Marijuana Business Magazine September 2020 by MJBiz Daily

$12.95

Insights for cannabis executives, investors & entrepreneurs

VOL 7 • ISSUE 8 • September 2020

Foreign

Affairs

Canada’s largest companies are on the defensive, signaling potential opportunities for newcomers and smaller players

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September TABLEOFCONTENTS

Marijuana Business Magazine

FEATURES

September 2020 • Volume 7 • Issue 8

FOREIGN AFFAIRS Canada’s largest companies are on the defensive, signaling potential opportunities for newcomers and smaller players.

84 VIRTUAL REALITY

Amid COVID, companies turn to virtual platforms for product launches, employee training and customer education and engagement.

92 GREEN PACKAGING REIMAGINED

Cannabis-based packaging could help the industry reduce waste and create a more sustainable future. Infused-products company Wana Brands sponsored a public art installation in Denver this summer. Learn more on page 16. Photo Courtesy of Wana Brands

Marijuana Business Magazine | September 2020

$12.95

Insights for cannabis executives, investors & entrepreneurs

VOL 7 • ISSUE 8 • September 2020

Affairs

Canada’s largest companies are on the defensive, signaling potential opportunities for newcomers and smaller players

FIVE QUESTIONS Pivoting to viRtUAL EvEntS

Is construction the future of Europe’s hemp industry?

CAnnAbiS-bASEd PACkAging imPRoving ExtRACtion With R&d

On Our Cover New countries legalize marijuana each year, but only a handful of them have real revenue potential. Find out which markets are the most lucrative starting on page 40.

TRENDS & HOT TOPICS Is Canada up for grabs?

IN FOCUS

Edibles company launches art house project.

From the Editor

Q&A With Steve Allin

Hemp Notebook

DEPARTMENTS

Foreign

Trends & Hot Topics

In Focus

Company News

104

BEST PRACTICES IN EXTRACTION

How to use research and development programs to innovate and stay relevant with consumers.

108

INDUSTRY PLAYERS Bringing the language of food to cannabis.

Industry Developments

104

Best Practices in Extraction

108

Industry Players

114

Question of the Month

116

Market at a Glance

120

Our Advertisers

122

Notable Quotes

September 2020 | mjbizdaily.com

ContactUs | Whoʼs Behind This Magazine? Magazine feedback We are here to help the multibillion-dollar cannabis industry prosper. Let us know how we can serve you. Email us at magazine@mjbizdaily.com with your thoughts, suggestions and any other feedback about the magazine and the stories we cover.

On the site To get the cannabis industry′s latest news and analysis, visit us at mjbizdaily.com and hempindustrydaily.com.

Find us on social media @MMJBusinessDaily @mjbizdaily  @MJBizDaily Marijuana Business Daily Are you reading this magazine during the pandemic? Post a photo on Instagram with the hashtag #quarantineandmjbizmagazine to be featured in a future issue.

Bugs the dog helps his owner, Meredith Gossland, brush up on business best practices before Gossland launches the Flash Your Stash cannabis jewelry website.

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Staff Writers Laura Drotleff Laura.Drotleff@HempIndustryDaily.com Solomon Israel Solomon.Israel@MJBizDaily.com Matt Lamers Matt.Lamers@MJBizDaily.com Ivan Moreno Ivan.Moreno@HempIndustryDaily.com Kristen Nichols Kristen.Nichols@HempIndustryDaily.com Alfredo Pascual Alfredo.Pascual@MJBizDaily.com Monica Raymunt Monica.Raymunt@HempIndustryDaily.com Omar Sacirbey Omar.Sacirbey@MJBizDaily.com Bart Schaneman Bart.Schaneman@MJBizDaily.com John Schroyer John.Schroyer@MJBizDaily.com Jeff Smith Jeff.Smith@MJBizDaily.com

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To start/change/cancel your subscription, visit MJBizMagazine.com, call us at (720) 213-5992, ext. 1 or email us at CustomerService@MJBizDaily.com. Marijuana Business Magazine subscriptions are currently free to qualified U.S. cannabusiness professionals and investors age 21 and over only. To advertise with us, email Sales@MJBizDaily.com or call us at (720) 213-5992, ext. 2. Marijuana Business Magazine, Volume 7, lssue 8, September 2020 lSSN 2376-7375 (print); lSSN 2376-7391 (online) Marijuana Business Magazine is currently published 10 times per year by Marijuana Business Daily™, a division of Anne Holland Ventures Inc. POSTMASTER: Please send address changes to: Marijuana Business Daily, 3900 S. Wadsworth Blvd., Suite 100, Denver, CO 80235. Copyright 2011-2020 by Marijuana Business Daily, a division of Anne Holland Ventures lnc. All rights reserved. Materials may not be reproduced in whole or in part without written permission. For reprints of any article, please contact Customer Service. MJBizMagazine.com

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FromtheEditor | Kate Lavin

Around the World in 120 Pages

As the second anniversary of Canadian recreational marijuana legalization approaches, we look at how closely today’s market resembles the one analysts predicted at the outset. Despite the bottom falling out of cannabis stocks and a capital crunch forcing many businesses to cut costs, International Editor Matt Lamers says provincial governments have largely delivered on the promises they made leading up to legalization. Lamers is based in Toronto, which is home to some of North America’s largest cannabis companies as well as the largest stock exchange for plant-touching marijuana businesses. In this issue, he offers an overview of Canada’s provincial landscape for the cannabis industry, including fast facts on sales figures, retailers per capita and how the medical marijuana market has held up since adult-use sales began. (Surprise: One western province has seen MMJ patient counts rise nearly 20% since rec sales began.)

Monica Raymunt, a reporter covering hemp from Germany, spoke with the director of the International Hemp Building Association in Europe (see page 10) about the business realities of cultivating hemp for construction rather than cannabinoids. As she learned, distribution of such dense materials is a major issue, even as the public looks for sustainable building alternatives. Hemp reporter Ivan Moreno’s research for this issue spanned three continents as he uncovered how countries are overcoming bans that effectively stopped low-THC cannabis production for much of the past century. China, once a global force for hemp cultivation and processing, has proved to be a powerhouse once again. However, the country’s lack of publicly available agriculture data means other hemp-producing markets can only speculate about how much of the crop farmers are growing and selling. (See “Global Hemp Potential” on page 72.) As North America enters its third season battling unforeseen challenges, we hope this issue brings some clarity about where other nations are headed and highlights potential business opportunities at home and abroad.

Overflowing Warehouses and Scaling Back

Sincerely,

arijuana Business Magazine’s roster of international writers has doubled since this time last year, allowing us to offer readers even more industry insights in this third issue dedicated to the global cannabis space.

Reporter Solomon Israel is based in Manitoba, Canada, where regulators are accepting applications for new retail outlets and plan to allow cannabis sales in mainstream stores—a trend U.S. businesses would no doubt love to emulate at home. Israel breaks down 18 other trends of interest to prospective investors in Canada’s market, exploring how the country ended up with a cannabis glut of nearly 1.5 million pounds and which infused products are catching on with consumers. He also consulted historical records for “Global Retreat” (see page 58), detailing the list of Canadian license holders that made large investments overseas—and likely regretted it. Alfredo Pascual, an international analyst for Marijuana Business Magazine based in Germany, identified 10 nations with regulated cannabis in various stages of development. His feature “Top International MMJ Markets” (see page 60) gives a rundown of five countries with functional medical marijuana programs and revenue-generating opportunities. “Five Countries to Watch” (see page 68) offers a look at overseas markets where the next 12 months could mean the difference between promising and profitable—but only if luck is on the side of businesses, capital markets and countries fighting the current public health crisis.

Marijuana Business Magazine | September 2020

Kate Lavin Marijuana Business Magazine Editor

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FiveQuestions | with Steve Allin

Is Construction the Future of Europe’s Hemp Industry? Building materials help isolate growers from fluctuations in the CBD market, promote sustainable growing methods, says director of international association By Monica Raymunt

ith the regulatory landscape for CBD in Europe growing more and more tenuous, some hemp growers are adamant that fiber-based products offer a way to prop up the industry. One such business is HempFlax, Europe’s largest independent hemp grower and processor. The Netherlandsbased company acquired German natural fiber insulation manufacturer Thermo Natur earlier this year to diversify its product offerings, double down on hemp construction materials and protect itself from CBD-market volatility. Still, interest and investment in hempcrete businesses and projects has amounted to a fraction of what the CBD industry has experienced—something that grates on Steve Allin, director of the International Hemp Building Association and the author of “Building With Hemp.” “The focus on CBD is going completely the wrong way and is part of an out-of-date paradigm,” said Allin, who is based in Ireland. “The only CBD I’m interested in is Cannabis Building Design.” Allin said the construction industry has started to move toward hemp and sustainable materials in parts of Europe, but conventional materials still dominate, and widespread use of hemp “is still a long way away.” For its third issue dedicated to the international cannabis market, Marijuana Business Magazine spoke with Allin to learn where hemp construction is taking off in Europe and what markets look promising.

What hemp-derived products are currently the most successful in Europe? How do you see that changing? Fiber and biomass … offer alternatives to unsustainable practices in the textile and construction industries. Recent developments in hemp textile fiber processing and the growing awareness of the benefits of hemp building materials will provide an alternative to the CBD craze. It will also mean a return to more ecological growing methods of field crops rather than neutered marijuana, which is far more intensive (to farm).

10 Marijuana Business Magazine | September 2020

Steve Allin

Belgian hempcrete block maker IsoHemp reportedly raised nearly $8.24 million (7 million euros) to build a new factory. What do you think this says about investment in the hemp construction sector? IsoHemp started out as a small local company making hemp blocks with a local hemp supply, which then attracted government help to expand to 1 million blocks a year. Demand has now propelled them into a 7-millionblock-a-year entity. As seen by the expansion of the IsoHemp factory, this value-added enterprise is what the processing sector needs to justify the initial investment. Expecting the initial investment in primary processing to give quick returns is not realistic. In such a new industry, we need to have value-added products or products that the materials can be turned into to make the enterprise a success.

Where do you see the greatest potential for growth in the use of hemp-based materials? The systems employed by Greencore Construction in the U.K. and Pedone Working in Italy have great potential and can be made more economic with scale. Hempcrete blocks and the sprayed application offer speed. France probably has the largest number of construction projects utilizing hemp, and the U.K. has the most diversity. Anywhere there is hemp production has the potential to “grow” a hemp building sector: Belgium, Netherlands, Canada, Czech Republic, Ireland, Ukraine and Spain also have a growing number of projects completed, and Israel and the USA are catching up.

Netherlands—have expanded into modular housing and hemp-fiber insulation. HempFlax now operates in Romania, so we hope to see more activity there. In the U.K., East Yorkshire Hemp and more recently Harrison Spinks have been supplying the market.

Where in Europe is hemp fiber currently not being grown but would be well suited to the climate? The climate in Scandinavia—especially Finland and Sweden—is well suited to growing hemp, and hopefully the pilot projects built there in the past few years will assist with this. This interview has been edited for length and clarity.

Who are the growers and processors that have developed a successful supply chain for hemp construction materials? (Concrete producer) LCDA in France led the way. But as materials were needed in regions where transportation was more expensive from France, processors Dunagro (Hemp Group) and HempFlax—in the small town of Oude Pekla,

Monica Raymunt is a reporter for Hemp Industry Daily and Marijuana Business Magazine. You can reach her at monica.raymunt@hempindustrydaily.com.

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HempNotebook | Kristen Nichols

Defund the Plant Police Why hemp testing perpetuates inequality and wastes money

s the United States confronts centuries of racism from authorities charged with keeping us safe, citizens are rightly debating how far we should go to reform police departments. Can they be overhauled to truly protect and serve, or must police departments be dismantled and replaced with new organizations to keep the peace while respecting human rights? There are strong opinions on both sides. So here’s an idea that won’t be nearly as controversial with the general public: Let’s defund the plant police.

Red-Tape Bonanza I’m talking about the enormous new bureaucracies spawned by the 2014 and 2018 U.S. Farm Bills, two wellintentioned attempts to legalize lowTHC cannabis known as hemp while maintaining marijuana prohibition through a vigorous system of testing the cannabis to make sure it’s the “good” kind. The problem is that this vigorous testing system costs money—a lot of money, and money that no state department of agriculture has to spare. So every state has turned to hemp growers to foot the bill. I get it: Why take precious tax dollars out of schools and hospitals to create a new plant police force to monitor the cannabinoid levels of a bunch of plants that frankly don’t care how much THC their flowers are producing?

It makes sense to charge hemp growers to carry out this task rather than taxpayers at large. I spend a decent bit of time reviewing state plans to conduct THC testing on hemp plants, and every single one asks producers to pay for it. But there’s a cost beyond the stupidly exorbitant licensing and permitting fees. And that cost is the perpetuation of a racist system that, frankly, no one wants to perpetuate.

No Poor People Allowed In my home state of Georgia, a new law with bipartisan support increases the annual fees hemp processors must pay from $10,000 per year to $50,000 annually. The measure also requires hemp farmers to test every single crop for THC, not take just a random sampling—at the farmers’ expense, of course. It’s an outrage. Because this kind of thinking doesn’t just milk an industry too new to complain. It perpetuates generational inequality by limiting participation to people with $50,000 sitting around. There’s no payment plan for interested entrepreneurs who don’t have five figures to burn on a new venture. Georgia is only one example. State after state is piling on fees to hemp operators to the extent that we’re going to be left with a hemp industry that’s even more full of white males than it is now, if you can imagine such a thing.

Hemp gives us a perfect platform for experimenting with ratcheting back enforcement without making serious changes to societal norms. 12 Marijuana Business Magazine | September 2020

A Way Out So what if we … just didn’t? Fund the testing regime, I mean. Would lawbreakers across the nation start growing higher-THC cannabis strains? Sure. Would that make a big difference to public health and safety? I think we all know the answer. So let’s continue to experiment with hemp. There’s no long-established profession of hemp testers to feel insulted by the suggestion of not funding them. No fears that unruly high-THC hemp plants are going to bust loose and start pillaging small towns. Hemp gives us a perfect platform for experimenting with ratcheting back enforcement without making serious changes to societal norms. We might just discover that industry and regulators alike are happier without plant police. Kristen Nichols is editor of Hemp Industry Daily. She can be reached at kristen.nichols@hempindustrydaily.com.

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Trends & HotTopics | Matt Lamers

Is Canada Up for Grabs? Large producers face declining market share and cash reserves as competitors eye their turf

iewing Canada’s cannabis sector through the lenses of publicly traded companies presents a bleak view of the industry: Market leaders are struggling to rein in massive losses while provincial regulators are burdening enterprising businesses. The reality, however, is quite different. Recreational cannabis sales have consistently posted impressive month-over-month gains since legalization, and regulators across the country have generally done what they said they’d do. Even Canada’s medical marijuana industry, which many wrote off on the eve of adult-use legalization, has fared well, losing only 4.8% of its registered consumers since recreational cannabis sales began. But if things are going well for the broader market—and the country is home to the largest centrally regulated medical cannabis industry in the world—what’s the problem in Canada?

Mistakes Made Two major errors made by some of the country’s larger cannabis businesses offer lessons as well as opportunities for competitors. The first mistake cannabis companies made was blaming regulators and lawmakers for their poor financial results. The law establishes the rules of the game while regulators set the boundaries where businesses get to play. Complaining about the rules is probably a waste of time and energy. Rather, businesses would be better off competing where they’re allowed to compete. For example, Hexo Corp. and other Canadian license holders have repeatedly blamed their poor financial

performances on Ontario’s slow rollout of legal stores—even though the province is on track to open exactly the number of stores it promised in 2018. The other mistake made by large producers was an executive-level fixation not on customers but on investors. That focus contributed to massive overinvestments in greenhouses, as that was what investors wanted to see at the time. Marijuana Business Daily reported in January 2018 that Canadian producers had already bankrolled enough greenhouse and indoor space to meet demand. But those investments didn’t stop for another year. Now, those properties are being unloaded at significant discounts. A more customer-centric approach is finally becoming normalized, but only after large Canadian producers spent three years chasing imaginary markets around the world, essentially wasting their once-extensive capital holdings. Now that most of Canada’s largest marijuana companies are in full withdrawal—essentially trying to slashand-burn their way to profitability with dwindling capital reserves—industry observers have to wonder: Is Canadian market share up for grabs? Until recently, the market share of large Canadian producers appeared locked up. But navigating the changing market will require these players to fend off competition while simultaneously eliminating thousands of jobs, stanching their bleeding coffers and turning over most of their executive teams. Forget about expansion—most of the current Canadian market leaders are in survival mode. Smaller players who grew their businesses responsibly now sense opportunity.

14 Marijuana Business Magazine | September 2020

Door Open The Canadian market is also in the midst of a “Cannabis 2.0” rollout, vastly expanding the product selection available to consumers. Edibles, extracts and topical cannabis products started trickling into stores across Canada at the end of 2019, though wider distribution is still ramping up. Two other factors will weigh on the Canadian market in the months ahead: • The impact of large-scale outdoor production. • Canada’s relatively new microclass business licenses. Entrepreneurs should not write off opportunities related to the micro licenses merely because of their limitations. These licenses provide entrepreneurs with lower-cost entry points to the regulated industry. Matt Lamers is the international editor at Marijuana Business Daily. Reach him at matt.lamers@mjbizdaily.com.

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InFocus | Images From the Cannabis Industry

A Very, Very, Very Fine House Infused products maker sponsors urban art exhibition in Denver neighborhood

hree vacant homes in Denver’s Tennyson neighborhood became a canvas this summer as artists banded together to create the Art House Project, an immersive public art installation. Infused products maker Wana Brands of Boulder, Colorado, partnered with Denver real estate company Reactiv for the project, which involved murals, projections, immersive performances and a boutique. The homes chosen for the project originally were slated for redevelopment, but construction was put on hold because of the coronavirus crisis. “The Wana Art House Project posed a unique opportunity during uncertain times, when redevelopment was paused due to the pandemic. With support from Wana Brands, we’ve transformed three vacant properties into a community destination, while providing jobs for more than 20 artists and retail space for small entrepreneurs,” said Tim Sack, Reactiv’s activation director. – Kate Lavin 16 Marijuana Business Magazine | September 2020

The three homes are all located on the 4300 block of Tennyson Street in Denver. Photos courtesy of Wana Brands

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CompanyNews | U.S., Canada & International

U . S . D E V E LO PM E N T S

By Omar Sacirbey

LeafLink Raises $250 Million LeafLink, a New York-based cannabis inventory and ordering platform, raised $250 million in a credit financing. The company said its supply-chain financing arm closed the senior secured credit facility with a private commercial lender, but terms weren’t disclosed. LeafLink plans to use the capital to provide liquidity to licensed cannabis businesses at a time when they face challenges such as limited access to basic financial services.

Recent deals, acquisitions and other announcements from cannabis companies

cannabis, to conduct a second collaborative research study on the effectiveness of Pennsylvania’s medical marijuana program. The study will measure the quality of life reported by patients using cannabis to address pain relief. Results from a previous study found that the levels of THC in products used by patients had the biggest impact on symptom relief.

New Name For Chicago Cannabis Firm NuMed, a vertically integrated cannabis company in Chicago, changed its name to NuEra to reflect the company’s expansion from serving exclusively medical marijuana patients to both MMJ and recreational cannabis consumers.

Curaleaf Completes Acquisition, Partners with IIP on New Jersey Leaseback Deal Massachusetts-based multistate operator Curaleaf completed its purchase of privately held Grassroots Cannabis, expanding Curaleaf’s footprint to 135 dispensary locations and licenses in 23 states. Curaleaf said it now will have 88 operational dispensaries, 30 processing facilities and 22 grow sites with a total cultivation capacity of 1.6 million square feet. The original value of the deal was $875 million, but Curaleaf announced in June an amended agreement that reflected a selloff of unspecified Grassroots assets in Illinois, Maryland and Ohio to comply with license caps in those locations. Analysts at that time put the value of the revised deal at about $700 million. Curaleaf was also involved in a sale-leaseback deal with Innovative Industrial Properties, a San Diegobased, marijuana-centric real estate investment trust (REIT). Innovative bought a 111,000-square-foot facility in Blue Anchor, New Jersey, for $5.5 million, then leased it back to a subsidiary of Curaleaf for use as a commercial marijuana facility. The California REIT agreed to reimburse Curaleaf for up to $29.5 million in improvements to the property. IIP also has brokered deals with cannabis MSOs such as Cresco Labs, Green Thumb Industries and Trulieve.

Pennsylvania Cannabis Study Consortium Keystone Canna Remedies dispensary is partnering with the University of the Sciences in Philadelphia and Releaf App, an app for individuals to track their use of

18 Marijuana Business Magazine | September 2020

NuEra has three retail outlets in Illinois—Chicago, East Peoria and Urbana—and a new brand of flower and pre-rolls. NuEra also recently took over ownership of the Hillcrest Cultivation Center in Rochelle, Illinois.

Verilife Opens Dispensary in Massachusetts Multistate cannabis company PharmaCann opened a Verilife dispensary in Shrewsbury, Massachusetts. It is the second Verilife retail location in the state and will initially serve the adult-use market with plans to serve medical patients. PharmaCann operates another Verilife location in Wareham, Massachusetts, which serves medical and adult-use consumers.

TerrAscend Opens Apothecarium Berkeley Ontario, Canada-based TerrAscend Corp. opened its seventh retail store. The Apothecarium Berkeley is TerrAscend’s fourth dispensary in California and its seventh in the United States. The Apothecarium Berkeley is a 4,200-square-foot, full-service recreational and medical cannabis retailer that offers online ordering and delivery.

ECS Brands Earns Organic and Non-GMO Certifications Broomfield, Colorado-based ECS Brands, a hemp and cannabinoid supply and products manufacturing

CompanyNews | U.S., Canada & International company, earned organic certifications from the U.S. Department of Agriculture and Project Non-GMO. The company recently doubled its footprint by expanding into more than 10,000 square feet of new research and development space formerly occupied by Dean Foods.

Two New Testing Labs for Florida The Florida Department of Health certified two testing facilities owned by Kaycha Labs, a multistate cannabis-testing company based in Fort Lauderdale, Florida. The labs, in Davie and Gainesville, earned the state’s Certified Marijuana Testing Laboratory accreditation. Both of the new labs are ISO 17025 accredited and perform product testing for marijuana and hemp. Kaycha Labs operates eight testing labs in seven states, including California, Colorado, Florida, Kentucky, New York, Oklahoma and Tennessee.

MSO’s Acquisition Goes Platinum

CAN ADA DE V ELO PMEN T S

Toronto-based multistate cannabis company Red White & Bloom signed a binding letter of intent to purchase California-based Platinum Vape for $35 million in cash and $25 million in further bonuses. According to a news release, RWB will acquire all ownership interests in Platinum Vape for a total cash payment of $35 million, consisting of $7 million in cash

at closing and $13 million in cash payable within 120 days of closing as well as a $15 million note convertible after 12 months, payable on the third anniversary of closing. The acquisition marks RWB’s entry into California. Platinum Vape sells vape cartridges, edibles and prerolls to more than 700 retailers throughout California, Michigan and Oklahoma. The company reports a current annualized revenue run rate in excess of $70 million.

California Marijuana Tourism Partnership The California Cannabis Travel Association is partnering with the California Travel Association (CalTravel) to create and support cannabis travel opportunities. CalTravel members include airports, attractions, industry associations, resorts, transportation companies and other organizations involved in the tourism industry. Current plans include establishing a committee dedicated to marijuana tourism in California and helping cannabis industry stakeholders take advantage of MJ tourism.

MedMen Opens Fifth Florida Store MedMen Enterprises opened a new store in Coral Shores, Florida, near Fort Lauderdale. It is MedMen’s fifth location operating in the state. The store includes 1,668 square feet of retail space and takes online orders.

Lind Global Macro Fund pursuant to a September 2019 convertible security funding agreement. The remaining proceeds are expected to be used to retire existing obligations and for general working capital and expansion purposes.

Aleafia Partners With Johnson & Johnson Division Archerwill Invests in Canada House Archerwill Investments placed $6.5 million in the form of a secured convertible debenture to obtain a 15.9% ownership interest in Canada House, a cannabis company in Pickering, Ontario. The two companies entered an investor-rights agreement that provides Archerwill with the right to match certain acquisition proposals received by Canada House in order to maintain its ownership percentage. Archerwill is entitled to nominate two directors for appointment to the board of directors at Canada House’s Sept. 30 shareholder meeting. Canada House used a portion of the proceeds from the transaction to repay the entire amount owed to

20 Marijuana Business Magazine | September 2020

Ontario cannabis company Aleafia Health announced that Janssen Pharmaceuticals approved its wholly owned subsidiary, Canabo Medical, as an administrator and prescriber of antidepressant nasal spray Spravato. Medical professionals at Canabo’s three clinics—including the company’s flagship Toronto location, along with a growing number of clinic network physicians and nurses—will be approved to administer and prescribe the drug after completing a training program. Janssen, a division of Johnson & Johnson, received U.S. Food and Drug Administration approval for Spravato for use with an oral antidepressant in adults with treatment-resistant depressive disorder, followed by the drug being made available in Canada on July 22.

I N T E R N AT I O N A L D E V E LO PM E N T S

CompanyNews | U.S., Canada & International Aphria Enters Agreement to Supply Israeli Market

Multinational Cannabis Company to list on Nasdaq

Aphria, a cannabis company in Leamington, Ontario, entered a strategic supply agreement with Canndoc, a subsidiary of InterCure, one of Israel’s largest medical cannabis producers. Under the terms of the agreement, Aphria will supply Canndoc with 3,000 kilograms (6,614 pounds) of dried bulk flower over a two-year period, with the option to extend for up to five years. The flower will be processed into finished product, co-branded under the Aphria and Canndoc brand names, and sold exclusively within the Israeli market. The strategic partnership will also include the possibility of Aphria and Canndoc collaborating on research initiatives such as clinical trials and exploring potential collaboration in the EU market. In March 2020, Canndoc entered a strategic partnership with Super-Pharm, Israel’s largest drugstore chain, allowing Canndoc products to be distributed across 95 pharmacies authorized to sell medical cannabis.

Clever Leaves International, a multinational cannabis company with its main operations in Colombia, announced that it reached a definitive agreement to combine with Schultze Special Purpose Acquisition Corp. to create a new business. Clever Leaves said the merger is expected to close in the fourth quarter of 2020. The new company, Clever Leaves Holdings, is expected to trade on the Nasdaq stock exchange with an initial enterprise value of approximately $255 million, according to a news release. Clever Leaves’ current executive management team will lead the combined company, which is expected to have a “cash balance of $111 million at closing.”

Ikänik Farms Subsidiary OK’d for Sales Ikänik Farms’ wholly owned Colombian subsidiary, Pideka, launched commercial and R&D sales of full-spectrum cannabis oil for use in Colombia’s regulated market. The company completed its first R&D sale with the Universidad Pontificia Bolivariana, Medellin, to begin clinical research on cannabis-based treatments for the coronavirus.

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Khiron Signs Kuida Distribution Deal in Hong Kong Khiron Life Sciences, a vertically integrated cannabis company with core operations in Latin America and Europe, signed a distribution deal with DNO Group, a distributor for the Asia-Pacific market. DNO Group will use its network of retail and online channels in Hong Kong to distribute Khiron’s Kuida CBD cosmeceuticals brand. The first orders are anticipated in the fourth quarter of 2020 and will include seven SKUs from Kuida CBD.

Village Farms Partners With Altum International British Columbia-based greenhouse grower Village Farms International executed a binding agreement to acquire 6.6% of Australia-based Altum International, a cannabinoid company operating in the Asia-Pacific region. Under the terms of the agreement, Village Farms has the option to increase its ownership in Altum on similar terms.

Altum already has launched a broad range of CBD products and is supplying craft brewers with product for CBD-infused beer as well as coffee chains and juice bars for beverages and edibles. In June 2020, Altum opened a boutique cafe and retail concept store in Hong Kong. The company also is pursuing high-THC medical cannabis opportunities in Australia and New Zealand.

International Partnership Uruguayan cannabis company Megalabs partnered with California-based Medterra to bring its CBD products to Latin America. According to the agreement, Megalabs will have exclusive rights to commercialize Medterra products in Argentina, Brazil and Mexico. Have a company announcement you want us to consider? Send a news release or general information to omars@mjbizdaily.com. (Note: We’re looking for news about expansions, financing, deals, partnerships and similar developments, not product-related announcements.)

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IndustryDevelopments | International & State MAP LEGEND High level of medical development/implementation Medium level of medical development/implementation Low level of medical development/implementation Other - federally illegal but unique circumstances Recreational

Countries included have passed legislation at the federal level and must fulfill at least one of the following criteria: • Cultivation, manufacture or sale of medical and/or recreational cannabis allowed. • Doctors can prescribe medical cannabis. • Import and/or export of medical cannabis allowed. High: Countries at the forefront of the global industry. Frameworks are established, and adoption is well underway. Medium: Implementation has begun but is still limited or restricted; lots of room for the market to develop. Low: Legislation has been passed, but implementation is very limited or nonexistent. Decriminalization is not included.

National & International News Israel Passes Germany as World’s Largest Importer of Medical Cannabis Flower Israel overtook Germany as the No. 1 importer of medical cannabis flower in the world so far this year, according to data compiled by Tel Aviv-based Israeli Cannabis Magazine and Marijuana Business Daily. As of July, Israeli imports surpassed 6 metric tons (13,228 pounds), according to Oren Lebovitch, editor of Israeli Cannabis Magazine. He gathered the import numbers from companies’ public disclosures as well as replies he received from several executives involved in the import side of the transactions. The latest German numbers, which stem from a reply to a parliamentary inquiry, show about 3 metric tons were imported as of end of May for pharmacy dispensing, according to data reported by MJBizDaily.

26 Marijuana Business Magazine | September 2020

As of early June, almost 4 metric tons of flower had been imported into Israel. The country had no large imports before 2020, but in only six months, Israel became the largest importer in the world, underscoring how quickly things change in the nascent international industry. Israel and Germany will likely be the only markets outside North America in which more than a metric ton of high-THC flower will be sold this year. Australia is the only significant importer of high-THC oil.

Canada Accused of Cannabis ‘Protectionism’ by Blocking Imports as Exports Soar The Canadian government is being accused of insulating domestic cannabis producers against foreign competition by not allowing imports of medical marijuana, and at least one foreign government plans to make a formal appeal to federal officials.

In 2019, Canada exported more than 5,000 liters (1,321 gallons) of cannabis oil products and roughly 3,740 kilograms (8,245 pounds) of dried cannabis for medical (commercial) and scientific use. But Canada imported virtually no cannabis for medical or scientific use during the same time period. Audley Shaw, Jamaica’s minister of Industry, Commerce, Agriculture and Fisheries, said Jamaica will make a formal appeal to the Canadian government. “Several Canadian investors have already closed down their operations in Jamaica” because of Canada’s stance on imports, Shaw said.

Cannabis Sales Remain Steady Even as Unemployment Bonus Ends Sales of recreational marijuana products proved resilient in the weeks after the U.S. government’s temporary lifeline to

millions of unemployed workers expired. The $600-a-week unemployment benefit that was part of the federal pandemic stimulus package ended July 31, and Congress failed to pass an extension before leaving for its August vacation. The weekly boost brought the disposable income of many recipients to near “normal” in pre-pandemic terms. But in the first two weeks after the benefits ended, sales of recreational marijuana in key markets remained stable, even posting a visible increase during the first week, according to data provided by Seattle-based Headset. “Consumer spending doesn’t often drastically shift overnight but, rather, gradually changes over a few months,” said Liz Connors, director of analytics for Headset. Markets might also see a shift toward medical marijuana purchases, which are not subject to the same taxes as recreational MJ, according to analysis from New York-based cannabis consultants Greenwave Advisors.

September 2020 | mjbizdaily.com 27

IndustryDevelopments | International & State WA MT

MN ID

DE MD VA

TN AR

SC MS

OH WV

RI PA

LA FL

■ Medical ■ Recreational Note: This map does not include states that have legalized only CBD-based oils.

State News

Arizona Secretary of State Katie Hobbs certified that supporters of a ballot measure to legalize adult-use marijuana collected enough valid petition signatures for the proposal to go before voters in November. The certification occurred only days after a Maricopa County Superior Court judge ruled against marijuana legalization opponents who argued the initiative didn’t include some principal provisions in a 100-word petition summary of the measure. Assuming the measure survives an expected appeal of the judge’s ruling, Hobbs’ certification means the marijuana measure will appear on the ballot and be labeled Proposition 207.

Arkansas A judge denied Illinois-based Green Thumb Industries’ request to stop the Arkansas Medical Marijuana Commission from issuing a business license to another company. The multistate operator claims the commission improperly awarded a second dispensary license to cannabis company Native Green. Pulaski County Circuit Judge Mary McGowan said no evidence was presented at a hearing on a preliminary injunction to convince her Green Thumb would be financially harmed if Native Green is allowed to have the license while the suit is pending.

28 Marijuana Business Magazine | September 2020

California At least 26 localities across California will have pro-marijuana initiatives on the November ballot. Many would authorize new business licenses or expand existing local industries. Others merely seek voter approval for new cannabis taxes—often the starting point for cities and counties looking to opt into the industry, since new taxes have to be approved by voters under California law. Still other measures are advisory questions that don’t bind city councils or county officials to repealing existing industry bans. Hirsh Jain, government affairs director at San Jose-based marijuana retailer Caliva, said the measures could result in as many as 150 new business permits being made available to the industry “within months of these passing.”

Colorado Adult-use marijuana sales in the state hit a record $158.1 million in June, marking the first month in the state’s history that sales topped $150 million. The sales figure represented nearly a 30% year-over-year increase from recreational sales of $122.4 million in June 2019. The state is on track to easily exceed its 2019 record of $1.75 billion for total marijuana sales.

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IndustryDevelopments | International & State Connecticut Herbology, the state’s 18th and final medical cannabis dispensary, opened its doors in the town of Groton. The dispensary recently was acquired by Massachusettsbased Curaleaf from Grassroots Cannabis of Chicago. Connecticut’s 8-year-old MMJ program has more than 40,000 registered patients. Lawmakers recently added chronic pain to the list of qualifying medical conditions, which is expected to provide another boost to the market. MJBizDaily projects that the state’s MMJ program will approach $130 million-$160 million in sales this year.

Hawaii State lawmakers approved a bill to allow medical marijuana businesses to make and sell edibles after MMJ patients began looking for ways to get the benefits of cannabis without vaping or smoking during the coronavirus pandemic. The legislation won’t take effect until Jan. 1, and the state health department must develop rules before edibles sales can begin, according to local authorities. Currently, Hawaii’s MMJ program is heavily regulated, with only eight vertically integrated licensees.

30 Marijuana Business Magazine | September 2020

Illinois The Cannabis Business Association of Illinois says tax revenue from recreational marijuana sales should be used to help social equity applicants who continue to accrue expenses because of licensing delays. The second round of licenses were to be awarded between May and July, and delays are expected to reach at least four months. This could be especially costly for cultivators and infusers that, unlike retail applicants, had to secure locations in advance. “Many of these applicants cannot afford an extended delay,” the industry association wrote in a letter to Gov. J.B. Pritzker. “Their expenses continue to mount every day.”

Maine State regulators set an Oct. 9 date for recreational cannabis sales to begin, nearly four years after voters approved adult-use sales. The state’s Office of Marijuana Policy released the timetable for adult-use cannabis businesses, saying it plans to issue the first licenses Sept. 8; license types include cultivation, manufacturing, retail and testing. Marijuana Business Daily projects the market will reach annual sales of $275 million-$325 million by 2024.

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IndustryDevelopments | International & State Maryland A former state lawmaker who helped create Maryland’s medical marijuana industry was sentenced to two years in prison for taking bribes totaling $33,750 for legislative favors, including votes to benefit a medical marijuana company. During sentencing, U.S. District Judge Catherine Blake said Cheryl Glenn, a Democrat who represented parts of Baltimore as a state delegate, sold her office to pay her bills and tried to cover up her corruption. Glenn must report to prison by Sept. 21. The judge also ordered her to pay $18,750 in restitution.

Massachusetts State regulators are considering eliminating the vertical-integration requirement for medical cannabis operators, a move that would open up the industry to stand-alone operations that would cost less to launch. Dispensaries in the state currently are required to cultivate and process most of the medical marijuana they sell. The Massachusetts Cannabis Control Commission (CCC) indicated it would like to keep the per-company cap at three licenses each for cultivation, processing and retail. The commission is scheduled to vote on the final regulations this month.

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Michigan The state is considering making recreational-only licenses available to marijuana businesses in November, a year ahead of schedule. Michigan launched its adult-use market Nov. 1, 2019, giving medical marijuana operators a two-year head start. Michigan Marijuana Regulatory Agency spokesman David Harns said that a final decision hasn’t yet been made and that discussions are ongoing with stakeholders.

Missouri State authorities awarded five additional medical marijuana manufacturing licenses because some companies apparently were given duplicates. The Missouri Department of Health and Senior Services, which oversees the MMJ program, said state law requires at least 86 manufacturing companies to be operational, so it issued the added licenses to ensure compliance. The redundant licenses were merged.

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IndustryDevelopments | International & State Montana A citizen initiative in Montana to legalize a commercial recreational marijuana program gathered enough valid signatures to appear on the November ballot, according to the Secretary of State’s office. The ballot initiative, backed by New Approach Montana, would set up an adult-use market regulated by the state Department of Revenue. If the ballot measure is successful, the business license application process would begin by Oct. 1, 2021, and a 20% retail tax would be assessed on adult-use products.

Nevada The state Tax Commission endorsed a partial settlement to resolve a consolidated lawsuit from a group of cannabis companies that claimed Nevada’s first round of recreational marijuana licensing was unfair. The state issued 61 permits in its adult-use licensing round in late 2018, but critics said the process favored certain well-capitalized businesses over other, smaller players. The settlement applied to 17 companies and must be approved by the Nevada Cannabis Compliance Board.

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New Jersey Some of the state’s cannabis companies are investing heavily in cultivation buildouts and other infrastructure in anticipation of recreational marijuana legalization by voters in November. Even if voters approve recreational legalization, however, the state will have to write regulations governing the industry and decide how many more MJ businesses would be allowed. The New Jersey Cannabis Regulatory Commission would be tasked with major decisions regarding how the recreational market would be shaped.

Ohio Medical cannabis companies in Ohio say market growth is being constrained and are calling for more dispensaries and permission to expand cultivation facilities. MMJ sales are less than half that of neighboring Pennsylvania, which allows more than double the number of dispensaries. Ohio has only about half the number of registered MMJ patients as Pennsylvania does.

September 2020 | mjbizdaily.com 35

IndustryDevelopments | International & State Oklahoma Kelly Williams, the deputy director of the Oklahoma Medical Marijuana Authority (OMMA), will serve as interim director of the regulatory agency, replacing Travis Kirkpatrick. Kirkpatrick was recently appointed deputy commissioner of prevention and preparedness at the Oklahoma State Department of Health. Kirkpatrick, who will oversee the OMMA from his new position, chose Williams for the interim post. Kirkpatrick had been chosen to serve as director of OMMA in January after serving as interim director for about three months.

Pennsylvania Marijuana multistate operator Parallel will provide $3 million in grants to the University of Pittsburgh to research medical cannabis under a 10-year agreement. The partnership is the eighth and final of such alliances permitted under Pennsylvania’s medical marijuana rules. Under the program, the MMJ businesses grow, process and supply marijuana to the research institutions. In return, the companies are granted a vertically integrated medical cannabis license with the right to open six dispensaries across the state. Atlanta-based Parallel, formerly Surterra Wellness, said it will operate its Pennsylvania MMJ dispensaries under its new Goodblend retail brand.

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Rhode Island Gov. Gina Raimondo will continue trying to legalize adult-use marijuana in the state. The Democratic governor floated the idea of adult-use legalization in late 2018, arguing that the state is losing business opportunities and revenue to neighboring states such as Massachusetts. She likely will face opposition, however, because key Senate leaders said in December they would oppose legal rec sales.

Texas Hemp manufacturers and retailers filed a lawsuit challenging the Texas health department on its recently enacted ban on selling smokable hemp products. Four businesses filed the lawsuit in a Travis County court against the Texas Department of State Health Services and its commissioner, John Hellerstedt. The ban on smokable hemp distribution and sales took effect Aug. 2.

Note: Entries sourced from Marijuana Business Daily, Hemp Industry Daily and other international, national and local news outlets. These developments occurred before this magazine’s publication deadline, so some situations may have changed.

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Canadaâ&#x20AC;&#x2122;s largest companies are on the defensive, signaling potential opportunities for newcomers and smaller players

40 Marijuana Business Magazine | September 2020

September 2020 | mjbizdaily.com 41

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AFFAIRS

f there is a lesson to be learned from the overseas misadventures of Canada’s large cannabis producers in recent years, it is this: Being first to a market is a waste of time and money if that market is still years (or decades) away from producing material revenue—more so if you’re unable or unwilling to bankroll losses in the meantime. When it comes to global expansion, slow and steady is winning the race. Most of the big spenders from 2017-20 are not much farther ahead today than they were when Canada legalized adult-use cannabis in October 2018. In recent years, much ink was spilled on Canada’s so-called international advantage. While American marijuana companies were largely hamstrung by federal prohibition and prevented from competing internationally, Canadian producers were free to splash their capital around the world, gaining leverage and establishing toeholds in promising markets. That practice turned out to be imprudent. After years of investments and billions of dollars spent, most Canadian producers have little to show for their large expenditures: Barely any have made meaningful money outside North America, and now the retreat is in full force for many of Canada’s largest players, as the need to conserve capital becomes part of their new survival strategy. (Read “Global Retreat” on page 58.)

OPPORTUNITIES ABOUND OVERSEAS That does not mean global medical

cannabis markets aren’t growing. Far from it. Revenue-generating opportunities exist today in numerous countries. (See “Top International MMJ Markets” on page 60.) However, experts urge businesses not to count their chickens before they hatch. To provide some perspective, Europe’s medical cannabis retail sales in 2019 were $260 million (240 million euros). That’s about one-third the size of Arizona’s MMJ market. Unsurprisingly, a handful of large Canadian producers made the same mistakes at home as they did overseas, including an executive-level fixation on investors at the expense of customers, resulting in a significant misallocation of resources. (See “Is Canada Up for Grabs?” on page 14.) Those mistakes by the industry’s largest producers opened the door to opportunities for competitors. Legalization in Canada has been a major success story, despite the challenges experienced by some companies.

AT HOME AND ABROAD This issue of Marijuana Business Magazine takes a close look at the cannabis market in Canada, which remains the only G-20 country to have legalized and regulated an adult-use industry at a national level—and a functional one at that. (See page 44 for a high-level look at the markets in Canada’s 10 provinces.) When it comes to low-THC cannabis, several international markets are reigniting industries made dormant

42 Marijuana Business Magazine | September 2020

There has never been a better time to be in the legal and regulated cannabis industry, but the sector is not growing as fast outside North America as some prognosticators had forecast. For this reason, it’s more important than ever to make business decisions based on reality and in accordance with your company’s established strategies and vision. Entrepreneurs and investors considering a stake in the international cannabis market should consider: • Being first to a market is not as important as doing it right; be strategic. • Revenue-generating opportunities already exist in numerous countries. • Your investors are important, but don’t lose sight of your customers. • Legalization in Canada has been a major success, and the market is growing exactly as fast as rational analysts expected. • Don’t count on regulatory evolution until it happens, because there’s no telling how fast or slow regulators will move. • Be more realistic than optimistic. Positivity is a good thing, but don’t let it cloud your judgment.

by hemp prohibition in the past century. Even China, which produced hemp for thousands of years before prohibiting the plant from 1985 to 2010, is clawing its way back to the top of the market. (See “Global Hemp Potential” on page 72.) When you’re doing business overseas in the cannabis industry, being realistic rather than optimistic is everything. Don’t be distracted by “a $160 billion market” in Country A, which will develop only if a series of extremely unlikely policy, political—and potentially astronomical—events coincide.

Matt Lamers is the international editor for Marijuana Business Daily. You can reach him at mattl@mjbizdaily.com.

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Provinces at a Glance Two years after adult-use cannabis legalization, the Canadian market boasts rising sales, and new business opportunities are available By Matt Lamers

anada’s legalization story has been an overarching success, despite major mistakes made by some of the biggest producers. The adult-use industry has experienced steady growth since the first products went on sale in October 2018, and the medical marijuana market is expected to bounce back as some companies try to meet the needs of MMJ patients rather

than recreational cannabis consumers. But given the aimlessness of most top producers, their dwindling cash reserves and an inability to defend their own turf, Canadian market share might be up for grabs. What started as a $30.1 million (CA$41 million) market in Canada’s first month of legal recreational marijuana two years ago grew to $140 million

44 Marijuana Business Magazine | September 2020

(CA$186 million) by May 2020, the latest month for which data is available. The newest figure implies an annualized market of about $1.8 billion (CA$2.4 billion) for 2020—approximately the same figure pragmatic analysts predicted in 2018. Disparities in growth trends persist from province to province and likely will for years to come. That’s partly

because the federal government handed regulatory responsibility for sales to provinces while maintaining oversight of production. The result? One province, Alberta, has opened more than 500 privately owned stores, or about one store per 10,000 people. By comparison, Canada as a whole surpassed the 1,000-store mark this summer. In contrast to Alberta, other provinces monopolized sales at the government level. Quebec, the second-largest province in the country, has opened only 43 government-owned outlets, or 0.05 stores per 10,000 people. This was predicted in early 2018 and comes as little surprise. Extracts, edibles and topicals started slowly rolling out across the country near the end of 2019—a little more than one year after legalization, which was always the plan. And Health Canada started issuing micro-class licenses, which come with lower barriers to entry for entrepreneurs. Canada’s medical market has been surprisingly resilient in the face of recreational sales. On the eve of recreational legalization, many experts wrote off what was (and remains) by far the largest federally regulated medical marijuana market in the world. Even though Canada’s largest producers took their focus away from their bread and butter—their medical patients—to try to capitalize on the recreational market, the overall medical sector has lost only 4.7% of its active registrations since October 2018. That’s despite one of the biggest companies in the country, Ontariobased CannTrust, filing for creditor protection and throwing its 67,000 patients to the wind. The medical sector still has a respectable 329,038 active registrations. What follows is a high-level look at where the 10 provincial markets stand today. Metrics include monthly adult-use sales, active medical registrations and retail stores per 10,000 residents.

Nationwide Monthly adult-use retail sales: $139 million (CA$186) million*

Standard cultivation licenses: 283

Active medical patient registrations: 329,038** (down 4.7% since legalization)

Sales licenses: 202

Number of retail stores per 10,000 residents: 0.27

Micro-processor licenses: 14

Retail, wholesale and e-commerce: Varies by province

ALBERTA Monthly adult-use retail sales: $34.8 million (CA$46.3 million)* Active medical patient registrations: 73,629 (down 33% since legalization) Number of retail stores per 10,000 residents: 1.15 (510 stores or licenses issued) Retail system: Private sector Wholesale: Alberta Gaming and Liquor Commission E-commerce: Government-controlled * As of May 2020

Alberta is a business-friendly province for cannabis companies. It’s the only jurisdiction in Canada to successfully open a large number of stores in short order after adult-use legalization in October 2018.

Standard processing licenses: 255 Micro-cultivator licenses: 58 Nursery licenses: 9 * As of May 2020. ** As of March 2020.

The province offers various incentives to businesses, including a nonrefundable tax credit of 10% of eligible expenditures, which has been accessed by Aurora Cannabis. Cannabis-related companies are eligible for similar business incentives such as the Alberta Investor Tax Credit, the Entrepreneurship Incubator Program and the Alberta Export Expansion Package. Cannabis producers and processors also might be able to access a suite of costsharing programs through the Canadian Agricultural Partnership (CAP), a joint federal-provincial initiative, if they meet strict eligibility requirements. The province’s medical cannabis market has been in retreat since legalization, but it’s still the secondlargest in the country when measured by active registrations. With government incentives, lower taxes and real estate costs, Alberta could make a fine home for micro-class businesses. Jasper National Park in Alberta, Canada

September 2020 | mjbizdaily.com 45

FOREIGN

AFFAIRS

BRITISH COLUMBIA Monthly adult-use retail sales: $20.4 million (CA$27.1 million)* Active medical patient registrations: 17,053 (up 19.8% since legalization) Number of retail stores per 10,000 residents: 0.52 (264 stores or licenses issued) Retail system: Hybrid model: privately owned brick-and-mortar stores competing against government-controlled retail outlets Wholesale: BC Liquor Distribution Branch E-commerce: Government-controlled * As of May 2020

The British Columbia government has done relatively little to nurture a robust cannabis industry since legalization. Perhaps no other province in Canada can claim B.C.’s economic potential for regulated cannabis businesses, though the province has done little to foster that growth. British Columbia is home to Canada’s largest illicit market, and the regulated sector posts underwhelming monthly sales figures. While the illicit market maintains a tight grip in B.C., the province’s unusual retail system has a small number of government-owned cannabis stores competing with privately owned ones. B.C. deserves credit for allowing more than 200 stores to open, but it has not allowed those stores to offer true curbside pickup and e-commerce during the coronavirus pandemic. (Online

payment is permitted, but customers still must enter the store to retrieve their purchases.) The province has levied most of the blame for its underperforming cannabis sector at the feet of the federal government—though not all provinces have shared the same problems. The province is weighing farm-gate sales and delivery options for private stores, but it’s unclear whether the government will implement any of those steps. B.C. does offer cannabis businesses a suite of cost-sharing programs through the Canadian Agricultural Partnership (CAP), but requirements to qualify are strict. The province funds a small program to help gray-market cannabis entrepreneurs in the Kootenay region gain a foothold in the legal economy. Meanwhile, municipalities have been a constant anvil for regulated businesses since legalization.

The province also is planning to allow cannabis stores to open within mainstream retail outlets, which will make those businesses more economical in smaller communities. Unlike Newfoundland and New Brunswick, Manitoba doesn’t offer cannabis-specific business incentives.

New Brunswick

Manitoba Monthly adult-use retail sales: $5.2 million (CA$6.9 million)* Active medical patient registrations: 13,855 (up 3.7% since legalization) Number of retail stores per 10,000 residents: 0.23 (32 stores or licenses issued) Retail system: Private sector Wholesale: Manitoba Liquor & Lotteries Corp. E-commerce: Government-controlled * As of May 2020

Vancouver, British Columbia

Hopewell Rocks Provincial Park in New Brunswick

Manitoba’s adult-use sales have stagnated over the past half-year, largely because the province has failed to open new stores. That’s going to change. Provincial regulators are accepting applications from prospective retailers, so the store shortage should be alleviated somewhat.

46 Marijuana Business Magazine | September 2020

Monthly adult-use retail sales: $3.8 million (CA$5.1 million)* Active medical patient registrations: 9,019 (up 14.1% since legalization) Number of retail stores per 10,000 residents: 0.26 (20 open stores) Retail system: Government-owned, brick-and-mortar stores Wholesale: Cannabis Management Corp. E-commerce: Government-controlled * As of May 2020

New Brunswick has welcomed regulated cannabis producers with generous incentives in recent years, making it a good place to grow. The province has outlined financial incentives for producers, funded research chairs at universities and developed a community college program for cannabis technicians. The government-owned retail system is being reviewed for privatization. If that happens, as expected, the regulated cannabis landscape in the province will look very different in the months ahead.

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FOREIGN

AFFAIRS Toronto, Ontario

Newfoundland and Labrador Monthly adult-use retail sales: $2.1 million (CA$2.8 million)* Active medical patient registrations: 4,652 (up 12.3% since legalization) Number of retail stores per 10,000 residents: 0.5 (26 stores or licenses issued) Retail system: Privately owned, brick-and-mortar stores Wholesale: Private sector E-commerce: Private sector * As of May 2020

Newfoundland and Labrador is the only Atlantic province to open the retail sector to private ownership, and there is more room for growth if the province will allow it. Relatively lower startup costs could make Newfoundland a good home for microbusiness startups (micro licenses are managed by the federal government). In the past, the provincial government has supported cannabis businesses, even offering Ontario-based Canopy Growth $30 million (CA$40 million) in reduced sales remittances to assist in building a 150,000-square-foot production facility.

The Battery in St John’s, Newfoundland and Labrador

Nova Scotia

Ontario

Monthly adult-use retail sales: $4.4 million (CA$5.9 million)* Active medical patient registrations: 13,611 (down 2.7% since legalization) Number of retail stores per 10,000 residents: 0.13 (13 stores or licenses issued) Retail system: Government-owned Wholesale: Nova Scotia Liquor Corp. E-commerce: Government-controlled

Monthly adult-use retail sales: $30.9 million (CA$41.1 million)* Active medical patient registrations: 171,107 (up 6.7% since legalization) Number of retail stores per 10,000 residents: 0.09 (140 stores or licenses issued) Retail system: Private sector Wholesale: Ontario Cannabis Retail Corp. E-commerce: Government-controlled

* As of May 2020

Nova Scotia’s relatively small adult-use cannabis market is complemented by a steady medical marijuana market that has not lost steam since legalization. The Atlantic Provinces Economic Council (APEC), a nongovernmental policy-research organization, notes that Atlantic Canadians, on average, consume more cannabis than those from other provinces. Businesses should plan for a shortage of retail outlets for years to come pending a change of course by the provincial government. Cannabis businesses are eligible for various provincial incentives, including a refundable R&D tax credit for 15% of eligible expenses.

Ontario’s legal cannabis market has been dominated by a few key trends: brisk growth in the adult-use market, steady growth in the medical market, a chronic lack of stores and over-centralization of production. Industry officials also blame government incompetence. Regulatory hurdles abound and should be factored into business plans. Cannabis companies—especially producers—should operate under the expectation that the private store rollout in Ontario and elsewhere will be slow. Store owners who completed the regulatory process are being forced to wait almost a year to open their doors as bills pile up with no revenue.

48 Marijuana Business Magazine | September 2020

Most of Canada’s large producers have an Ontario address, partly because the province is home to Toronto, the country’s financial hub. Investors rained capital over cultivators in the early years of legalization—but in retrospect, most of the large companies made poor investment decisions by wagering on large cultivation facilities. Across the province, massive cannabis greenhouses now sit empty, and many of them will probably never produce cannabis again. Ontario’s legal cannabis industry is growing, but it will grow much faster when regulators allow fair competition with the illicit market. The province has pledged to allow farm-gate sales, privatize wholesale cannabis and create a framework for “craft” producers. Time will tell whether Ontario follows through on those pledges, however.

For details about the provincial wholesaler’s supplier process, see peicannabiscorp.com/pages/suppliers.

QUEBEC Monthly adult-use retail sales: $28.9 million (CA$38.5 million)* Active medical patient registrations: 16,904 (up 57.7% since legalization) Number of retail stores per 10,000 residents: 0.05 (43 open stores) Retail system: Government-owned Wholesale: Société Québécoise du Cannabis E-commerce: Government-controlled * As of May 2020

PRINCE EDWARD ISLAND Monthly adult-use retail sales: $432,688 (CA$575,000)* Active medical patient registrations: 1,439 (down 6.9% since legalization) Number of retail stores per 10,000 residents: 0.25 (four stores or licenses issued) Retail system: Government-owned Wholesale: Prince Edward Island Liquor Control Commission E-commerce: Government-controlled * As of May 2020

Like most East Coast markets, Prince Edward Island’s government monopolized cannabis retail, wholesale and e-commerce. Those functions are operated by PEI Cannabis Management Corp., so there are no private-sector store opportunities in the regulated market. The island has the smallest adult-use market among Canada’s 10 provinces.

home cultivation. The only large producer in the province, Hexo Corp., had to move its headquarters to Ontario because of an insurance dispute. In Quebec’s cannabis market, things can only get better; they can’t get much worse. Despite the government’s heavy hand, Quebec remains the third-largest adult-use cannabis market in Canada. It is the second-most populous province with more than 8 million residents.

The Quebec market suffers from a chronic lack of retail stores and heavy government regulation that allows the illicit market to thrive. The provincial government has not exactly put out the welcome mat for the cannabis industry. Instead, it has banned vape pens, raised the age of consumption and prohibited

Frontenac Castle in Old Quebec City

Saskatchewan Monthly adult-use retail sales: $7.9 million (CA$10.6 million)* Active medical patient registrations: 7,385 (down 14.9% since legalization) Number of retail stores per 10,000 residents: 0.37 (44 stores or licenses issued) Retail system: Private sector Wholesale: Privately owned E-commerce: Privately owned * As of May 2020

Saskatchewan is one of Canada’s more business-friendly provinces for cannabis companies, but it has a relatively small adult-use market, and the medical sector is in decline. The province’s Ministry of Agriculture allowed cannabis cultivators to access cost-sharing grants funded through the Canadian Agricultural Partnership (CAP), a joint federal-provincial program to boost agriculture and commercial food businesses across Canada. Fifty-one retailers were selected by lottery when legalization kicked off, but now the province is ready to open things up: Private-store applications will be accepted for most communities. Saskatchewan also allows stores to sell cannabis online and to act as wholesalers—two functions most provinces kept a tight grip on.

September 2020 | mjbizdaily.com 49

FOREIGN

AFFAIRS

The Lay of the Land 18 trends shaping Canada’s recreational cannabis market—from excess production capacity to monthly sales growth and the rollout of infused products By Solomon Israel

anada’s adult-use cannabis market has expanded rapidly since the legalization of marijuana in October 2018. Monthly retail sales figures in May signaled an annual market worth around $1.6 billion (CA$2.2 billion)—or roughly the size of Colorado’s recreational and medical markets combined. But since the population in Canada is more than six times larger than Colorado’s, the Canadian cannabis market has plenty of room left to grow as it matures. Already, today’s market looks a lot different than it did at the outset of legalization two years ago. Before internationally minded cannabis executives open their checkbooks to invest in Canada, it’s worth knowing the lay of the land. Here are key trends observed by Marijuana Business Magazine’s international team:

1. COMPANIES SHUTTER CULTIVATION FACILITIES In the run-up to cannabis legalization in Canada, “funded capacity” was the buzzword on investors’ lips. The assumption was that producers who bankrolled the most future growing space would reap the biggest capital rewards. Over the past year, some of that production capacity has come back to haunt several of Canada’s largest cannabis growers. Alberta-based Aurora Cannabis, for starters, closed five production facilities across the country in June as part of a centralization move, not long after selling off an unwanted Ontario greenhouse for about half the listing price. Canopy Growth shuttered two massive British Columbia greenhouses in March and abandoned work on another in Ontario, where its headquarters is

50 Marijuana Business Magazine | September 2020

located, citing “slower-than-anticipated” recreational market development. A Saskatchewan facility was axed in April. Other cultivators including Hexo Corp. and The Green Organic Dutchman, both in Ontario, as well as British Columbia-based Tilray also have pulled back from unneeded facilities. Altogether, those facility closures serve to illustrate the dangers of expanding too quickly in new markets, no matter how rosy the forecasts.

2. EXECUTIVES RECEIVE PINK SLIPS C-suite shake-ups at major Canadian producers have become commonplace in the past few years, as investors turned their focus from fundraising to profitability. From Vic Neufeld, who stepped down as Ontario-based Aphria’s CEO

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FOREIGN

AFFAIRS Adult-Use Cannabis Sales by Month in Canada

in early 2019, to Bruce Linton, who was ousted from Canopy Growth that summer, to Terry Booth’s departure from Aurora in February 2020, a number of the executives who led the charge through legalization have since moved on. With most large producers still struggling to prove they can turn a profit, it’s reasonable to expect more executives will be shown the door.

Canopy Growth CEO David Klein

3. QUARTERLY LOSSES CONTINUE Staggering quarterly losses have stained the balance sheets of several major Canadian producers since legalization, although a handful have managed to turn a profit. Some money-losing license holders have blamed lower-than-expected revenues partly on a painfully slow rollout of regulated cannabis stores in Canada’s largest provinces, including Ontario and Quebec. But undisciplined spending has played a role, too.

Aside from triggering facility closures and executive turnover, the continued red ink highlights the failure of most major publicly traded Canadian producers to deliver sustainable business plans in their home market. If that trend doesn’t change soon, industry consolidation seems likely, with struggling companies either going out of business or getting scooped up by healthier rivals.

52 Marijuana Business Magazine | September 2020

4. THE BIGGEST PLAYERS RETHINK STRATEGY With their former leadership out, two of Canada’s largest producers have undertaken major corporate transformation in recent months. Canopy Growth initiated a business review after bringing on new CEO David Klein, a former chief financial officer at alcohol giant Constellation Brands, which owns nearly 40% of Canopy. Under Klein’s leadership, Canopy started closing cultivation facilities and pulling back from certain international markets to focus on Canada, the United States and Germany, where the company sees its best chances for nearterm profit. Aurora Cannabis similarly launched its own transformation plan, closing some grows to centralize production and lower production costs. The success or failure of those corporate reform attempts will doubtless offer important lessons to the rest of the industry.

5. LAYOFFS PROLIFERATE AT HOME AND OVERSEAS Corporate transformation plans at those two major producers have resulted in hundreds of layoffs in Canada and abroad in recent months. But job cutbacks haven’t been limited to Canopy and Aurora. In the past year, layoffs also have taken place at CannTrust, The Green Organic Dutchman, Hexo, Organigram, Tilray and Zenabis. Some of those job cuts have been related to the COVID-19 pandemic, while others reflect cultivation-facility closures and corporate restructurings at struggling producers. At the very least, Canadian cannabis job losses translate into a large pool of workers available for companies in search of talent.

6. LEGAL CANNABIS SALES ENJOY STRONG GROWTH

Shoppers visit Four20 Premium Market in Calgary on the first day of legal recreational cannabis sales in 2018. Photo by Lindsey Bartlett

Canadian retail sales of legal cannabis have increased more or less sequentially in the months since legalization, from $31 million (CA$42 million) in the first month to nearly $139 million this past May. (See chart “Adult-Use Cannabis Sales by Month in Canada.”) That figure suggests a roughly $1.6 billion annual market for legal cannabis in Canada, despite lagging retail stores in key provinces. The overall growth trend in sales continued during the COVID-19 pandemic, notwithstanding some regional variation related to temporary store closures in certain provinces, including Ontario. Despite trouble at individual producers, continued month-over-month growth bodes well for Canada’s cannabis industry.

stores for a population of 4.4 million. Sales from that province comprised 25% of the national total in May. But Ontario, the largest province by population with 14.7 million people—nearly 40% of Canada’s population—still had fewer than 150 cannabis stores as of August. Store growth is even more sluggish in provinces that allow only governmentoperated stores. Quebec, Canada’s second-most populous province with 8.5 million people, had only 43 government-operated marijuana stores as of August. Continued store growth in the months ahead likely will only improve legal marijuana’s market share in Canada.

7. STORE OPENINGS INCREASE UNEVENLY

8. MORE COMPANIES SEEK CREDITOR PROTECTION

The number of regulated adult-use cannabis stores in Canada passed 1,000 this summer. Alberta, the fourth-largest market, leads the way with roughly 500 cannabis

Amid a dearth of outside funding in the past year, several cannabis companies have received creditor protection from Canadian courts—in effect, Canada’s form of bankruptcy protection.

Some of those creditor-protection orders come alongside debtor-inpossession loan deals from lenders who eventually acquire the distressed firms. The list of companies turning to creditor protection includes AgMedica Bioscience, Beleave, James E. Wagner Cultivation Corp. and Wayland Group, all in Ontario, as well as Ascent Industries and Invictus Group in British Columbia. CannTrust in Vaughn, Ontario, is the biggest Canadian name to seek creditor protection in the past year after a 2019 scandal in which the license holder was sanctioned for growing plants in unlicensed areas.

9. PRODUCERS REDUCE THEIR GLOBAL FOOTPRINT After years of acquiring and building infrastructure abroad from Lesotho to Luxembourg, a number of Canadian producers have scaled back their international ambitions in favor of financial discipline. (See “Global Retreat” on page 58.)

September 2020 | mjbizdaily.com 53

FOREIGN

AFFAIRS Total Number of Registered Cannabis Patients in Canada % Change from Previous Quarter

Patients

% Change from Previous Quarter

Patients

10. INFUSED PRODUCTS ON THE RISE

11. CANNABIS STOCKPILES BALLOON

It took more than a year after Canada’s first wave of legalization for the government to finalize regulations for so-called “Cannabis 2.0” products, including edibles, infused beverages, topicals, vape cartridges and other concentrates. Those products finally started trickling out to stores in December 2019, and consumers in most parts of Canada can now buy at least some marijuana-derived products from their local cannabis stores. Vape cartridges are generally easy to find, but selection in other categories has been limited at times, with stores experiencing shortages of edibles and beverages. For now, uneven availability for cannabis derivatives makes it harder to get a sense of which products, brands and price points are catching on with consumers.

Canada’s regulated cannabis growers are sitting on huge piles of unsold marijuana, the latest federal figures show. More than 1.4 million pounds of unpackaged product was sitting in producers’ inventories as of April, plus about 85,000 kilograms (187,393 pounds) of packaged cannabis awaiting sale and millions of units of as-yetunsold marijuana-derived products. Since retail sales are trending upwards, stockpiling suggests future inventory write-downs by some producers.

12. OUTDOOR CULTIVATION EXPANDS As if the existing massive stockpile of cannabis weren’t enough, a boom in outdoor cannabis crops is increasing regulated production. Outdoor cultivation was permitted with recreational marijuana legalization

54 Marijuana Business Magazine | September 2020

in October 2018, but fewer than 20 licenses to cultivate marijuana outdoors had been granted as of summer 2019. That figure had grown to 70 outdoor cannabis cultivation licenses in June. As of April, Canada’s licensed indoor growing area totaled about 2.1 million square meters, compared with 2.8 million square meters of outdoor growing area. Increasing outdoor production should help some growers achieve lower production costs and cheaper inputs for cannabis derivatives including infused products, which is important at a time when consumers are focused on affordability. On the flip side: Any glut from outdoor harvests could contribute to stockpiles and falling prices.

13. VALUE BRANDS TAKE A GROWING MARKET SHARE As Canada’s adult-use market matures,

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FOREIGN

AFFAIRS major cannabis producers are increasingly competing against each other on price. Retailers say they’ve observed growing consumer interest in discount brands—many priced around $3.75 (CA$5) per gram or less—giving them an opportunity to compete directly against the illicit market. While those discount products might help producers unload some of their surplus, they come at a cost: As average prices have fallen, profit margins on dried cannabis have declined even as sales volumes have grown.

14. MEDICAL CANNABIS EXPORTS FACE HEADWINDS Canadian cannabis firms collectively exported a record amount of dried cannabis (8,245 pounds) to foreign medical markets in 2019. That figure represents a 160% annual increase over 2018 exports. However, the vast majority of that exported cannabis (more than 94%) went to just one country, Germany, which is the largest medical cannabis market in Europe. Australia was the No. 2 destination, receiving about 450 pounds of Canadian flower in 2019. With Germany’s own medical cannabis cultivation sector slowly coming online, it’s reasonable to assume Canada’s biggest cannabis export market might be less hungry for imports in the future.

15. MEDICAL MARIJUANA PATIENT NUMBERS DECLINE The number of registered marijuana patients in Canada’s federally regulated medical marijuana program peaked at nearly 370,000 in September 2019, almost a year after recreational legalization. That figure appears to have been a plateau: By March 2020, the number had dropped below 330,000. (See chart “Total Number of Registered Cannabis Patients in Canada”.) The decline in patient counts isn’t consistent across Canada, with some provinces including British Columbia, Ontario and Quebec seeing increases in

Companies can be delisted from public stock exchanges if share prices fall below a certain threshold.

the number of active medical cannabis registrations since legalization. The biggest decline came in Alberta, which also has the highest per-capita number of recreational stores of any Canadian province. As more cannabis stores open across Canada, that will raise questions for producers reliant on medical cannabis revenue.

16. MICRO COMPANIES ON THE RISE The number of micro licenses for cannabis cultivation and processing in Canada has grown steadily in the past year. At the beginning of 2019, Health Canada had issued only one such license. By early August 2020, 78 entities held micro licenses. For cultivators, a micro license allows indoor or outdoor growing space of up to 200 square meters. Micro-processing licenses similarly allow processing of a limited amount of cannabis with no limit on plants grown under a microcultivation license at the same site. With new micro-sized cannabis companies coming online every month, Canada’s regulated adult-use market will likely become increasingly diverse as more small businesses enter the space.

17. OUTSIDE FUNDING DRIES UP There was a time when investors couldn’t get enough of Canadian cannabis stocks, resulting in soaring market capitalizations and consequent spending sprees by producers flush with cash.

56 Marijuana Business Magazine | September 2020

Much of that investor interest dried up toward the end of 2019, as Canadian cannabis firms mostly failed to deliver on the hype. The increasing difficulty of accessing capital helps explain some other trends in Canada’s cannabis sector, especially downsizing, layoffs and creditor protection.

18. FEWER COMPANIES GO PUBLIC; DELISTINGS BEGIN In light of those capital market challenges, it has become increasingly rare for Canadian cannabis firms to go public. In one case, a Canadian producer was actually delisted from stock exchanges: Scandal-struck CannTrust got booted from both the Toronto Stock Exchange and the New York Stock Exchange in the spring. Aurora Cannabis consolidated its shares in April to avoid being removed from the New York Stock Exchange, and the NYSE warned Hexo in April that its shares could also be delisted for falling below $1. The shifting market conditions are a reminder of an uncomfortable truth for the industry: Investors just aren’t as excited about cannabis as they used to be.

Solomon Israel is a reporter for Marijuana Business Magazine. You can reach him at solomon.israel@ mjbizdaily.com.

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FOREIGN

AFFAIRS

Global Retreat

Some Canadian cannabis firms are starting to pull back from their international aspirations, a reminder of the risks of expanding too quickly into new, immature markets By Solomon Israel

ack in the early days of Canada’s regulated adult-use cannabis industry, some of the country’s biggest publicly traded marijuana producers discovered that investors rewarded international ambitions. The domestic recreational marijuana market that launched in October 2018 was exciting, of course, but that opportunity would always be limited by Canada’s relatively small population of around 38 million people. Before a single Canadian producer had turned a profit selling recreational marijuana at home, some cannabis businesses started looking beyond the country’s borders for future growth potential: to Africa, Australia, the Caribbean, Europe and South America. Armed with capital from the marijuana stock bubble, all Canadian cannabis executives had to do was find a likely international market and start spending. By doing so, they could plausibly claim to be positioned to dominate the global market of the future. Fast-forward to today. Meaningful international marijuana revenues remain somewhere in the indeterminate future. And some of Canada’s biggest cannabis producers—including Canopy Growth in Ontario and Aurora Cannabis in Alberta—have started pulling back from their international aspirations in the face of trouble at home. The situation offers a valuable lesson to cannabis players with an eye on global growth: New markets are certainly out there, but aggressive expansion without a clear path to profitability can come back to haunt a company’s balance sheet.

Owen Bennett

“They started running before they could walk,” said equity analyst Owen Bennett, senior vice president of global tobacco and cannabis research with Jefferies, an international investment bank in New York City. “They need to prove they can run a sustainable business in Canada before they even start thinking about wider global ambitions.”

ERA OF INTERNATIONAL GROWTH Some Canadian cannabis companies started legally exporting relatively small amounts of product in 2016, most of it destined for Germany. But beyond simply exporting, a few Canadian license holders started spending hundreds of millions of dollars to acquire and build assets abroad. Take Canopy Growth. It acquired a German pharmaceutical distributor in late 2016, launched a Danish cannabis joint venture in 2017 and picked up a Czech Republic medical cannabis company in 2018. Canopy’s 2018 acquisition of a cannabis grower in the landlocked African country of Lesotho was worth nearly $22.4 million (CA$29 million) at the time, and the company issued shares

58 Marijuana Business Magazine | September 2020

worth tens of millions more to acquire operations in Latin America. A Spanish cannabis producer was added to Canopy’s international portfolio in 2019, and the company spent $254.6 million (CA$343 million) to acquire a German producer and distributor of synthetic cannabis medication dronabinol. Along the way, Canopy made forays into Australia, the United Kingdom, Poland and elsewhere. Aurora Cannabis took a similar approach to global expansion, buying a stake in an Australian producer in 2017 and acquiring German medical cannabis importer, exporter and distributor Pedanios. In 2018, Aurora launched a joint venture in Danish marijuana production and acquired South American producer ICC Labs in a deal worth $220 million (CA$290 million). Later acquisitions included a Mexican importer and an ownership stake in a Portuguese license applicant. By late 2019, Aurora claimed to be active in 25 global cannabis markets, with plans to “win on a global scale.” British Columbia-based producer Tilray also has tested the waters abroad, starting with exports to markets including Australia, South America and the European Union. In 2017, Tilray announced it was spending $24 million (CA$29.5 million) to build a European hub in Portugal, which has since exported cannabis to Germany and Israel. The next year, Tilray spent $3.9 million (CA$5 million) to acquire its South American partner, turning the company into a Latin American subsidiary.

Another major international spender has been Ontario-based Aphria, which announced a $670 million (CA$826 million) deal to acquire global cannabis firm Nuuvera in early 2018, turning it into an international division with interests in Europe, Africa and Australia. (The price of the Nuuvera deal was subsequently lowered because of a drop in cannabis stock value.) Later that year, Aphria opened its war chest to acquire assets in Jamaica and South America. Short-seller Hindenburg Research pegged the price at roughly $212 million (CA$280 million) and alleged the transaction was nothing more than a “shell game” meant to enrich company insiders, which Aphria denied. (Hindenburg also lobbed accusations at Aphria over the Nuuvera acquisition.) Aphria’s early 2019 acquisition of German pharmaceutical distributor CC Pharma GmbH boosted its international portfolio further, giving the company an international source of non-cannabis revenue. Other Canadian marijuana players with international interests include Auxly Cannabis, Cronos Group, Flowr, Organigram, Supreme Cannabis and Zenabis.

QUESTIONS ABOUT STRATEGY The retail investors who poured money into cannabis stocks in the early days were never likely to ask hard questions about those international strategies, said Bennett, the Jefferies analyst. But institutional investors expect more. “They’re going to want serious business models. They need to see these guys actually delivering profitability in the near term,” Bennett said. “And as a result of that, (the producers are) left with these huge cost bases and infrastructure in a global market where the demand is just not there yet. If they weren’t going back to the international markets now and getting rid of these cost bases, then you would be asking questions.”

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The entire European market for regulated cannabis was worth roughly $260 million in 2019, according to Marijuana Business Daily’s latest European market report (see above). Germany’s medical cannabis market could contribute some meaningful revenue to Canadian producers’ balance sheets in the near future, Bennett added, but “that’s still very, very small in the context of things.” Relatively high prices for medical marijuana in Germany have been a bright spot, according to Bennett—but he expects that advantage to fade as competition increases, supply improves and downward price pressures set in. “If Germany really doesn’t accelerate over the next 12 to 18 months, then I think there are big question marks in terms of the opportunity in wider Europe over the next several years,” he said.

SIGNS OF A GLOBAL RETREAT Indications of a partial Canadian pullback from international cannabis markets are beginning to show. In June 2019, a Canopy Growth news release trumpeted the company’s longterm view of international markets, “leveraging its substantial cash position to lay the foundation for a global, revenue-generating network.” CEO Bruce Linton, who had overseen those global ambitions, was fired that July.

By the following April, Canopy announced its new leadership had decided to exit a number of international markets to lower costs and conserve cash. The company left South Africa and Lesotho and stopped cultivation in Colombia. Canopy later said it was focusing on three markets with the best near-term profit potential: Canada, Germany and the United States. Aurora Cannabis halted construction on the second phase of its Danish cultivation facility in late 2019 to save cash in the wake of a large quarterly loss. In July 2020, Aurora said it was downsizing its European workforce by about 25% and shutting down offices in Italy, Portugal and Spain, according to BNN Bloomberg. Aurora told Marijuana Business Magazine it was still committed to producing medical cannabis in Denmark and Germany despite the cuts. This past June, Auxly announced that its majority-owned Uruguayan subsidiary Inverell S.A. wouldn’t be planting a crop for the 2020-21 growing season, citing “the slower-than-anticipated pace of cannabis-specific regulatory development in Latin America.” In July, Aphria reported $47.9 million (CA$64 million) in impairment charges related to its international operations in Jamaica, Lesotho and South America, blaming the impact of the COVID-19 pandemic. The company pressed pause on building a cultivation facility in Colombia, and CEO Irwin Simon said Aphria could simply supply that market with exports from Canada. Still, another comment made by Simon on Aphria’s July 29 investor call serves as a reminder that international hype remains a feature of Canada’s cannabis industry landscape. “With all our GMP certifications and our licenses, the opportunity for Europe is going to be tremendous,” he said. “And don’t be surprised if Germany becomes legalized over the next couple of years.”

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Top International MMJ Markets From Israel to Australia, countries with medical marijuana programs are generating revenue By Alfredo Pascual

ot a week goes by without a prognosticator foretelling an international marijuana industry worth a bajillion dollars between five and 50 years from now. But what about today’s markets? It turns out there are some healthy, and growing, medical marijuana markets outside the United States and Canada—assuming you can look past the cannabis industry fan fiction. What follows is a list of five of our top markets where revenue opportunities exist today.

GERMANY Germany is home to one of the largest medical cannabis markets outside North America. And unlike countries where medical patients have access to domestically grown marijuana, Germany must depend exclusively on imports at least until the end of 2020. In recent years, a dozen or more countries have legalized medical cannabis with the goal of attracting foreign investment and establishing an export industry. That’s not been the case for Germany—at least not yet. As of mid2020, Germany continued to import medical flower and full-spectrum extract from Canada, the Netherlands and Portugal. The medication is sold at German pharmacies as magistral, or customized, preparations. The products have enjoyed robust

The Löwen Apotheke in Trier calls itself the “oldest German pharmacy” and dates back to 1241. Photo by Alfredo Pascual

demand among Germans. As in 2018, German sales of medical cannabis last year exceeded the combined sales of all other European nations. Moreover, medical cannabis sales in Germany in 2019 posted stronger growth than in Italy and the Netherlands, Europe’s second- and third-largest markets, respectively, for flower and full-spectrum products. But it’s hard to say definitively that Germany has the largest medical cannabis market outside North America because a lack of reliable data makes comparisons difficult. If flower imports are used as a benchmark, Israel overtook Germany as

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the No. 1 importer in the world in July. While Israel imported about 6,000 kilograms (13,228 pounds) of flower through July 2020, Germany barely surpassed 3,000 kilograms during the first seven months of the year. In 2019, a total of about 6,500 kilograms were imported for pharmacy dispensing in Germany, which translates to average monthly imports of 542 kilograms. In 2020, the average has been closer to 600 kilograms per month. Germany’s first domestic harvest to supply local pharmacies with flower is expected to be ready at the end of 2020. But the crop won’t be large enough to fill the country’s growing demand—meaning

Insurance-Covered Cannabis Products in Germany

* These categories vary slightly from what is reported by German agencies, so there might be some variation from reported values. Source: GKV-Spitzenverband Copyright 2020 Marijuana Business Daily, a division of Anne Holland Ventures Inc. All rights reserved.

These figures appear in euros and refer to the second quarter of 2019 through first quarter of 2020. At press time, the exchange rate was $1.19 USD.

overseas producers will continue to supply at least part of the German market. Marijuana Business Daily estimates the total retail value of all medical cannabis products sold in Germany in 2019 was at least $185.4 million (170 million euros). That includes private prescriptions that patients paid for out of pocket. And there’s no sign demand is slowing in 2020. Insurance reimbursements for medical cannabis continued to reach fresh quarterly records early in the year. In the JanuaryMarch period, total reimbursement of cannabis and marijuana-derived medicines reached 38.9 million euros, the German National Association of Statutory Health Insurance Funds (GKV-Spitzenverband) reported. That was 6% higher than the final quarter of 2019. (See chart “Insurance-Covered Cannabis Products in Germany.”)

ISRAEL Israel is home to one of the biggest centrally regulated medical marijuana markets in the world. But, as is the case in many countries, the government body charged with overseeing the nascent industry releases almost no data on a regular basis. That creates challenges for businesses and investors keen to invest in the industry. No data from the Israeli government means a variety of market indicators must be pieced together from bits of information provided by corporations and the government. Those indicators include: • The market’s size. • The number and types of licenses held by companies. • The quantity of cannabis produced and stored. • Monthly sales data.

However, with more than 70,000 patients, Israel easily represents one of the best revenue-generating investment opportunities in the world. As noted above, Israel recently passed Germany as the world’s largest importer of medical cannabis flower. In addition, the Israeli government recently approved medical cannabis exports. But whether overseas shipments will occur remains to be seen. This is not the first time the country has “approved” cannabis exports.

ITALY Italy is the second-largest medical cannabis market in Europe by volume of flower and other full-spectrum products sold as magistral preparations. Patients in Italy bought 861 kilograms of medical cannabis in 2019, a 50% increase from the 578 kilograms sold in

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AFFAIRS Medical Cannabis Sold in Italy by Source

Italian pharmacies in 2018, according to data from Italian health authorities. (See chart “Medical Cannabis Sold in Italy by Source.”) However, surprisingly few companies are involved in the Italian medical cannabis market. By contrast, dozens of companies are active in the United Kingdom’s medical cannabis market, which is much smaller than Italy’s in terms of sales. The likely reason: The Italian market is structured in a way that leaves little room for business opportunities. A little more than 80% of the 861 kilograms of cannabis sold in Italy last year was imported from the Netherlands; that figure is up from 75% in 2018. Bedrocan, a Dutch company, produces much of that flower supply, which is exported by the Dutch Office of Medicinal Cannabis (OMC). Cannabis is either imported directly by hospital pharmacies, which are part

of the Ministry of Health, or by a few private pharmaceutical wholesalers that distribute to pharmacies. Italy does have its own medical cannabis production, grown exclusively by the Ministry of Defense through its Stabilimento Chimico Farmaceutico Militare (SCFM) unit in Florence. The SCFM—the only organization authorized to grow medical cannabis in Italy—was responsible for distributing 157 kilograms of cannabis to Italian pharmacies in 2019. However, the SCFM was not responsible for producing all 157 kilograms. The agency also bought some flower from Canadian producer Aurora Cannabis for distribution to Italian pharmacies. Aurora won its first supply application process in Italy in early 2018, offering an average price of $3.48 (3.2 euros) per gram of cannabis. That initial round allowed the company to sell 100 kilograms to the SCFM. Aurora also was the sole winner of a

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second application process in mid-2019, offering an average price of $1.94 (1.73 euros) per gram of cannabis for a total of 400 kilograms over a period of two years. (Forty kilograms of the 400-kilogram supply was subsequently canceled by the Ministry of Defense, which declared one of the original three lots “not necessary.”) The SCFM is expected to increase its domestic production in 2020. All medical marijuana flower sold in Italy is produced in facilities with European Union-Good Manufacturing Practice certification. The product is irradiated to reduce as much microbial contamination as possible. Italy has 20 administrative regions with some level of autonomy for health policies. Most of the regions offer patients some insurance coverage for medical cannabis, but the qualifying conditions vary. The Tuscany region, in the center of the country, leads Italy in cannabis sales.

FOREIGN

AFFAIRS New Medical Cannabis Approvals in Australia by Month

AUSTRALIA Australian authorities expect the number of medical cannabis prescriptions this year will more than double the 30,000 approvals from 2019, signaling impressive growth in this nascent market. While the country’s market is relatively young, just about every metric—patient approvals, prescriptions, corporate participation—has experienced strong growth in recent years. That’s not a given. New markets should expect some turbulence in the early years, as regulators and corporate managers align their approaches with public-policy objectives. The Therapeutic Goods Administration approved roughly 14,000 Special Access Scheme Category B (SAS B) cumulative applications, or prescriptions, in 2020 through April. The gains have continued since then, with more than 5,500 patient approvals in July alone—the biggest one-month increase on record. (See chart “New Medical Cannabis Approvals in Australia by Month.”) The country is one of the largest centrally regulated medical cannabis

Brazil's National Sanitary Surveillance Agency (ANVISA) discusses new rules for medical cannabis in the country. Photo courtesy of Rodrigo Mesquita

markets outside Canada, so revenuegenerating opportunities exist for overseas companies. Besides medial cannabis, the country is relaxing its narcotics scheduling of cannabidiol (CBD) to make limited doses available over the counter, a move expected to create additional business opportunities. Australia’s ambition to become an exporter of medical cannabis will eventually run up against reality,

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however: Few countries currently import cannabis in any meaningful quantity, while about a dozen want to be exporters.

BRAZIL As of mid-2020, Brazil was home to Latin America’s only major medical cannabis market; most Brazilian patients access cannabis through a program designed to be used in exceptional cases.

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AFFAIRS ANVISA Authorizations for Individual Patient Imports of Nonregistered Cannabis Products

The country has three different categories of cannabis products: • Cannabis-based medicines registered like any other medicine, for which efficacy and safety needs to be proved. So far, that includes only GW Pharmaceuticals’ Sativex, sold under the name Mevatyl in Brazil. • Cannabis products with “sanitary authorization,” the new category created by ANVISA—the country’s health agency—in December 2019. These products do not require proven efficacy via clinical trials during the first five years but must obtain pre-market authorization. As of mid-2020, only one product was authorized in this category: a CBD oil. • Authorizations granted on a case-by-case basis to import nonregistered cannabis products, which also do not require clinical trials. This has been working since

2014 and is sometimes called “compassionate use.” During the first quarter of 2020, almost 3,000 patients received authorization to import nonregistered products, an increase of 25% over the previous quarter. (See chart “ANVISA Authorizations for Individual Patient Imports of Nonregistered Cannabis Products.”) Local sources estimate that 10,000 to 20,000 patients access cannabis through the third option. This makes Brazil unique in Latin America, because no other country in the region comes close to that number of patients. And the growth trend has been positive. Using data obtained from the country’s health agency, Marijuana Business Daily previously estimated Brazil had almost 11,500 patients at the end of the first quarter of 2020, up from 8,352 at the start the year. CBD oil makes up most of the imports because the Federal Council of

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Medicine—the agency responsible for regulating the medical profession—restricts the prescription of cannabis to CBD for treatment of refractory epilepsy in children and adolescents. ANVISA, however, does not limit imports of nonregistered cannabis products to CBD, and, in practice, some doctors also prescribe products with high THC for conditions other than infant refractory epilepsy. But it is harder to get a doctor’s prescription for THC-high products, and these are also more difficult to ship internationally. International Editor Matt Lamers contributed to this report. Alfredo Pascual is Marijuana Business Daily's international analyst. You can reach him at alfredop@mjbizdaily.com.

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Five Countries to Watch From pilot programs to legal recreational cannabis, these international markets have long-term potential By Alfredo Pascual

atience might prove to be a virtue when it comes to the five nations outlined here. These countries don’t offer cannabis entrepreneurs an opportunity to cash in quickly—at least not yet. Rather, the five selected countries, which span from Europe to Latin America and Oceania, are worth keeping tabs on for their potential business opportunities down the road.

THE NETHERLANDS 2019 Population: 17.3 million 2019 Gross Domestic Product: $909.1 billion 2020 Projected GDP (% Change): –7.7%

Other European countries will be closely watching the pilot program, and its results will likely be part of any future legalization debate on the continent. The Dutch government is expected to select up to 10 companies to participate in the pilot program before the end of 2020. The application process to become a legal grower ended July 28. Selected growers will supply around 80 coffee shops in 10 municipalities that would, in turn, sell the products to consumers. All coffee shops in the municipalities that joined the experiment must abandon their illegal suppliers. None of the 10 participating municipalities are among the top Dutch cities by population, such as Amsterdam and Rotterdam. Price, THC and CBD content will largely depend on supply and demand rather than government regulations.

Sources: World Bank and International Monetary Fund

For decades, Dutch authorities have tolerated the sale of recreational cannabis in cafes under certain conditions. But wholesale cultivation and sales were illegal. Now, the Dutch government is rolling out a novel experiment to permit the legal production of recreational marijuana that will be sold in select coffee shops. Despite its limited scope and duration, the experiment is important: If all goes as planned, the first legal, commercial marijuana plants will be grown and harvested in Europe in 2021.

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The government estimates a minimum production of 65,000 kilograms (143,300 pounds) per year will be needed from the growers. This assumes each of the 80 coffee shops has an average turnover of about 1 kilogram per day, 20% of which is hashish. However, the growers won’t be obligated to each grow 6,500 kilograms during the trial, nor will they have any guarantee they will be able to sell their cannabis crop. The experiment will last four years but can be extended for another year and a half. A government-appointed committee will conduct an independent assessment at the end of the trial. As a result, the legalization debate will likely be on hold as evidence is compiled. Unless current laws are changed, once the experiment is over, the country will Aurora Cannabis halted construction on the second phase of its Danish cultivation facility in late 2019. Courtesy Photo

return to the status quo in place before the test program began. That means all coffee shops would need to reconnect with their illicit sources of cannabis. Some other European countries also are moving forward with measures that could legalize recreational marijuana. Switzerland is preparing a comparable, limited pilot project. And the government of Luxembourg has promised full legalization within the current legislative period.

DENMARK 2019 Population: 5.8 million 2019 GDP: $348.1 billion 2020 Projected GDP (% Change): –6.5% Sources: World Bank and International Monetary Fund

Denmark’s recently launched medical cannabis pilot program so far has generated lackluster sales. And there’s little indication the situation will improve.

The pilot began in January 2018 and is expected to finish at the end of 2021. Unless the number of approved products and patients’ access to medicine increase, the data collected from the trial will likely be too small to justify making definitive reforms. That could have negative implications for the experiment’s renewal or the approval of legislation providing access to medical cannabis in Denmark. Moreover, cannabis opponents in neighboring countries could use the lackluster results to lobby against major cannabis reform. Sales in the first quarter of 2020 grew slightly over the fourth quarter of 2019,

but the overall market remains tiny. (See chart “Sales of Medical Cannabis Under the Danish Pilot Program.”) During that six-month period, fewer than 350 patients per quarter received one or more prescriptions for cannabis products included in the pilot scheme. Doctors wrote an average of 250 prescriptions per month for medical cannabis during the same time frame. That’s far fewer than were written in mid-2019, when the pilot program was at its sales peak with about 1,000 patients receiving 1,800 prescriptions per quarter. The number of patients sharply declined in the second half of 2019 and has not shown any signs of regaining previous levels. Only four medical cannabis products were available in Denmark as of mid-2020: Three varieties of Bedrocan flower imported from the Netherlands and one form of capsules sold by Aurora Cannabis of Alberta, Canada.

Sales of Medical Cannabis Under the Danish Pilot Program

Source: The Danish Health and Medicines Agency’s database of health data (eSundhed) and Marijuana Business Daily estimates Copyright 2020 Marijuana Business Daily, a division of Anne Holland Ventures Inc. All rights reserved.

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AFFAIRS Companies have tried to register more products. But as Marijuana Business Daily recently reported, only eight of 63 applications were approved, and some of those products were removed because they could no longer be legally provided in the country of origin, Canada. During the first quarter of 2020, 27 packages of Aurora capsules—each containing 100 units—were sold in Denmark, in addition to about 9 kilograms of flower. The revenue generated from flower sales totaled almost $160,000, while the capsules produced $4,400. Total cannabis sales during the first quarter of 2020 reached almost $1.4 million, but that was largely outside the pilot program. Most of that revenue was generated through sales of customized, or magistral, preparations using pure THC or CBD—and, to a lesser extent, finished pharmaceutical medicines such as Sativex. These represent preparations or finished products that, for the most part, have been available in Denmark since before 2018 and are outside the pilot program. More than 5,500 patients received a prescription for medical cannabis at least once from January 2018 until March 2020, mostly for isolated cannabinoids. About half the prescriptions were written to treat neuropathic pain. Most of the patients have been older than 40, and women represent more than 60% of patients. Canadian producers exported roughly 89 gallons of medical cannabis oil products to Denmark in 2019.

PERU 2019 Population: 32.5 million 2019 GDP: $226.8 billion 2020 Projected GDP (% Change): –4.5% Sources: World Bank and International Monetary Fund

While most South American countries have legalized medical cannabis in some form, no nation has developed a viable

internal market. Except for Brazil—and, to a lesser extent, Colombia—domestic sales of medical cannabis in the region were insignificant as of mid-2020. But a positive scenario is evolving that could make Peru the next Latin American nation to offer entrepreneurs real revenue opportunities. As of late July, the Peruvian health authority’s public database showed 24 applications seeking approval for cannabis products. As of July 26: • Four were withdrawn by the applicants. • Three product registrations were approved in recent months as a “cannabis-derived natural health product,” a category created by Peruvian regulators. The first to be approved belongs to Canopy Growth in Canada. The other two, registered by Peruvian CannFarma, are for products to be exported from Uruguay by Toronto-based Ramm Pharma. They contain CBD as the active ingredient. • The remaining 17 product registrations, submitted by six companies, were pending approval. Any product approvals would be in addition to Sativex, manufactured by GW Pharmaceuticals in the United Kingdom and approved as a cannabisderived pharmaceutical, although it has not yet been commercialized, according to local sources. Moreover, Peru allows magistral preparations that are customized to meet individual patients’ needs. The pharmacist is expected to prepare the prescription for each patient and is free to choose the supplier of the necessary ingredients.

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As of July 2020, the only company to announce it had the necessary permits to start selling approved cannabis products was Toronto-based Khiron Life Sciences, a company with its main operations in Colombia. Khiron made an agreement with Peruvian Farmacia Universal for distribution, but as of mid-July, no patients had access to the products. Rather, the only cannabis product available to patients in Peru was a CBD medicine sold in just one pharmacy. That product was bought by the country’s health authority through two different supply tenders from Anden Naturals, an Oregon-based supplier. The 10-mililliter bottles with 5% CBD sell at retail for about $14. Peruvian patients also have the option to import nonregistered products on a per-case basis. This option of exceptional authorizations is often called “compassionate use.” So far, Peru has depended entirely on imports, but its legislation allows for domestic production. Many expect that the country’s regulators will begin licensing production activities in the second half of 2020.

URUGUAY 2019 Population: 3.5 million 2019 GDP: $56 billion 2020 Projected GDP (% Change): –3.0% Sources: World Bank and International Monetary Fund

Uruguay fully legalized cannabis at the end of 2013, but the first meaningful exports didn’t occur until the end of 2019. They ramped up in 2020. In August, the government approved rules to promote additional overseas cannabis sales, allowing companies to export plant material that is not registered as medicine in Uruguay. This comes after Uruguay’s medical cannabis export business was dormant for several years—until last year. Marijuana Business Daily reported that in late 2019, Uruguay-based Fotmer Life Sciences shipped 1,000 kilograms of high-THC cannabis flower to Portugal. It was probably the largest single shipment of psychoactive cannabis flower to date. But in 2020, Fotmer made a second, even larger shipment of almost 1,500 kilograms, also to Portugal. Fotmer also shipped roughly 500 kilograms to Israel, for a total of about 3,000 kilograms exported as of mid-2020. No other company has exported high-THC cannabis from Uruguay as of July 2020. The two huge shipments to Portugal, meanwhile, are unusual for their secretive nature—at least from the importer’s standpoint. So far, no company has publicly taken responsibility for the flower. Infarmed, the Portuguese regulatory agency responsible for approving

imports and exports of narcotics, also would not identify the buyer: “The specific information sought is not public, falling within the scope of the activities of the licensed companies,” the agency told MJBizDaily. Portugal has a regulatory framework that allows domestic sales of medical cannabis. But no Portuguese company has been able to get the necessary approval to begin selling to domestic patients. For that reason, it seems even more unusual that the high-THC flower was shipped to the European nation late last year—unless it was used for research or the shipments were destined for another country. The declared customs value of the latest Fotmer shipment to Portugal was about $2 per gram, lower than the first shipment, which registered a value of $3.20 per gram. Uruguay also began exporting hemp flower recently, with two companies shipping a total of 2,834 kilograms for an average price declared in customs of 16 cents per gram to Switzerland as of Aug. 5. Flower has slightly more than 10% CBD and in Switzerland is typically used as a tobacco substitute, not as medical cannabis.

NEW ZEALAND 2019 Population: 4.9 million 2019 GDP: $206.9 billion 2020 Projected GDP (% Change): –7.2% Sources: World Bank and International Monetary Fund

New Zealand could become the third country in the world—after Uruguay and Canada—to legalize adult-use marijuana production and sales.

The “Cannabis Legalization and Control Bill” is set for a Sept. 19 vote in a nationwide referendum that coincides with the nation’s general election. The proposed legislation would: • Reserve market share for micro-cultivators. • Prioritize indigenous-run businesses. • Allow consumption lounges. However, the measure would also ask the Cannabis Regulatory Authority to establish a yearly cap on the amount of marijuana available for sale in the licensed market. It also would set potency limits through controls on the amount of THC permitted in cannabis products. If the referendum wins approval from voters, the incoming government would be able to introduce legislation to Parliament. That means the outcome of the general election could be as important as the cannabis referendum itself. The bill states that its purpose is to “authorize, regulate and control the cultivation, processing, use and sale of cannabis in New Zealand, with the intent of reducing harms from cannabis use.” The bill proposes to tightly regulate all aspects of the cannabis supply chain, from seed and growing to retail sales. It would effectively ban vertical integration by limiting to one the type of license a person may hold, meaning businesses allowed to grow cannabis could not operate a retail outlet or consumption lounge. When setting the annual limit, the cannabis authority would determine the share of the cap to be awarded among holders of cultivation licenses, including micro-cultivation license holders. The bill also contains a provision to limit the market share one company could control: The authority would not be allowed to authorize a license holder to supply or sell more than 20% of the annual cultivation cap allocated.

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Global Hemp Potential From dominant China to tiny Lithuania, nations are increasingly lifting prohibitions on low-THC hemp By Ivan Moreno

emp has captured the imaginations of entrepreneurs for a few years now, and while the United States is experiencing a CBD craze, it’s easy to forget there’s a whole world of hemp out there. And, depending on the country, not all of it is grown to extract cannabidiol (CBD). Once a world leader in hemp, Romania is trying to regain its former position, Germany is returning to its roots as a major hemp producer, and China has already achieved its former dominance after lifting its prohibition of the plant in 2010. Ecuador is the newest player on the scene, having recently legalized hemp, while hundreds of millions of dollars have been invested in Colombia, where there’s plentiful land and weather that allows year-round planting of hemp for CBD. Lithuania, meanwhile, is a country punching above its weight class, producing as much as or more hemp than some bigger countries. Follow us on a quick spin around the globe and see countries that have become hemp powerhouses, the places that are experiencing a resurgence and which nations are taking their first steps toward becoming industry leaders.

place in the hemp industry once the prohibition was lifted in 2010. Today, China is believed to be the world’s top hemp producer. The “industry has exploded and is set to grow even further,” noted a report about China released in February by the U.S. Department of Agriculture’s Foreign Agricultural Service. According to the FAS report, China produces more than half the world’s hemp supply. Chinese hemp-fiber sales

were estimated at $1.2 billion in 2018, although the government does not release official cultivation, production or sales data. “Multiple media outlets also report that China accounts for 11% of the $800 million global CBD market behind Europe and the United States,” the FAS report said. According to industry estimates, China planted 164,819 acres of hemp in 2019, and more than half of it was for fiber. No other country plants as much hemp for fiber as China, which accounts for about half the world’s hemp fiber supply, according to the FAS. (See chart “Distribution of China’s Hemp Crop in 2017.”) Hemp is planted across the country, but most of it grows in the far northeast and far southwest. In the near term,

Distribution of China’s Hemp Crop in 2017

CHINA 2019 population: 1.4 billion 2019 GDP: $14.3 trillion 2020 Projected GDP (% change): +1% Source: World Bank and International Monetary Fund

Thousands of years before hemp-derived CBD became a hot commodity, China was planting hemp for fiber and seed production. Like much of the world, China eventually banned hemp. But it didn’t take long for the country to resume its

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FOREIGN

AFFAIRS hemp production is expected to increase because two provinces recently legalized CBD production—Yunnan and Heilongjiang—and a third province, Jilin, is expected to do so soon. China considers CBD an extract from hemp leaves and flower that can be used in cosmetics, but the government hasn’t approved CBD for food or medicine. China defines hemp similarly to the United States, meaning the plant must not have THC content greater than 0.3%. Although China has potential appeal to investors, the market is still tightly controlled by the government, and the regulations can be complex. “Regulations and processes for importation are unclear, and no clear process exists for applying for an import license,” the FAS report said, adding, “regulatory information is nonexistent or difficult to obtain.” China doesn’t import much hemp now, but the potential is there, provided regulatory barriers are addressed, according to the FAS. “This potential is several years away. … Importation of CBD is banned, and only a negligible amount of fiber was imported in 2018,” the FAS said. “Nonetheless, the industry envisions this changing rapidly as the national government recently approved CBD for cosmetic use. Industry sources indicate that the majority of China’s CBD production is exported to the United States. In 2018, China imported only a small amount of hemp fiber ($53,540), mainly from South Korea and Belgium.” But despite regulatory roadblocks and the tightly controlled market, China is a force to be reckoned with in the hemp world. “The world market for hemp products remains relatively small, and China—as the world’s largest hemp fiber and seed producer—has had and likely will continue to have major influence on market prices and … (profits) in other countries,” according to the 2018 Congressional Research Service report, “Hemp as an Agricultural Commodity.”

protein bars, which are sold online and in retail chains. CBD products also are found in pharmacies and health stores. Hempseeds are Romania’s most traded product, and the United States was Romania’s top export market for hempseeds in 2019.

ROMANIA 2019 population: 19.4 million 2019 GDP: $250.1 billion 2020 Projected GDP (% change): –5.0% Source: World Bank and International Monetary Fund

Once Europe’s largest hemp producer, Romania is experiencing a resurgence after years of decline. The circumstances that led to Romania’s fall from the top of Europe’s hemp producers—lower demand, strict government regulations and old processing facilities—have all flipped: International demand has grown, new processing facilities are being built, and there’s more government support for the industry. Romania’s hempseed imports reached $2.6 million during the first eight months of 2019, compared with $1.7 million during the same period in 2018, according to the USDA’s Foreign Agriculture Service. The agency said Romania is among the top five European Union member states cultivating hemp—mainly for fiber, oil, seed or grain. Legally, the plant’s THC level cannot exceed 0.2%. Although Romania doesn’t have the same number of processing facilities it once did—28 in the country’s hemp heyday—there are several in operation that handle a wide range of products, including hempseeds for humans and animals, CBD for cosmetics and edibles, protein powder for shakes and smoothies, and nutritional bars. Consumer demand is expected to grow as a variety of hemp products come on the market, the FAS said. Hemp is used as a key ingredient in many foods, such as breakfast cereals, protein shakes and

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COLOMBIA 2019 population: 50.3 million 2019 GDP: $323.8 billion 2020 Projected GDP (% change): –2.4% Source: World Bank and International Monetary Fund

Over the past few years, hundreds of millions of dollars from investors have poured into this South American country straddling the equator. The money has gone to build infrastructure for vertically integrated, pharma-oriented extracts, said Manuel Baselga, co-founder and board member of Savanna Ventures, a venture capital firm in Bogota that invests in cannabis companies internationally. “Most of those companies are also targeting wellness, cosmetics, nutraceuticals and other less-regulated products,” Baselga said. Colombia is one of many parts of the world where the word cannabis is used for both marijuana and hemp. When Colombia legalized cannabis for medical use in 2016, the plant was separated into two categories: psychoactive cannabis, which includes anything with more than 1% THC, and non-psychoactive cannabis, which falls below that threshold. Hemp was an afterthought in the 2016 legislation, so although it was included in cannabis legalization, there wasn’t

FOREIGN

AFFAIRS an independent regulatory space for industrial-hemp uses. Baselga expects the hemp-specific regulations to come online soon and be similar to the U.S. Farm Bill or European hemp laws. Currently, there are about 50 Colombian hemp farms in operation, and companies there have regulatory hurdles to clear before they begin exporting—starting with registering their cultivars and strains with the National Agronomic Agency. After that, cultivators must obtain processing and exporting licenses. Baselga said CBD-rich cannabis extracts are starting to be exported, but industrial products such as fiber and grain will take longer. Investment in fiber and grain has been minimal so far, he said. Colombia’s tropical weather and plentiful land make it ideal for low-cost greenhouse cultivation year-round, allowing growers to generate up to three or four crops annually, Baselga said. “I think for CBD we’re certainly going to be a main player,” he said. One of Colombia’s advantages—its weather—is also one of its main challenges. That’s because the most common cultivars for industrial hemp don’t perform well with year-round tropical weather. But Baselga said many companies are working on seed genetics to find the right cultivar for the equatorial climate.

ECUADOR 2019 population: 14.7 million 2019 GDP: $107.4 billion 2020 Projected GDP (% change): –6.3% Source: World Bank and International Monetary Fund

Ecuador is one of the more recent countries to legalize the sowing, cultivation and harvesting of hemp, as long as the plant doesn’t have more than 1% THC and is used with authorization for medical, scientific and research purposes. It also can be used for industrial purposes, such as fiber for textiles. Ecuador is still very much a hemp industry taking its first steps. Legislation passed in 2019 formally took effect this June. Still, there isn’t a regulatory framework officially in place. The government has 120 days from June 21 to formalize those, and it’s possible they’ll be ready sometime in October. Baselga of Savanna Ventures said one advantage Ecuador shares with Colombia is its weather, which allows for yearround, low-cost greenhouse production. “It really is just a very basic cost-benefit scenario,” Baselga said. “It’s impossible that any U.S. grower or European grower will be able to come even close to production costs in … Ecuador and Colombia.” One advantage Ecuador has over Colombia is the ability to legally export flower and biomass. Colombian law requires biomass to be processed, and only its derivatives or transformed products such as oils can be exported. “Eventually, farmers will be able to start growing very cost-efficient, quality flower and just export it. If they want to process it, they can do that, but it opens up a competitive advantage versus Colombia,” Baselga said. “We can have a situation where, in less than a year, Ecuador is exporting mass bulk, quality flower to whoever accepts it.” The regulations in Ecuador also are expected to be more streamlined and easier to follow than Colombia’s—another possible appeal for investors. When growing hemp for industrial uses, however, Ecuador faces the same challenge as Colombia: Hemp plants grown for fiber don’t perform well in equatorial climates, so Ecuador has to solve the riddle of plant genetics.

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LITHUANIA 2019 population: 2.8 million 2019 GDP: $54.2 billion 2020 Projected GDP (% change): –8.1% Source: World Bank and International Monetary Fund

This tiny country roughly the size of West Virginia is already one of the larger hemp growers in the European Union, and production could ramp up with pending legislation that would allow farmers to create products using the whole plant. Lithuania grew 22,689 acres of industrial hemp last year. That’s double what Germany produced—and Germany is considered a major player in the EU’s hemp industry. Currently, farmers can grow EUapproved strains to produce hemp fiber and seeds, but they cannot process leaves or flower for anything other than research and development. The sale of biomass is permitted only internationally; the tops of hemp flower must be exported, and CBD products are illegal. Those provisions are part of Lithuania’s first hemp law, which took effect in 2014. However, legislators are working to expand the plant’s use. Under a pending proposal, licensed hemp farmers would be allowed to use all parts of the plant for processing. Hemp-derived products that contain less than 0.2% THC would be legal to produce and sell, and they could also be imported and exported. The proposal passed two votes in Parliament, but the bill stalled in April as lawmakers looked to ensure their regulations were compatible with EU law. The European Commission and EU-member states have three months to examine the bill and respond.

3K-R

10K

FOREIGN

AFFAIRS Licensed Hemp Acreage in Germany

GERMANY 2019 population: 83.1 million 2019 GDP: $3.8 trillion 2020 Projected GDP (% change): –7.8% Source: World Bank and International Monetary Fund

After a 14-year ban, Germany legalized hemp cultivation in 1996, and demand for products derived from the plant has been increasing in recent years. In 2019, the country grew 11,140 acres (4,508 hectares) of hemp, which was an increase of about 45% from 2018. (See “Licensed Hemp Acreage in Germany.”) In fact, both the number of establishments licensed to grow hemp and the amount of hemp grown have steadily risen since 2013. Only 86 establishments were growing hemp in 2013 and just 1,080 acres

were cultivated that year, according to figures from the country’s Federal Office for Agriculture and Food. Now there are 575 establishments cultivating hemp. Despite the rapid growth, Germany trails some of Europe’s more prolific hemp cultivators such as France and Lithuania, which in 2019 planted 35,944 acres and 22,550 acres, respectively. But German retailers say they’re seeing demand for hemp-derived products such as cereals and cereal bars, hemp flours, oils and beverages, according to a report released in February by the USDA’s Foreign Agricultural Service. One of Germany’s largest retailers reported having 100 different hemp-based products on shelves, according to media reports; another well-known drugstore had more than 40 such products. And according to the German Federal Institute for Risk Assessment, more than 200 hemp-derived products entered the German market between 2012 and 2017, about 150 of them food products. CBD products also are popular, but as in many parts of the world, the legal environment is complex. In 2019, the European Food Safety

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Authority included CBD in the Novel Foods Catalogue, meaning products require government approval before they’re marketed. But getting approval is a long, expensive process. “Even though CBD products are currently available on the market, companies run a high risk of potential harm to their businesses due to different interpretations of the laws and regulations,” the FAS warned. Still, there is a “clear upward trend in the German hemp market and increasing export opportunities for U.S. suppliers,” the FAS concluded in its February report. There was a caveat, however: “In view of the wide range of products, recent legal changes and the complex legal environment, we advise that U.S. exporters verify the full set of import requirements with the respective competent authorities.” Ivan Moreno is a reporter for Hemp Industry Daily and Marijuana Business Magazine. You can reach him at ivan.moreno@ hempindustrydaily.com.

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FOREIGN

AFFAIRS

Insights from a Former Cannabis Regulator Colombian official drew from policy in Colorado, Germany and Uruguay to form medical cannabis framework By Alfredo Pascual

ndrés López is a chemist who started to work in the national narcotics office (FNE) of the Colombian Ministry of Health in 2007. He joined the drug policy office in the Ministry of Justice in 2013. In December of that year, López developed a major interest in cannabis regulation. He attended an intergovernmental meeting in Bogota,

where the heads of drug agencies across the Americas discussed how they could team up to combat drug trafficking. Coincidentally, the meeting occurred the same year Uruguay became the first country to fully legalize cannabis—a hot topic among the attendees. After the meeting, López started developing proposals and technical documents to

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support a Colombian cannabis law that was being drafted to legalize cannabis for medical and scientific purposes. In mid-2016, when Colombian Law 1787 was approved, López returned to the FNE as general director to oversee the implementation of the cannabis law. He stayed at the agency until mid-2019. López shared some of his experiences with Marijuana Business Magazine.

What’s the status of CBD in Colombia, and how does it relate to the World Health Organization’s (WHO) cannabis scheduling recommendations? In Colombia, even before the cannabis law, it was clear that CBD is not a narcotic drug. The FNE has been allowing imports and exports for years. But THC is a narcotic. The lack of standards regarding THC traces in CBD medicines is what the WHO is proposing to solve with an international THC threshold. If the recommendation is approved, it would eliminate a barrier of access to medical CBD products while allowing drug-enforcement authorities to focus on more dangerous drugs—of which there are plenty. Unfortunately, drug policymaking has been historically based in good intentions but also a lack of evidence. The current scheduling status of cannabis and cannabis products is the best proof, and change at a multinational level is extremely challenging and slow. In this scenario, I think countries should focus on taking a step ahead on national levels. They should set their own THC limits to define narcotics in favor of patients and based on science.

What has been the social impact of medical legalization in Colombia? The Colombian cannabis law is based on the constitutional right to health, and the purpose is to provide safe access to medicinal cannabis. Of course, it also creates a new industry with opportunities for economic development and revenue. At the very beginning, the industry was seen more as a new agriculture business rather than a pharmaceutical operation. Now, with regulations in some of the more promising markets like Brazil and Germany being quite restrictive in terms of quality standards, it’s clear that significant investment should be made to develop such capacities. But it won’t be easy for small growers to afford to comply with such regulations.

Andrés López

Companies that have already made such investments are employing a lot of local workers in their operations, providing formal employment—usually with gender inclusion. Significant employment was also generated around licensing in Colombia. This includes service providers of legal, agronomic and technical consultancy that in many cases help the smaller companies get up and running.

Which foreign cannabis regulations were considered for the Colombian regulatory model? At the end of 2014, I joined Sen. Juan Manuel Galan—the future author of the Colombian cannabis law—and some other lawmakers in a visit to Colorado. There, we had a rich exchange of experiences with lawmakers, licensed

producers, dispensaries and patients. Experts from Colorado provided valuable insights about the main mistakes and related amendments to their regulations. Also, Uruguay was an interesting source of ideas—particularly regarding the separation of high-THC and lowTHC cannabis regulations—to make a policy based in risk assessment. We also learned from countries like Germany, where the use of magistral preparations as a high-quality alternative to registered medicines is key. Also, like in Germany, we didn’t want to write a list of qualifying medical conditions, which might be restrictive and hard to update. We preferred to leave the decision to the doctors. The interview has been edited for length and clarity.

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Virtual Reality By Margaret Jackson

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Amid COVID, companies turn to virtual platforms for product launches, employee training and customer education and engagement

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Virtual Reality

Cannabis businesses are turning to virtual platforms to stay connected as COVID-19 prevents them from hosting and attending large gatherings. The following are some of the lessons learned from their experiences: • Have someone manage virtualevent technology while the host engages with participants. • Do a test run to ensure the camera angle and lighting are correct. • Understand and use available functions on your chosen virtual platform. Drew Martin sent participants in its virtual cocktail-making class packages that included a box of its branded pre-rolls along with mixers and elixirs needed to create the drinks. Courtesy Photo

s states around the country started shutting down businesses in March to try to stop the spread of COVID-19, both mainstream and cannabis businesses pivoted from in-person to virtual events. In some cases, such as 4/20, the unofficial marijuana holiday, the switch had to be made in a matter of weeks. In the cannabis industry, companies including Marijuana Business Daily are turning to virtual platforms for everything from trade conferences and product launches to consumer and client education as well as staff training. Whether it’s Instagram, Zoom or a platform specifically designed for conferences, the industry still wants to gather to exchange ideas, conduct business and engage customers and clients as the world navigates tumultuous conditions resulting from the pandemic. While most companies report that virtual events have been successful and attendees say they’re getting value out of them, there are challenges. “There is a distraction issue,” said Joe Hodas, chief marketing officer for Wana Brands, a Boulder, Colorado-based manufacturer of infused products, who has participated in a number of virtual

conferences both as an attendee and a panelist. “The challenge is you’re on your desktop and you catch up on emails.” Even so, it appears that virtual events are the reality for the time being. What follows are lessons learned from three cannabis-related businesses that have hosted virtual events.

Company: Drew Martin Headquarters: Los Angeles Line of business: Pre-rolls What Happened: Drew Martin was

planning to launch its line of high-end pre-rolls with a series of dinners and cocktail parties. But the coronavirus pandemic forced the company to shift to a virtual Zoom event and subsequent parties. Drew Martin teamed up with San Vicente Bungalows, an exclusive club in Hollywood, California, that caters to A-list celebrities and power brokers. “We knew we’d have to do this all virtually and digitally to keep our team safe and to keep our guests safe,” said Andrew Freeman, Drew Martin’s chief brand officer. “Being a part of what’s happening in Los Angeles was important

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• Survey participants to determine what they’re interested in discussing. • Create an outline and agenda for participants to ensure the group stays on topic.

to us. We worked with San Vicente Bungalows to create a program for their members who could get the word out about what we were doing as well.” Participants in the Zoom event—most of them from the L.A. area—were treated to a master cocktail-making class by company founder Drew Martin, a former mixologist who has worked in several James Beard Award-winning bars. Participants received a list of alcohol and other ingredients they would need for the event. Packages that included a box of pre-rolls, a lime, a lemon, a measuring cup and a few mixers and elixirs were delivered to participants. “Our founder who created the product is a mixologist and herbalist by training,” Freeman said. “He’s always talked about these joints as if they’re cocktails.”

What Worked: The partnership with

San Vicente Bungalows enabled Drew Martin to engage with an audience that is aligned with what it has to offer. “Because our participants had to gather their own supplies, they were more invested in it,” Freeman said,

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Virtual Reality referring to people having to purchase alcohol and other ingredients. “There was a payoff there to making it an engaging piece. There was a little more buildup and a little more seriousness around it.”

What Didn’t Work: It’s difficult to account for everything that can go wrong, so it’s good to do a test run before the actual event, which Drew Martin did. But because the test run did not happen at precisely the time the event was scheduled, event producers didn’t realize the angle of the video equipment would be problematic when the sun set. “It’s really important to dedicate someone to manage that tech side of it,” Freeman said. “If you’re leading the event, you can’t be managing the community or the waiting room. If you’ve dedicated someone to managing that tech side, it can save a lot of heartache and trouble.”

Virtual trainings and events allow participants to hear from experts such as Papa & Barkley co-founder and Chief Product Officer Guy Rocourt. Courtesy Photo

Adam Grossman

Best Piece of Advice: “To create an experience that will leave people excited about your brand, you have to create an engaging experience for them,” Freeman said. “For us, the key has been to make something that’s interactive. You’re not talking about your brand for 60 minutes; you’re showing who your brand is.” Company: Papa & Barkley Headquarters: Eureka, California Line of Business: Tincture and topical manufacturer What Happened: As COVID-19 started spreading across the United States, Papa & Barkley pivoted from in-store customer education about its medical cannabis products to virtual training sessions for budtenders as well as brand promotion—all done via Zoom. “It’s more challenging than setting an appointment and going into the dispensary,” said Adam Grossman, Papa & Barkley’s CEO. “It’s an ongoing necessity of the business to make sure

we’re good partners and communicators and training their people.”

What Worked: There isn’t any extra cost

associated with training budtenders via Zoom because the number of hours invested in virtual training is the same as it would be if Papa & Barkley employees were doing the training in person, Grossman said.

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Because some cannabis retailers are working with a skeleton crew, it’s often difficult to schedule the Zoom training. So Papa & Barkley is creating a five-module video series on the ExpertVoice platform. The training series also gives Papa & Barkley the opportunity to standardize the information it provides budtenders. Budtenders watch a video and then must pass a quiz before moving to the next module. The first video module provides information about Papa & Barkley’s story, brand and core values. Other modules are more product specific. “It’s the medicinal attributes of our product mix that require a higher degree of education,” Grossman said. “Because we have multiple ratios, it requires a lot of education.”

What Didn’t Work: Replicating the patient-education days that were primarily conducted in stores has been difficult. “Our demographic is generally utilizing the products in ways that require more education,” Grossman said. “There’s just less human touch, which is such a core part of the experience as a cannabis company. I wouldn’t say it hasn’t been working well, but it’s hard to articulate our value proposition online.”

Vangst surveyed clients about their interests and developed webinars to serve those needs. Courtesy Photos

Best Piece of Advice: Understanding

and using the different functions available on your selected virtual platform is key. “We like to use the notes features, and with using the chat feature, we’ve found positive engagement both to field questions and to capture emails of people who want to be on our mailing list,” Grossman said.

Company: Vangst Headquarters: Denver Line of business: Cannabis staffing What Happened: When states started

shuttering their economies in March to stop the spread of COVID-19, Vangst began hosting webinars on the video platform Vimeo to help cannabis companies navigate the challenging business environment.

What Worked: Vangst, which has hosted 10 virtual events, surveyed its clients

to determine the type of information they thought would be helpful and developed panels that brought industry experts together to discuss topics such as: • Motivating and managing remote workers through adaptability, empathy and communication. • New safety norms for cannabis businesses, including social distancing and workplace safety. • Operational excellence and leadership during a crisis. “The purpose of our webinars was to bring the community together in a non-salesy way and answer the question, ‘How can we be the best employer possible?’” Vangst founder and CEO Karson Humiston said.

What Didn’t Work: As happens with the career fairs Vangst hosts, people who sign up for a webinar don’t necessarily show up. “At career fairs, we get a 50% showup rate,” Humiston said. With virtual,

attendance is “less than half (of people who sign up).” Humiston also has had issues with people using the chat feature to promote their businesses. In the most recent case, she privately messaged the person and asked him to stop. Humiston said Vangst hasn’t experienced any problems with inappropriate comments, but she has had to deal with off-topic questions. “In a session about wellness, someone kept asking about social equity. And it would take the panel down such a rabbit hole if we’re talking about self-care,” she said.

Best Piece of Advice: Create an outline

and an agenda for participants after seeking their input on the topics they want to discuss. “It’s annoying for me as a consumer when the vendors are jamming their own agendas our way,” Humiston said. “This is a chance to bring industry leaders together and ask them questions.”

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92 Marijuana Business Magazine | September 2020

Green

Packaging D E N I G A REIM

Cannabis-based plastic and paper could reduce waste and promote a more sustainable future By Laura Drotleff

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Green Packaging D

REIMAGINE

Cannabis waste provides low-cost raw materials for hemp paper and bioplastics while relieving cultivators of the cost of disposal. Pioneering this effort could help the cannabis industry position itself as a leader in earth-friendly, sustainable packaging. Here’s what you need to know:

Tiny ePaper founder Erica Halverson re-created shopping bags using hemp paper. Courtesy Photo

• Cannabis businesses have an opportunity to lead other consumer packaged goods industries by reducing the waste that ends up in landfills and adopting plant-based packaging.

annabis businesses have long struggled with the excessive packaging their products are required to use, employing extra layers of plastic and paper to ensure that flower or vape products are childproof and don’t fall into the wrong hands. But that struggle might be nearing its end: New plant-based paper and plastic packaging options are coming to market at a price point that’s comparable to conventional packaging. That’s all thanks to the ingenuity of a few innovative minds that are working to use hemp and marijuana waste to make cannabis biocircular. In other words, the plants come from the earth, and their leftover waste can be used to create environmentally friendly products such as hemp paper that can be recycled multiple times rather than going straight to a landfill. And cannabis companies are here for it, said Erica Halverson, founder and CEO of Tiny ePaper, a Long Beach, California-based company that makes 100% hemp paper. Halverson said the interest in and need for sustainable packaging in the cannabis industry was the green light she needed to launch her company. “We are selling this medicine, these healing products, but we’re selling it in one of the most irresponsible ways

• Hemp paper and cannabis-based plastic packaging is cost-comparative to tree-paper and petroleum-based plastics when made from waste. It could end up costing even less for product manufacturers if regulators begin taxing companies for using conventional plastics.

• Hemp paper is notoriously stronger than tree paper and breaks down four times faster. Biodegradable plastic breaks down within a year of use, unlike petroleum-based plastic that is not compostable. • Certifying agencies such as the U.S. Department of Agriculture ensure green packaging is sound and ethically produced. Erica Halverson

possible. So the cannabis industry, in particular, has gotten to the point that it is begging for sustainable packaging solutions,” Halverson said.

TIMING IS EVERYTHING

The economic shock caused by the coronavirus pandemic revealed the weaknesses in the global supply chain. It’s also created a serendipitous moment for North America’s green packaging companies, and executives say there are four reasons why now is the right time for cannabis brands to switch to green solutions: Reducing waste while increasing cannabis use and profits: Long-desired

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sustainable packaging alternatives that incorporate cannabis have been elusive because of the legality of hemp and marijuana. Also, supply-chain hurdles stand in the way of companies converting waste to usable raw material. Stopping waste pollution: Cannabis destruction has traditionally been required during waste disposal. Consequently, much of this biodegradable material has been thrown into landfills, adding another financial and environmental burden to cannabis cultivators and processors. Instead, growers and processors could give their waste to entrepreneurs who can salvage it for other uses and eliminate two problems at once—all while adopting sustainable packaging.

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Green Packaging D

REIMAGINE

Bio-circular requirements are the future: Using the waste that is readily available to create environmentally friendly products such as plant-based plastic bottles—versus those produced from fossil fuels—can make the industry bio-circular and position companies for the years ahead. Such a change is bound to be part of the next green revolution, according to Tarek Moharram, founder of London, Ontario-based Moharram Ventures and bioplastics firm True Green Plastic. “We are asking our regulators to build in a requirement to say, ‘If you, as an industry, have a bio-circular opportunity, you need to be taking it or be seriously exploring it,’” he said. “Bio-circular is going to be the future for consumer-packaged goods, because ultimately we’re making things with carbon.” It also makes good financial sense. In the cannabis industry, biomass is 80% of what comes out of the ground, and it isn’t being used, Moharram said. Leaders of publicly traded cannabis companies “have a fiduciary duty to their shareholders, and almost 90% of what’s being grown

Verifying Green Claims For packaging to qualify as “green,” manufacturers must be able to certify that their product is made with fewer than 125 microns of thickness, allowing it to easily break down in the environment within a year after use. Businesses also may pursue green packaging certifications to promote their products as sustainable alternatives.

Tarek Moharram

isn’t having value extracted from it,” he said. Consumers care: Brands need to communicate with customers about their values, then demonstrate those values through action, according to Moharram. “Consumers are really focusing on triple-bottom-line organizations,” Moharram added. “People care about the footprint of the industry. When you are speaking to the consumer about and demonstrating your values, that’s what builds longterm consumer relationships and lifetime customers.”

The U.S. Department of Agriculture’s biobased products certification is one option to pursue, according to Ry Russell, founder of plant-based plastics firm Knot Plastic in Saco, Maine. Russell has sent his Knot Plastic bags to various international organizations for certifications, including Austria’s TÜV Rheinland Group and the Bureau de Normalization in Quebec, Canada. It’s not enough just to be “eco-friendly,” said Russell, who believes there has been too much greenwashing in business. Instead, he’s working to create his own standard to certify partner companies and products. “We want a verified, trusted army that other organizations and other governments say is ethically approved,” Russell said.

GREEN CERTIFICATION

Brands pursuing cannabis-based products and packaging can apply for green certification from a variety of independent, third-party organizations verified by the U.S. Small Business Council and the U.S. Federal Trade Commission. Some examples include: Green Seal allows companies to promote eco-friendly products that meet the nonprofit organization’s environmental standards. Green Seal certifies everything from household products to construction materials. Scientific Certification Systems uses internationally recognized standards for certifying a variety of products from textiles, wood and construction materials to food and agriculture services, paper, packaging and more. The U.S. Green Building Council is a nonprofit organization that certifies cost-efficient and energy-saving green buildings using its Leadership in Energy and Environmental Design (LEED) system. The entity also certifies products eligible for use in green building with the LEED certification.

Fiber sourced from hemp is thicker and stronger than most tree- or petroleum-based products. Courtesy Photo

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The Sustainable Packaging Coalition is not a certification program but an organization that provides education and events centered on sustainable packaging. Its members encompass the entire supply chain, from B2B companies to consumer packaged goods. – Laura Drotleff

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Price Pressures for Plant-Based Products? The higher costs associated with eco-friendly packaging often steer product manufacturers away from using it. But many producers of cannabis-based packaging are adamant about keeping their prices competitive. Hemp paper entrepreneur Erica Halverson, owner of Long Beach, California-based Tiny ePaper, is determined not to pass along high logistics costs to her customers so they don’t find hemp paper to be too expensive. This childproof cannabis packaging is made from hemp paper that’s been reverseengineered to emulate standard die-cut packaging. Courtesy Photo

GOT PAPER?

Industry needs can often lead to opportunities. Take the case of Tiny ePaper. Halverson started the company in November 2017 after a conversation with a cannabis industry colleague revealed that the industry didn’t have access to 100% hemp paper. “My original goal was to get them to switch, and then the cannabis industry gets to be a model for every other industry in showing that we can actually band together and make really smart, responsible decisions and change an entire industry and be a model for everybody else,” Halverson said. But she quickly found that a lack of pulpers and paper mills were willing to work with hemp, as the crop at the time was still illegal at the federal level. And those that were willing to do business generally weren’t close to California. “First of all, finding anybody to believe that I could get to 100% hemp paper on a commercial, scalable basis was a chore in itself,” Halverson said. After hemp was legalized with the passage of the 2018 Farm Bill, Halverson said she saw a greater willingness among companies to learn about hemp paper and process it. But the supply chain

remains a struggle because there is a shortage of processors and pulpers, so most of her cost goes to shipping raw material out of state and back, then shipping it to other manufacturers to make the paper. Ultimately, it would be ideal to have an extractor, raw material processor, paper mill and printer in geographical “silos” in the West, Midwest and East, Halverson said. Hemp paper is notoriously strong compared to tree paper, Halverson said, and it can be recycled seven to eight times as opposed to three or four times for tree paper. Over the past several months, Halverson has been busy proving these concepts on the social media network LinkedIn. Using the same hemp paper she uses for business cards, Halverson reverse-engineered standard die-cut packaging from cannabis—including childproof packaging—to packaged beverages including sparkling water, beer and wine. “My purpose was to show that you can make hemp paper function in any part of the manufacturing process,” Halverson said. “I’m proving that the same glue and the same amount of glue work. … They might have to add a certain amount of pressure onto the die-cut machine

98 Marijuana Business Magazine | September 2020

“I’m not going to charge 30% over what the tree-paper version of that product would cost. I’m going to find an aggregate average,” Halverson said. “If I don’t make this paper affordable, nobody’s going to make a switch,” she said. “If I don’t suit my value proposition to where it makes sense for that price increase, nobody’s going to believe that it’s a better choice. So I have to hold a certain price, or I’m going to shoot myself in the foot.” Price has been a concern for plant-based plastics, too, but that concern is waning because of the lower cost involved in making plastics with cannabis waste. When the supply is free—or a revenue stream—it evens out the cost for customers, according to Tarek Moharram, founder of Canadian cannabis-based plastics firm Truly Green Plastic in London, Ontario. Further, authorities enforcing fines on companies for the environmental impact of the products they use will also make plantbased plastics more price-competitive, Moharram predicted. Municipalities that have banned the use of plastic bags are one such example. “It doesn’t matter how cheap it is to produce; if you’re not allowed to sell it in jurisdictions X, Y and Z, you’ll probably want to have a different revenue stream,” Moharram said. Ry Russell, founder of Saco, Mainebased bioplastics firm Knot Plastic, said his company is committed to being less expensive than tree paper and cardboard, but he can’t guarantee that he can match prices for petroleum-based products. One way to become more competitive could be to use less material. “The fiber of hemp is already larger, more microns, than the actual thickness of a plastic straw,” Russell said. “What we’re trying to dial in is: Can we use 15% less of our materials, so maybe we can get closer to a 15% or 25% premium over petroleum-based solutions?” – Laura Drotleff

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to cut through the paper, but every time they put in a different stock, they have to recalibrate the machine for that anyway.” Halverson said the LinkedIn posts have generated so much interest that she has signed several letters of intent and has other potential customers ready to sign once she is up and running. In July, Halverson estimated she would be ready to take preorders in the next 30 to 60 days, once her final pulper and paper mill-vetting process was complete and she could get paper to her selected product manufacturers. “This is helping me build some data points so I make sure that I make enough paper,” Halverson said. “I’m showing the world that this doesn’t have to be centered around cannabis. I’m (using hashtags for) beverages and other industries, trying to open up people’s minds right now to the possibilities of the hemp plant. That’s also given me more demand and created more insurance.” Halverson said she’s also looking into additional intellectual property using organic adhesions and vegetable-based inks on her packaging, because she is adamant no harmful chemicals touch her products. “I don’t use any chemicals or any substances that I can’t put in my body; if I can’t drink it, it doesn’t go on my product,” Halverson said. As demand for plant-based packaging ramps up, it’s likely there will need to be more cannabis waste to repurpose. Despite regulatory pressures, the unprecedented growth of the cannabis market worldwide shows there will be ample supply for now, according to Halverson, who sources all the hemp waste for her paper from extraction firms and hemp growers. While setting up her business in North America, she has made contacts in other parts of the world that are ready to provide waste and help her develop the international supply chain for hemp paper. The next step for Halverson is taking the crop full circle and creating a living soil made with hemp and paper waste for farmers to boost their yields—a project

Ry Russell’s company, Knot Plastic, creates plant-based bags from corn and hemp. Courtesy Photo

that’s already in the works with a private company, she said.

PLANT-BASED PLASTICS

According to the U.S. Natural Resources Defense Fund, humans worldwide produce 300 million tons of plastic each year, half of which is for single-use items—a figure nearly equivalent to the weight of the entire human population. Single-use plastics include packaging, bottles, wrappers, straws and bags, which are often disposed of immediately after use. Polyethylene terephthalate, which is one of the most commonly recycled plastics, can be recycled into products from polyester to car parts, although 91% of all plastic isn’t recycled at all. Instead, that waste ends up in landfills—or, worse yet, discarded in the environment. Currently, 99% of plastic is derived from fossil fuels, which means the market possibilities for plant-based alternatives are endless. Two new companies in the cannabis space are aiming to bring products to market that will make a difference. Knot Plastic, a manufacturer based in Saco, Maine, set out in February to create safe, nonplastic alternative packaging products. When the COVID-19 pandemic hit, Knot Plastic co-founders Ry Russell and Michael Osborne, an engineer, had

100 Marijuana Business Magazine | September 2020

already done all the tooling and were ready to manufacture cannabis pre-roll containers. But when manufacturers were shut down, they quickly pivoted to develop the plant-based Knot Plastic bag, having quarantined themselves in a factory to contain any potential spread of the coronavirus. The team started with ethanol because of the abundant corn supply and because they thought there was a shortage of hemp, making the raw material cost-prohibitive. But when they learned about the oversupply of hemp biomass from the 2019 crop, Russell called some local farmers and started experimenting. “We added 15% of industrial hemp, and we nailed that. Now, we’re testing 25%,” Russell said. “We’re testing to see how much hemp we can add to our polymers and start that transition now. “Even if it’s not permanent, we want to include hemp in our cannabis packaging that we’re launching this fall. If next year the economics don’t make sense, we still have a consistent supply of non-GMO corn to make our polymers and our high-density plastics. We’re not a hemp or corn company—we’re a plant-based plastics company.” Knot Plastic can currently supply 15 million bags per month and has ordered two more machines to produce the bags, which will at least double production.

MEETING CONSUMER DEMAND

The interaction with hemp farmers while sourcing material for the Knot Plastic bags led to a second product—biodegradable zip ties. Because hemp growers are required to label every plant for traceability, one farmer said he was spending up to $11,000 per year on zip ties. After some research into the market, Russell submitted the tooling, and the product debuted this summer. Knot Plastic also released a hempbased urine sample cup, demonstrating the ability to create plant-based packaging for the medical-supply market. With this success, Russell and partners are adding larger percentages of hemp to their products, and they hope to integrate hemp into the cannabis packaging—a pre-roll tube and 19-dram, child-resistant pop-top container—that drops this fall. “We have to scale into each SKU, so we’re going to introduce the 19-dram, make those relationships and then just listen to the feedback on what other sizes are needed,” Russell said. “The market will tell us where we need to be.” Initially, Knot Plastic will be able to produce 10 million units per month and has ordered machines so production can ramp up with demand, Russell said. “For us, it was really important that we set up our supply chain. We are way more self-reliant on toolmaking and production,” Russell said, referring to how COVID-19 brought much of the international manufacturing sector to a standstill. “Where we’ve got a unique opportunity for future products is that it’s never going to take us nine months again from concept to production. We should be able to go from product development to a finished good in about 90 days.” That commitment isn’t just competitive—Russell wants to declare war on the fossil-fuels market and replace those products with plant-based alternatives. “We need to be able to be the fastest rather than allowing time for less

Knot Plastic created hemp-based urine sample cups to show its ability to serve the medicalsupply market. Courtesy Photo

ethical solutions to come to market,” Russell said. “Ocean-recycled plastic just restarts this entire process all over again; we hurt somebody when we melt it down. We hurt somebody when we have no idea where that product goes. So Knot Plastic has got to be faster and more efficient than anybody else to deliver truly not-plastic products. That’s my KPI.”

CUSTOMIZED BIODEGRADABILITY

In Canada, Moharram Ventures’ Truly Green Plastic effort—in partnership with a team of researchers from Lambton College in Sarnia, Ontario—has created a biodegradable plastic polymer from cannabis waste that is sourced from Canadian license holders. Moharram aims to offer pelletized, cannabis-based plastic polymers to manufacturers. It’s the same form in which most petroleum-based plastics are provided, ensuring minimal disruption to the manufacturing process. The company is currently self-funded and not making plastic at a commercial scale, but at press time, Moharram was spearheading a capital raise to build a facility and begin production. Using a bacterial process, Moharram and his research partners converted cellulose into a thin, biodegradable film that can be used on its own or blended

with other elements to create unique composites. The film is designed to break down naturally when exposed to organic elements in the environment and can ultimately be tailored to break down in hours or within a year, according to Moharram. The goal is to use the process to turn cannabis waste into personal protective equipment, medical transdermal patches and food packaging. “We want the polymers to be narrowly tailored to what their purpose is—that’s the future of where we’re going with the polymer space, certainly single-use plastic,” Moharram said. He points to the example of plastic bags used to pick up dog waste and how they do not naturally decompose. “That’s the future of this green change in our consumer-activity patterns. It’s OK to have plastic, but it’s much better if it’s biodegradable and it’s suited to its purpose and doesn’t last longer than it’s needed,” Moharram said. According to Moharram, plastic wrap used to package cucumbers and plastic protectors placed over the screens of electronic devices are other examples of needless waste that is immediately discarded but lasts longer in landfills than necessary. On the other hand, he noted, products must be usable as long as they’re needed. “Ultimately, we want to be cautious about just totally jumping off the deep end in the other direction. Look at paper straws: We know they don’t work so well,” Moharram said. “If we can offer a Truly Green Plastic solution to have it biodegrade five days from when it was submerged in liquid, great. It doesn’t have to last forever—perhaps 15% longer than you need it—but it should last more than 15 minutes.” Laura Drotleff is a reporter for Marijuana Business Magazine and Hemp Industry Daily. You can reach her at laurad@ hempindustrydaily.com.

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BestPracticesInExtraction | Bart Schaneman

Always Be Creating How to use research and development programs to innovate and stay relevant with consumers

xtraction is one of the most innovative sectors in the marijuana industry, with new forms and techniques developing each year. To stay ahead of the curve, cannabis extraction companies need to be innovating constantly and researching new product types and processing methods. When thinking about research and development, cannabis researchers should consider: • The importance of product innovation to stay relevant in a competitive market. • Allocating a portion of budget and facility space for research and development (R&D). • Implementing testing procedures to determine quality before sending products to retailers. “R&D keeps you relevant in the market,” said Mark Micallef, head of operations at Exclusive Brands, a vertically integrated cannabis company based in Ann Arbor, Michigan. The company makes many of the typical concentrates seen in retail stores—including shatter, wax and budder—and fills its cartridges and vape pens in-house.

Encourage Experimentation Jim Parco, senior vice president of manufacturing for Colorado-based Schwazze, said he tries to foster a culture of risk-taking and allowing members of the extraction team to make mistakes when trying to develop new products. “If something breaks, it’s OK,” he said. “We’ll fix it. “ Parco said he encourages employees to bring him bad news about experiments they’ve tried.

As products and markets evolve, marijuana extraction companies can stay ahead of the curve by focusing on innovation. Photos courtesy of Exclusive Brands

“It’s that transparency of open, honest communication” that leads to innovation, he said. Of course, both Parco and Schwazze still maintain quality standards and demand high levels of performance. R&D and product innovation is built into the ethos of Glass House Farms, a cannabis company based in California’s Santa Barbara County. According to company President Graham Farrar, one way Glass House develops new products is by looking at traditional agriculture and applying similar practices. The company is experimenting with minor cannabinoids such as CBG, THCv and CBN to help consumers experience effects beyond the traditional THC and CBD results. “We’re always open to new ideas, and we experiment a lot,” Farrar said.

The Art of Extraction At Exclusive Brands, a small team of extractors is dedicated to developing

104 Marijuana Business Magazine | September 2020

Staying ahead of the competition with extracted cannabis products can make or break a business. Extraction companies thinking about research and development (R&D) should be aware of: • How creating cutting-edge products will keep consumers coming back. • The importance of setting aside space, time and money for R&D. • Creating a culture where employees can be creative and offer feedback on new products before they hit store shelves.

new ideas and techniques to help the company get ahead. Two “extraction artists,” with the help of an assistant, spend about 30-40 hours a week making new products. “We like to come out with something new every six months, even if it’s not

BestPracticesInExtraction | Bart Schaneman groundbreaking,” Micallef said. “It’s always important for any company to develop new products.” As consumers become more sophisticated, they start looking beyond simple potency numbers and seek out other qualities such as terpenes and other cannabinoids, he said. “They’re all expecting higher-level product,” Micallef added.

Set Aside Money, Time, Space Parco said Schwazze allocates about 10% of both time and budget toward R&D. “If you don’t want to pay for it, you don’t really want it,” he said. The company doesn’t set aside space in the facility just for R&D. Innovation is built into every square inch of the process. However, if team members want to focus on something such as a new packaging solution, they’ll find a place to work on it. Farrar estimates Glass House spends upwards of 10% of its budget for R&D. The company doesn’t set a specific timetable for releasing new products. For Micallef at Exclusive Brands, budgeting for research and development requires more time than money. “We probably spend about a good 40-50 hours a week on R&D,” he said. The R&D room at Exclusive Brands takes up about 5% of the company’s 15,000-square-foot space.

In-House Guinea Pigs After going through the regular hoops of compliance testing, Parco relies on family and friends as well as budtenders and manufacturing associates to help beta test new products. For example, when the company develops a new vape pen, it asks testers to try to misuse it—leave it on the dash of the car, for example, or in a pocket or in the freezer.

Allotting space in a facility specifically for research and development is one way companies can foster new ideas. Photos courtesy of Exclusive Brands

They then send on the product to customers and record data based on their feedback. “We listen to that, then go back to the drawing board,” Parco said. Glass House uses budtenders, other employees and friends of the company to help test new products. After that stage, new items will be sent to the company’s four pilot stores in California to get feedback from consumers and budtenders, then sent out more widely. Farrar said one of the company’s popular products, a strain it calls Jellyfish, was developed after listening to friends who said typical cannabis flower was too potent. So the company grew a CBDdominant strain and extracted it into a tincture and vape version. “You really have to go into it with an open mind of where the data and the science lead you,” Farrar said.

106 Marijuana Business Magazine | September 2020

Exclusive Brands relies on a group of employees who try out the company’s new products. The testers evaluate products for a variety of qualities, including how they taste and if the hardware is working properly. Micallef said it helps to have budtenders on board with any new products so they can encourage retail customers to try them. “R&D keeps you relevant in the market,” he added. “If you don’t (continue creating), all these other companies will be coming out with new techniques, and you don’t want to lose your market share to other companies.” Bart Schaneman covers cultivation and extraction for Marijuana Business Magazine. You can reach him at bart.schaneman@ mjbizdaily.com.

IndustryPlayers | New Hires & Promotions

A look at some recent hiring moves in the marijuana industry

Michael Highdale

By Omar Sacirbey

Bringing the Language of Food to Cannabis

ichael Highdale started his tenure as chief operating officer of 48North, a Torontobased license holder, in late July. But his first day likely would have arrived much sooner had it not been for the COVID-19 pandemic and his previous post as vice president of operations at Sofina Foods, a major food-services company based in Markham, Ontario. He was introduced to 48North CEO Charles Vennat by “an industry player” much earlier in the year and met with him several times throughout the pandemic. “However, working in food and beverage, you can imagine I was incredibly busy during the first few months of the pandemic. Before joining (48North), I needed to ensure my former company was in a good place,” he told Marijuana Business Magazine via email. Now that Highdale is officially COO of the cannabis company, he plans to use some of the lessons he learned at Sofina. “There are many learnings that can be adopted from other industries and transplanted (to the

Danielle Perry

cannabis business) with success,” he said. “For example, in food and beverage I was focused on streamlining operations within a costefficient environment; this makes sense for cannabis as well.” Yet, Highdale acknowledged he has some learning to do. “I did not arrive at 48North with a significant amount of cannabis experience. I see this as a benefit: I have a fresh set of eyes, and I look forward to leveraging this clean slate,” he said. “That said, I have a very talented team with significant cannabis experience. I look forward to learning from them and other players in the industry.” He added: “It is my focus to further build a manufacturing and operational team/facility that is agile, nimble and cost-effective.”

new licensing round that will add to the number of legal marijuana businesses. Before accepting the Illinois post, Perry oversaw an agriculture job training program, served as communications director at the Chicago Inspector General’s office, was a member of Chicago Mayor Lori Lightfoot’s transition committee and served in President Barack Obama’s Department of Agriculture.

David McCullough

New CFO for BC Company  Perry Named Illinois Cannabis Oversight Officer Gov. J.B. Pritzker appointed former Obama administration insider Danielle Perry as Illinois’ cannabis regulation oversight officer. Perry takes over for former state Sen. Toi Hutchinson. Perry takes the reins as entrepreneurs await results from a

Vancouver, British Columbia-based 1933 Industries—a vertically integrated cannabis company with operations in California, Colorado and Nevada— appointed Tricia Kaelin as its new chief financial officer. She replaces outgoing CFO Stephen Radusch. Kaelin has held multiple CFO posts including eight years at Smart Business Solutions, an accounting and businesses services company.

108 Marijuana Business Magazine | September 2020

 Akerna Gets New Chief Technology Officer Akerna, a cannabis-focused software company based in Denver, appointed David McCullough chief technology officer. McCullough has been with Akerna for more than five years, most recently serving as Akerna’s executive vice president of product and engineering.

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IndustryPlayers | New Hires & Promotions Before Akerna, McCullough was president of his own software consulting company, Ally Web, and before that was CTO of Easy Student Publishing. McCullough takes over for Alex Shah, who stays on as president of Solo Sciences, an anti-counterfeiting businesses acquired by Akerna late last year.

Aaron Chamberlin

Marijuana Co. of America Gets M&A Pro

Sproutly Shakes Up Board Sproutly Canada, a Toronto-based maker of cannabis-infused formulations for beverage and edibles makers, announced that Gregg Orr resigned from the board of directors and was replaced by Sproutly CFO Craig Loverock. The company also appointed Paul Marcellino to the board of directors, subject to regulatory approval. Marcellino has a degree in chemistry and previously served as CEO of an international nutraceutical company.

Cafe and Taco Chelo. He is the creator of Chef Dad, a project focused on creating healthy behaviors.

 Copperstate Hires Chef as CEO of Edibles Brand Copperstate Farms Management, a vertically integrated cannabis company in Arizona, appointed Aaron Chamberlin the CEO of its Good Things Coming edibles brand. Chamberlin is a chef and restauranteur who co-founded the infused-products line in 2019. Chamberlin also owns Arizona restaurants Phoenix Public Market

Marijuana Co. of America in Escondido, California, appointed Themistocles “Tim” Psomiadis as executive vice president of mergers and acquisitions. Psomiadis has been a member of the company’s board of directors since Feb. 28. For the past two years, he has been a consultant; before that, he was president of a Brazil-focused investment group.

Flower One CFO Steps Down The chief financial officer of Torontobased Flower One Holdings, Geoff Miachika, stepped down for personal reasons. He had held the post since June 2018. David Kane was

appointed interim CFO, and Miachika will continue to work with Flower One in an advisory capacity to ensure a smooth transition. Kane, a certified public accountant, began his accounting career with Arthur Andersen and Ernst & Young. He has held several CFO posts and most recently was CFO of Xtreme Cubes Corp., a manufacturer of high-end modular structures. Kane also was CFO at Tryke Cos., a vertically integrated cannabis cultivator, manufacturer and retailer in Nevada.

USDA Adds Hemp Advocate to Trade Committee Kevin Latner, vice president of marketing for the National Industrial Hemp Council in Washington DC, was appointed by the U.S. Department of Agriculture and Office of the U.S.

Trade Representative to a federal advisory committee on trade issues. He will serve as a member of a panel focused on trade in processed foods alongside representatives from well-known brands and organizations such as the Brewers Association, Campbell’s, Kraft Heinz Co., the National Association of State Departments of Agriculture, PepsiCo. and the Wine Institute. Latner’s term expires in 2024.

Immigrant Advancement, where her work included initiatives such as the Greater Boston Immigrant Defense Fund. She began her career as a public school teacher in New York City and Boston and served as the director of ¿Oiste?, a Latin civic and political organization where she promoted economic justice and electoral reform.

 Boston Mayor Makes Cannabis Board Appointment Mayor Martin Walsh announced the appointment of Alejandra St. Guillen to the Boston Cannabis Board, which was created in the spring to strengthen the city’s focus on equity in the marijuana industry. St. Guillen most recently served as the director of Boston’s Office for

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IndustryPlayers | New Hires & Promotions Carol Vallone

 Cresco Refreshes Board Chicago multistate operator Cresco appointed Carol Vallone to its board of directors. Vallone currently serves as chair of the board of trustees at McLean Hospital in Cambridge, Massachusetts, the largest psychiatric affiliate of Harvard Medical School. She also sits on the board of trustees at MGH Institute of Health Professions and on the finance committee at Mass General Brigham, a 14-hospital network in Boston. Vallone also serves on the board of directors of Arosa, the Bain Capital Double Impact portfolio company; as an advisory director for private investment firm Berkshire Partners; and as an advisory board member of the health care-focused venture growth firm Longitude Capital. In the past, Vallone served as president and CEO of e-learning companies including WebCT, where she grew the company to cover almost 2,000 institutions in 70 countries. Cresco also announced that Brian McCormack retired as vice chair of the board as part of the planned boardrefreshment process.

Quebec Cannabis Firm Nabs Clorox Exec for Product Development Neptune Wellness Solutions, a marijuana and hemp company in Quebec, appointed Eric Gharakhanian as director of product development for health and wellness innovations. Gharakhanian will be responsible for

developing and building Neptune’s portfolio of health and wellness products with a focus on sustainable and natural plant-based sanitizing wipes and hand sanitizers. An organic chemist, Gharakhanian joins Neptune from The Clorox Co., where he served as product development specialist for cleaning products and brands.

Former Israeli Deputy Prime Minister Takes Helm at MJ Company Israeli cannabis company Vonetize, which is publicly traded on the Tel Aviv Stock Exchange, appointed Haim Ramon as board chair. Ramon served in the Israeli Legislature between 1983 and 2009. Over the years, he held positions from minister of health to minister of justice, and in 2007 he became deputy prime minister. In the past decade, Ramon has served as a board member and consultant for several public and private companies, including Keter Plastic in Israel.

 Legal Eagle Sativa Rasmussen, a cannabis attorney with international law firm Dorsey & Whitney, was elected chair of the Washington State Bar Association’s Cannabis Law Section. Rasmussen will serve a two-year term beginning Oct. 1. She previously served as the chair-elect for the Cannabis Law Section, which she founded in 2016.

member. Previous board member and CEO Zohar Levy stepped down from his roles. Feiler serves as director of the Bank of Georgia, is a partner at Forest Investment House and head of the scientific advisory board of Cannabics, a Maryland company working on cannabinoid-based cancer therapies. Grossman has been a partner at Hava Cannabis Ba’arava since 2017 and served as a board member at Gefen Biomed Investments. Freidenberg’s past roles include vice president of sales and business development at Trigyn Technologies, an IT services provider.

HIA Appointment The Hemp Industries Association (HIA) appointed Jody McGinness as its new executive director. After a monthslong search with nearly 100 qualified candidates, the national hemp association selected McGinness, a veteran association executive in the nonprofit sector. McGinness, who is based in Washington DC, last served as the head of fundraising for the Marijuana Policy Project. The HIA’s executive director role has been vacant since the departure of Colleen Lanier at the end of 2019.

Shake-up at Lord Jones

Israeli AgTech Firm Elects Board of Directors

Robert Rosenheck stepped down as CEO of Lord Jones, the California CBD company he co-founded in 2017, less than a year after it was acquired by the Cronos Group, Barron’s reported. Cronos appointed Summer Frein to general manager of its U.S. operations, which includes Lord Jones. Frein joined Cronos this year and previously served as vice president of U.S. brand sales, including Lord Jones.

Seedo Corp., an agtech company in Israel, voted three new directors to its board: Dr. Gil Feiler, chair; David Grossman, CEO and board member; and David Freidenberg, board

Hired or promoted someone for a senior-level position? Send a news release or general information to omars@mjbizdaily.com.

112 Marijuana Business Magazine | September 2020

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QuestionoftheMonth | Edibles Price Inputs By Omar Sacirbey

ach month we survey a group of cannabis executives and ask them an industry-related question. We welcome your suggestions for topics. Email us at magazine@mjbizdaily.com. At the beginning of the year, chocolate prices were predicted to rise during 2020 and, more recently, sugar prices have rebounded from near-record lows. Has your cannabis edibles business been affected by price changes to inputs used in making your products?

Have p changes rice for input s affected y o u r cannabis edib business les ?

Brian Scott

Vice president of new products and co-founder, Valhalla Confections, Santa Rosa, California We have seen significant fluctuations in the cost of our ingredients over the last few months—especially the cost of chocolate and sugar. We always want to keep our wholesale prices as consistent as possible. To that end, our pricing models can tolerate some fluctuation in the cost of our ingredients while still allowing us to keep our product pricing steady. Happily, over the past few months we’ve seen a significant uptick in sales. That’s partly because our new line of chocolates and four new gummy flavors have been really popular. Second, during the COVID-19 crisis, a lot of people are switching to edibles, especially the types of products we produce: gummies and chocolates. These sales increases have allowed us to do more bulk purchases of ingredients, which are more cost-effective. Also, the cost of the cannabis we use has dropped slightly in 2020. Taken together, this has allowed us to keep our wholesale prices competitive without compromising on quality, despite the fluctuations in costs.

Andrew Schrot

CEO, BlueKudu, Denver We have the experience of adapting to many changes in vendor pricing. Fortunately, BlueKudu has not been affected by a price increase in our chocolate sourcing within the past couple of years. However, we have incurred a small increase in the cost of our sugar. Our production facility has the storage space for extra inventory. We have used the storage space to our advantage and negotiated purchasing our ingredients in larger quantities in order to maintain a low cost. Most of our ingredients, such as sugar, do not require refrigerator space and have a long shelf life.

Tim Schuler

President, Detroit Fudge Co., Detroit Our main ingredient is obviously distillate made by our sister company, Cannalicious Labs. Our raw material prices—namely fudge and raw chocolate—have remained stable through 2020, and it helps to be producing the most chocolate edibles in the state of Michigan. It allows us to order … our raw ingredients by the pallet and have them directly shipped from the manufacturers to our kitchen. We are constantly monitoring all of our raw materials so we can always deliver a finished product at a great price.

114 Marijuana Business Magazine | September 2020

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Connecticut’s 18th medical cannabis dispensary opened its doors in July, meaning all of the state’s dispensary licenses are now being used. The market already exceeds $125 million in annual sales. Connecticut’s patient count surpassed 40,000 in March and an increasing number of registered physicians are joining the program, signaling broader adoption and improved access for state residents.

While state regulators aren’t accepting any new license applications at this time, many Connecticut dispensaries want the number of growers to be expanded because of the likelihood the four that are currently licensed won’t be able to keep up with increasing demand. Connecticut could be a prime candidate to legalize recreational marijuana through its Legislature in coming years. – Jenel Stelton-Holtmeier

Main measure

State tax requirements

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License fees

House Bill 5389 2012

Medical marijuana is exempt from state sales and use tax.

Dispensary: $1,000

Dispensary: $5,000 (initial and annual renewal)

Producer: $25,000

For information about cannabis regulations in other markets, order the Marijuana Business Factbook at mjbizdaily.com/factbook.

116 Marijuana Business Magazine | September 2020

Producer: $75,000 (initial and annual renewal)

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118 Marijuana Business Magazine | September 2020

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