a lot of work we’re doing inside to get ready for this, with the idea of continuing to have a premium position within the cannabis industry, but knowing to do that we need to make some changes in a way that’s going to benefit our company, consumers and dispensary owners,” Adkins said. “With the regulations in California, however they end up, we’re looking at positioning ourselves as ‘potency you can rely on.’” c
OCT. 2016 NOV. 2016 DEC. 2016 JAN. 2016 FEB. 2017 MAR. 2017 APR. 2017
TOTAL CHANGE JAN. 2016 - APRIL 2017
76% 74% 74% 72% 75% 71% 69% 72% 71% 71% 69% 72% 70% 69% 69% 64%
SHARE OF RETAIL SALES BY PRODUCT JAN. 2016 - APRIL 2017
4%
2%
1%
70% FLOWER
22% CONCENTRATES
4% EDIBLES
2% PRE-ROLLS
22% 70%
1% OTHER
Source: greenRush
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LEGAL
Legal Limbo
Major retailers continue to flirt with the prospect of selling CBD products by Hilary Bricken
T
he media reported on Target Corporation’s short-lived effort at selling cannabis-based cannabidiol (CBD) products online in late September. By the end of the day when the story broke, the major retailer had already removed the product from its website. The Phoenix New Times quoted Target spokesperson Kate Decker as saying, “We started carrying Charlotte’s Web hemp extract items last week on Target.com. After further
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review, we have decided to remove it from our assortment.” Many online retailers including Walmart, Groupon and Amazon sell or have sold CBD products online. This is in part because of the complex legal status of CBD. The Drug Enforcement Administration’s (DEA) current stance is that CBD (and other cannabinoids derived from cannabis) is a Schedule I substance under the Controlled Substances Act (CSA). Last year, the DEA created a rule defining
“marihuana extract” as an extract “containing one or more cannabinoids derived from any plant of the genus cannabis,” as cannabis, a Schedule I controlled substance. Use of “any” means it applies to any derivative of the cannabis plant, including CBD and other cannabinoids found in cannabis. This far-reaching definition purports to make illegal parts of the cannabis plant that were seemingly legal. Setting aside that DEA’s rule, there are three scenarios in which CBD is arguably legal even under federal law. The first being when CBD is derived from the “mature stalk” of the cannabis plant, because the CSA’s definition of cannabis “does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture salt, derivative, mixture or preparation of such mature stalks (except the resin
of the cannabis plant are explicitly outside the scope of the CSA, and the DEA was not permitted to expand its scope of enforcement to encompass those CSA-exempt parts of the plant. At the time of these rulings, the Farm Bill did not exist, so these rulings only applied to hemp imported from outside the U.S. Cultivation of hemp in the United States (outside of the Farm Bill) requires a permit from the DEA (which the agency pretty much never issues to anyone). However, these Ninth Circuit holdings could also apply to hemp grown pursuant to the Farm Bill, making CBD from Farm Bill-grown hemp with only trace amounts of naturally occurring THC lawful under the Ninth Circuit’s ruling as well. The Hemp Industries Association sued the DEA over the cannabis
Nonetheless, despite potential legal flaws, the DEA’s cannabis extract rule is currently in place and anyone who distributes ‘cannabis extracts,’ including CBD, is a potential target of the DEA. CBD extracted from hemp should be legal in the state in which it was derived, though the sale of this product in other states is not explicitly allowed under the Farm Bill. The final scenario is when CBD is derived from imported hemp. In the early 2000s, two cases out of the United States Court of Appeals for the Ninth Circuit, Hemp Indus. Ass’n v. DEA, 357 F.3d 1012 (9th Cir. Cal. 2004) and Hemp Indus. Ass’n v. DEA, 333 F.3d 1082 (9th Cir. 2003) determined that the DEA cannot restrict or outlaw the possession or consumption of hemp products simply because they contain trace amounts of THC. This is because some portions
extract rule, and that case is still pending. Until that case is decided, uncertainty remains as to the legality of CBD products. The DEA may very well lose in this newest lawsuit, because its rule appears to conflict with the Farm Bill and the hemp industry cases from the early 2000s. Nonetheless, despite potential legal flaws, the DEA’s cannabis extract rule is currently in place and anyone who distributes “cannabis extracts,” including CBD, is a potential target of the DEA. This is likely why online retailers like Target have flirted with selling CBD products online, but usually end up pulling the products from shelves. c
Set to take place close to the beginning of winter, the International Cannabis Business Conference (ICBC) taking place in Kauai, Hawaii should help unify the local and nationwide cannabis industries. ICBC offers learning opportunities and networking in addition to panels about cannabis media, cannabis brands and public cannabis companies. Featured speakers will include Hawaiian Senator Will Espero, Congressman Dana Rohrabacher and Meg Owen, senior digital marketing director for Leafly. Topics of discussion include mainstreaming cannabis media, extraction techniques, and the rules and regulations for medical cannabis in Hawaii. After the conference concludes, attendees are invited to play golf on a course that is often used by professionals during the PGA Grand Slam of Golf. (Tyler Shultz)
The International Cannabis Business Conference
extracted therefrom), fiber, oil or cake, or the sterilized seed of such plant which is incapable of germination.” 21 USC § 802(16). The DEA clarified that its new CBD rule does not include those portions of the plant specifically exempt from the CSA’s definition of cannabis, but it also maintains that products containing any more than nominal amounts of CBD can be derived from the mature stalks and would therefore constitute unlawful cannabis derivatives. The second scenario is when CBD is extracted from industrial hemp that is lawfully grown in compliance with Section 7606 of the Agricultural Act of 2014 (U.S. Farm Bill). The Farm Bill allows states to enact pilot programs for cultivating hemp for research and scientific purposes without a permit from the DEA. Under the Farm Bill,
WHEN: Fri, Dec. 1-Sun, Dec. 3. Golf Tournament on Mon, Dec. 4 WHERE: Grand Hyatt Kauai 571 Poipu Rd Koloa, Hawaii WEBSITE: www. internationalcbc.com
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LEGAL
Plan and Prepare Key essentials for opening a new dispensary in California by Michelle Mabugat, Esq. at Manzuri Law
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very week, without fail, Manzuri Law speaks with prospective clients looking to open or invest in a new cannabis dispensary in California. This, of course, is not surprising. With state licensing beginning soon, entrepreneurs everywhere are vying for the chance to be at the forefront of California’s newest, multi-billion dollar industry—legal cannabis. Opening a new retail shop in this industry is not easy or without risk. In fact, the licensing process can be an extremely daunting experience for industry veterans and newcomers alike. The state laws that govern dispensaries in California are extremely technical and complex. But the bigger challenge lies in the fact that not all cities and counties are alike. With those things in mind, here is the bare minimum you need to know before you decide to start a new retail venture in California.
1
Be Aware of Local Rules and Regulations
First things first, you must be in compliance with local laws in order to get a state license. On June 27, Gov. Jerry Brown signed Senate Bill 94 into law, merging California’s cannabis laws into one single unified system of rules for the state’s medical and non-medical (i.e. adult use) commercial cannabis businesses. SB-94 took effect immediately and created a new comprehensive regulatory system called the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA). Under SB-94—which is officially now California law—local law remains king. Local cities or counties retain the authority to prohibit cannabis businesses entirely, allow only some or allow them under whatever strict conditions they see fit. The state will be prohibited from issuing a state license to any business that violates local law. The following is how it’s planned to work: When the state receives your application, it will notify your local city or county. Your local officials will then have 60 business days to alert the state if your dispensary is not acting in compliance with local laws. If your local officials tell the state that your dispensary is not acting in compliance with local laws, the state will reject your license application. So, do your basic homework. At the very least, be aware of the cities or counties that ban cannabis outright so that you can avoid those locales altogether. If you’re lucky enough to be in a city or county that is cannabis-friendly and has a local permitting process, then you must get a local permit first before you can apply for a state license. On the other hand, if your city or county is still on the fence about cannabis and
has a temporary ban or moratorium currently in place, then you cannot apply for a state license unless your local government decides to allow commercial cannabis activity in the future.
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Secure Real Estate
Just like any other business venture, finding a location is critical in this industry. Your retail location not only has to suit the needs of your business—it must also comply with applicable state and local laws that govern where retail shops can exist. For instance, under California law, all retail shops must be located at least 600 feet away from a K-12 school, day care center or youth center. Cities and counties have the authority to mandate stricter restrictions than those required by the state. For example, in Los Angeles, city officials approved a zoning regulation ordinance that limits dispensaries from operating within 800 feet of K-12 schools, thus increasing the state’s buffer by 200 feet. This means that if you plan to open a dispensary in Los Angeles, you will have to comply with the larger 800-foot buffer required by the city, as well as any other zoning or local land use requirements. Do your due diligence. Once you find a viable location, make sure the location complies with all state and local requirements and regulations. You can do this by reviewing relevant municipal codes, land use regulations, zoning ordinances and, in some cases, talking with the appropriate government officials. You don’t want to be that person who invests into a multi-million dollar property or gets locked into an expensive long-term commercial lease—only to have your application denied because you were unaware that your property failed to comply with state and/or local laws. >>
support for legalization by number of children in household support for legalization varies significantly by the number of children in the household
FAMILIES WITH NO CHILDREN
FAMILIES WITH 1 TO 3 CHILDREN
FAMILIES WITH 3 OR MORE CHILDREN
25% 14%
1987
11%
68% 55% 46%
2016 CULTUREB2B.com
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Get your Finances in Order
The cannabis industry is capitalintensive, so financial planning is key. Figure out your startup costs and make sure to keep your startup budget on track. If you need to secure outside financing, just be aware that giving ownership shares to an investor could potentially jeopardize your chances at licensing. SB-94 defines an “owner” as a person with 20 percent or more ownership in the business, a CEO or board member or any person who participates in the “direction, control or management” of the business. Because all “owners” will be subject to criminal background checks, an investor with a criminal record could potentially put your application at risk. New operators should also take into account the high possibility of lengthy delays. According to SB-94, priority will only be given to businesses that were operating “in compliance with the Compassionate Use Act and its implementing laws” before September 1, 2016. In other words, a large number of pre-existing nonprofit collectives are going to get first dibs on state licenses in January 2018, while new dispensaries will have to go to the back of the line and wait. Also, given the current state of the law, new business owners will probably be unable to operate until they receive their state license, which could potentially take
months or even years. Make sure your budget accounts for these various uncertainties by adding more funding as cushion.
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Get Your Paperwork Ready
Again, each city and county will have different application requirements and operational standards for dispensary operators within their borders. However, there is a lengthy list of documents that a prospective retailer will almost always be required to turn in with their application. Some of these documents include corporate docs, standard operating procedures, owner financial info, security plans, staffing plans, employee handbooks, landlord authorizations, premises diagrams, community benefit plans, track-andtrace plans, etc. etc. . . . the list goes on and on. Feeling a little overwhelmed by this maze of requirements? Well, welcome to the world of regulated cannabis. Navigating the licensing process is not a fun or easy task. But in order to protect both yourself and your investment, you need to fully understand all the various requirements and legal hurdles that are involved. Soon, when state licensing begins in January 2018, only those operators who are willing to expend the time, effort, money and risk required to run a compliant shop will be the ones able to enjoy the profits of California’s legal cannabis. c
OPPORTUNITIES FOR CANNABIS ON DEMAND AROUND LEGAL MARKETS ONLINE ORDERING TRENDS ON THE GREENRUSH PLATFORM
4%
2%
1%
22% 70%
TOTAL SHARE OF UNADJUSTED RETAIL VALUE BY PRODUCT 70% FLOWER 1% ACCESSORY 22% CONCENTRATES >1% ORAL/LIQUID 4% EDIBLES >1% TOPICALS 2% PRE-ROLLS
TRANSACTION VALUES $70.67
$69.98
$678.32
AVERAGE TRANSACTION VALUE
AVERAGE FIRST-TIME TRANSACTION VALUE
AVERAGE TOTAL TRANSACTION VALUE PER PATIENT Source: greenRush
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TRENDS
If each customer can refer five friends every three months, you’re getting a huge, huge increase in the number of customers. And if you can retain even 25 percent of those customers that were referred, you’re getting a huge boost to your bottom line.
Smart Solutions
How to increase customer retention and stay competitive in the industry by Devon Alexander Brown
D
espite uncertainties on a state and federal level, the cannabis market is growing and is on course to continue that growth. In 2016, the legal cannabis market in the U.S. generated $6.7 billion, according to a report by Arcview Market Research, and by 2020, New Frontier Data projects cannabis businesses will create over 250,000 jobs— ultimately establishing more jobs than utilities, government or manufacturing sectors. In short, the demand for cannabis is real. And that demand makes attracting customers and building revenue fairly simple. However, retaining those customers is a lot trickier. Here are some ways to better connect to your customers and foster loyalty.
Hire the Right Staff In many ways, the cannabis industry is still in a startup phase. Due to evolving regulations and growing competition, it is important to have dedicated and passionate staff members who are knowledgeable and equipped to help customers navigate their experience with cannabis. Karson Humiston, founder and CEO of Vangst Talent Network, a cannabis talent and recruitment agency, shared with CULTURE B2B that a business is only as good as the people it hires. “Hiring and retaining
the best talent is absolutely the most important part of companies, yet it’s often not prioritized,” said Humiston. “When looking for employees, there are three key things to look for: First, experience. It’s critical to find someone with proven experience doing what you need them to do. Second, personality. Find someone who will be the right personality fit for your current organization. Third, motivation. I look for people who are motivated to get ahead in their careers and have ambitious goals.”
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Use a B2C Marketing Automation Platform Knowing your customer demographics is the first step in personalizing your business. But it’s tougher than it sounds. Platforms like Google will organize customers into groups based on criteria like gender and age, but this data only goes so far. More specific information like previous purchases and social media influence are harder to track without an appropriate marketing platform. Automation marketing platforms like SailPlay, Baker, MANTIS®, BudBytes and many others can be beneficial to retailers, because they lend greater understanding of individual customer interests and determine actions that
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can help businesses increase repeat visits. Marketing automation is commonly used by businesses outside of the cannabis industry to reach a broad audience as efficiently as possible, but it can also offer invaluable assistance to cannabis companies. Ultimately, marketing automation is software that uses analytics to facilitate repetitive actions like emails, SMS messaging, push notifications and other marketing efforts in a personalized way. It can also integrate with social media accounts to raise brand awareness and track customers who are especially active in promoting your business online. Arnab Mitra, marketing manager at SailPlay, told CULTURE B2B that effectively using customer data is a serious learning curve, but automation marketing platforms help businesses streamline the process. “Customer data is a huge asset for you and so it can become quite a challenge to understand how to utilize data, how to understand what is working and what is not, and then that’s where [SailPlay] really can hop in and make the difference on your investment and make sure your revenue is always increasing,” Mitra said. However, automated marketing platforms are not enough on their own. Basic maintenance is required to reap the utmost benefits. Once a lead has been generated, it needs to be nurtured. Then, the platform needs to be updated, and there needs to be regular follow-up to ensure customers are responding positively to marketing initiatives. >>
Create a Customer Loyalty Program Loyalty or rewards programs are designed to encourage customer retention. Offering customers sales coupons, exclusive access to products and free merchandise are simple strategies to implement into your business and can get customers talking— especially when these offers are personalized to reflect their purchasing habits. Loyalty programs are best used with automated marketing platforms, because they intuitively track sales data and determine campaigns that most accurately reflect your consumer base. Since nonpurchase actions like
social media activity are also tracked, Mitra shared that rewards for customer referrals are especially effective at fostering customer loyalty. “Something we really push through social media is the refer-a-friend function, because that’s how you really increase your customer reach,” Mitra said. “If each customer can refer five friends every three months, you’re getting a huge, huge increase in the number of customers. And if you can retain even 25 percent of those customers that were referred, you’re getting a huge boost to your bottom line.”
Get Involved in the Community States like California, Colorado, Washington and Oregon have thriving cannabis markets with retailers deeply rooted in the community. Regardless of the location, or whether the market is large or small, cannabis businesses face a lot of competition. One way to make an impression on customers and keep them coming back is to show your business’ dedication to the community. For example, dispensaries like The Pothole in Colorado and Summit Medical Marijuana in
Stay Focused With seemingly endless potential in the cannabis industry, it can be easy to lose sight of your business plan and customer retention efforts. Humiston, CEO of Vangst Talent Network, also shared that it’s important to limit distractions that can jeopardize your brand and alienate your customers. “There are
so many opportunities in the cannabis industry, which can tempt entrepreneurs to ‘chase shiny objects’ rather than focus on doing one thing really well,” Humiston said. “I look at some entrepreneurs in this industry with great ideas and if they would stay focused on their single idea, they’d probably see more success.”
Maine have shown dedication to the community by offering free cannabis to adults ages 21 and over who pick up and turn in a bag of trash. Holding special events is an effective strategy to gain loyal customers that might otherwise stay home. Dispensaries like Vela Cannabis in Seattle, Washington host monthly art showcases for local artists free of charge. They also run a blog and team up with local shelters to hold special events like “Pet Appreciation Day” as a way of drawing in a niche community and expressing solidarity with other establishments. c
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TRENDS
How to Succeed in Video Marketing by David Edmundson
Video is the future. Now that everyone has a high definition camera in their pocket, there is virtually no excuse not to have a robust video platform behind your brand. Videos can help you set yourself apart from your competitors and is an amazing avenue for engaging with your audience. 30
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Videos also allow you to have a more emotional connection with your audience, and when someone is emotionally invested in your message, they are much more apt to share it with their personal audience.
Why Video? People love watching moving images, which explains why the latest The Fast and The Furious movie made over $1 billion. Vin Diesel movies aside, video has been proven to help audiences retain information better. A recent study by the marketing company wyzowl (wise owl, took us a minute too) showed that 74 percent of watchers went on to purchase the product they were researching. Videos aren’t just for people, Google loves videos—after all, the technology company own the largest video platform on the internet through YouTube. Google is also aggressively adding video content to its search results. So, be sure to add good descriptions to your videos that focus on the keywords you are looking to dominate. Remember that camera you are carrying around in your pocket? Turns out that it also plays videos, and with Facebook and YouTube optimizing content for mobile
devices, users are being drawn to a new age of video marketing. YouTube reports that mobile video watching has risen at least 100 percent each year since 2013. Google has also stated that smartphone users are 1.4 times more likely to watch advertisements before videos, in comparison to TV or desktop users. Video content is incredibly shareable on social media. All major platforms now offer live video options, as well as native video players for you to customize your branding and messaging to. Videos also allow you to have a more emotional connection with your audience, and when someone is emotionally invested in your message, they are much more apt to share it with their personal audience. How many times have you seen the man with Parkinson’s who is healed by cannabis, or the one where a lion is reunited with the man who saved him years earlier? Videos make us feel things instantaneously, in a way that print can’t. And once you have your audience hooked, they will share your message with their friends. Let your audience market for you.
Different Strokes for Different Folks There are a number of approaches you can take for your videos. You can record and edit your videos, you
can “go live” on your social media of choice, you can outsource your videos to a professional company or any combination imaginable. If you do record your videos, it is crucial to invest in a decent microphone. It has been shown time and time again, that people will forgive poor video quality if the content is good, but poor audio will always be frowned upon and disregarded. You can get a decent microphone for under $100, and unlike most technology, microphones don’t go out of style every week. You also need to set your expectations. If you haven’t made a video before, your fist video will probably be pretty bad. Your second one will be better, and so on and so forth. You weren’t born with the innate ability to craft video content, so don’t get frustrated and give up. Watch your competitor’s videos. See what they do right, and avoid what they do wrong. For those who want to do live videos on social media, do us two
favors. First, please make sure you are properly lit. I’m not saying you need to have a film degree in lighting, but you can tell by looking at your screen if the light behind you is blowing you out, or if it is so dark that no one has any idea what you are doing. Secondly, please turn your phone sideways and take the video in landscape orientation. We’re not all savages here. If there is one downside to the rise of smartphones, it is that it has heralded the rise of portrait-mode video. Also, if you see someone shooting with their phone up and down, please correct them—they’ll thank you for it one day. Finally, if you want to outsource your video content, make sure you know what you want. If you are all over the place, the agency will rarely be able to give you what you want. Go in with a plan, but also be flexible to their ideas. They are the professionals after all. Never go into your meeting though without an idea of what you are looking to accomplish.
Get the Word Out We’ve touched on social media several times already, but its importance cannot be understated. Facebook is hurtling towards two billion users, YouTube says that they have one billion monthly users, and Instagram is closing in on the billion user mark. You should utilize the live video features of your social media platforms when applicable, and post videos there whenever possible. When you post your videos, make sure to upload them directly to the site. It takes a little longer than simply sharing your YouTube link, but the video will auto-play if you add it to the native player. It will also be added to similar videos that are suggested after someone watches a likeminded video. Like any creative marketing, you need to tailor your video content to your audience. Study your demographics, and play to your strengths—you will be able to flourish in no time. c
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