MJBiz Magazine November-December 2021 by MJBiz Daily

NOV.-DEC. 2021

MAGAZINE VOLUME 8 • ISSUE 10 • $12.95

What Consumers Want Cannabis education, demographics and product familiarity all play a role in what wins over buyers

Prepare Your Retail Business for Acquisition

Greenhouse Buyers Guide

Steps Marijuana Companies Can Take to Avoid Eviction Newest Cannabis Business Leaders Climbed Industry Ranks

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Nov.-Dec. TABLEOFCONTENTS

FEATURES

COVER STORY

WHAT CONSUMERS WANT

Volume 8 • Issue10

From the Editor

Cannabis education, demographics and product familiarity all play a role in what wins over buyers.

Five Questions with Joe Bayern

Hemp Notebook

CANNABIS LEADERS 2.0

A new generation of up-and-coming marijuana entrepreneurs is making its mark on the industry.

Company News

AVOIDING EVICTION

Marijuana companies have same rights as other businesses in state-legal markets, but an ironclad lease is recommended.

Industry Developments

Best Practices in Retail

Industry Players NOV.-DEC. 2021

M AGA Z I N E

VOLUME 8 • ISSUE 10 • $12.95

What Consumers Want

On Our Cover

Cannabis education, demographics and product familiarity all play a role in what wins over buyers

Prepare Your Retail Business for Acquisition Steps Marijuana Companies Can Take to Avoid Eviction Newest Cannabis Business Leaders Climbed Industry Ranks

The retail sales trajectory of flower between January 2018 and September 2021 varies widely by market. Turn to page 42 for a detailed update on consumer trends in a variety of product categories.

Seed to CEO Podcast

Art by Katie Ruland

Correction

An article on page 92 in the October issue of MJBizMagazine incorrectly stated that McGovern Capital has invested in more than 30 cannabis companies. McGovern Capital has more than 30 investments in consumer technologies, several of which are in cannabis.

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MJBizMagazine | November-December 2021

Infused gummies remain the most popular product in the edibles category. Read more about consumer trends starting on page 42. Courtesy Photo

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MJBizMagazine | November-December 2021

FromtheEditor | Kate Lavin

A Bevy of Options Thousands of cannabis products are available, but old favorites still lead the pack

hile planning this consumer trends issue of MJBizMagazine in late 2020, our editorial staff looked forward to finding out what products and brands would be the most popular with marijuana buyers.

Would another 12 months help the vape sector claw back its market share lost to the vaping health crisis in 2019? Would infused edibles finally break free of gummy molds? Would beverages catch on with consumers the way spiked seltzers did in 2020? The cover story starting on page 42 has answers to these questions and hundreds more.

Local and National Trends MJBiz data journalist Andrew Long analyzed figures from Seattle-based cannabis analytics company Headset to create the charts that illustrate this month’s cover story. Along the way, he discovered some interesting facts: • The top-selling flower strain between January 2020 and September 2021 was Wedding Cake, an indica-dominant hybrid. Could this be connected to the many weddings canceled in 2020 because of coronavirus concerns? • Millennial-age men remained the top buyers in every marijuana category. Women and older consumers contributed significantly, however, to edibles, tinctures and topicals purchases. • The Cannavative brand alone sold $11.03 million worth of pre-rolls in Nevada—an impressive feat in a state where the population is 3 million.

Tried and True Despite the ever-growing number of cannabis brands and product offerings, flower still reigned supreme, making up about 50% of total marijuana market share. The retail sources whom reporter Omar Sacirbey spoke with for this issue agreed that bud remains a popular choice for regular marijuana consumers, with potency being the highest priority with most buyers. As legal marijuana markets mature, however, veteran retailers noted that consumers become more educated and decisive about what to buy. Ann DeMarco, general manager at Highland Health in Trinidad, Colorado, said some of her best consumers ask specific questions about extraction techniques, products’ terpene profiles and features such as nanotechnology.

10 Marijuana Business Magazine | November-December 2021

Do What You Do Best As the number of marijuana product types, tiers and competition continues to expand, businesses would be wise to look at the cover package in this issue and carefully consider whether it is worth trying to be everything to everyone. With nearly half of cannabis sales going toward flower, it might not be necessary to spend extra capital developing a new line of unusual concentrates, infused beverages or topical products—unless, of course, that is what your company is known for. Consumers who have consistently positive experiences can be incredibly loyal. Rather than try to win over customers from your competition, evaluate what works well in your business and strive to improve on things that could be better. Thoughtful and consistent improvement can only benefit your bottom line in the long run.

Kate Lavin MJBizMagazine Editor

FiveQuestions | with Joe Bayern

Preparing an MSO for Legalization Curaleaf CEO leans on mainstream background to prepare marijuana company for the future By Jeff Smith

oe Bayern, who became the CEO of marijuana multistate operator Curaleaf in January, has a deep background in corporate and brand strategy. Bayern was part of a team that revitalized the Snapple beverage brand in the late 1990s. He held executive positions at mainstream businesses such as chief operating officer and chief strategy officer of Snapple, head of global strategy for Cadbury Schweppes and chief operating officer at Voss of Norway, an artesian water company. Before joining Curaleaf, Bayern served as president of Indus Holdings, a California-based vertically integrated cannabis company that has since merged with Lowell Farms. He replaced Curaleaf co-founder Joseph Lusardi, who is now executive vice chair of the company’s board of directors. At Curaleaf, Bayern oversees one of the largest U.S. cannabis companies by revenue. He believes the company is still in the “very early innings” of its growth as a cannabis business. Bayern spoke at MJBizCon in October on a panel titled, “Clash of the Titans: Can Cannabis Culture and Big Business Co-Exist?” For this issue of MJBizMagazine, he provided insight about what lies ahead for the cannabis industry.

What about your consumer packaged goods (CPG) background is most useful to lead Curaleaf's next phase? I’m fortunate that my background aligns with Curaleaf’s long-term view that the cannabis industry will

ultimately be much like traditional CPG, where trusted brands will stand apart and create value for the long term, continuing to capture higher margins and consumer wallet share. Smart and innovative CPG products drive the country’s consumer economy, and the growing demand for cannabis will soon redefine what CPG is capable of. With Curaleaf and Select, we are building and scaling the first nationally recognized cannabis brands. We have the opportunity to employ the tools of traditional CPG to foster brand familiarity, preference and loyalty—in turn furthering mainstream acceptance of the plant.

Do you think marijuana can become a mainstream industry? Yes. It’s not a question of if but when. Curaleaf’s long-term strategy is centered around the belief that

12 MJBizMagazine | November-December 2021

cannabis will be no different than every other consumer goods product, which is why we’re investing in the expansion of our footprint, brand development and innovative product R&D.

To what extent is Curaleaf trying to position itself for federal legalization? Curaleaf maintains one of the strongest balance sheets in the sector, which allows us to invest in high-return growth opportunities that will build our footprint and differentiate us at scale in the industry once cannabis is federally legal. One recent example is our acquisition of Los Sueños in Colorado, which provides Curaleaf with outdoor cannabis cultivation expertise at commercial scale. This deal furthers our strategy of constructing low-cost supply chains that will secure healthy

margins and position us for interstate commerce when the time comes.

How does Curaleaf weigh the amount to invest in certain markets, knowing that some of them won’t be cost competitive after federal legalization? We deploy a multi-horizon approach to evaluating investments at Curaleaf. We need to continue to invest in capital projects on a state-by-state basis to ensure that we can supply the current demand in the market and hit our financial goals. These projects typically pay back in relatively short time frames, so we’re not too concerned about recouping our investment. We’re playing the long game. At the same time, we’re investing in assets that will not only meet

our current capacity requirements but prepare us for the eventual nationalization of cannabis. The third horizon is investing in assets to prepare us for where the industry might be in three to five years, like our investments in the European market through the acquisition of Emmac (Life Sciences)/Curaleaf International earlier this year.

What keeps you up at night? There’s undeniable momentum in our industry, but my fear is that politics gets in the way of the will of the people. In order to create a robust and equitable industry, we need the right balance of legislation, taxation and law enforcement. If all three of these elements aren’t considered, there’s a risk to the industry.

Another concern is that, once cannabis is legalized, administration falls under the authority of the FDA (U.S. Food and Drug Administration), and the FDA puts the brakes on the industry until they have the chance to research the effects of cannabis, which would unravel years of progress and virtually eliminate the opportunity for smaller companies and entrepreneurs to participate in the growth of the industry. This interview has been edited for length and clarity.

Jeff Smith is the legal and regulatory reporter for MJBizDaily. You can reach him at jeff.smith@ mjbizdaily.com.

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HempNotebook | Kristen Nichols

Red-Tape Runaround The USDA says it wants to encourage organic production, but it’s going about it all wrong

onsumers are all in on organic growing. They know organic farming is kinder to the Earth, and they’re willing to pay a premium for goods that require less use of fossil fuels. It’s a win-win. So why are federal regulators so clueless about encouraging the very farming practices that consumers want?

Paperwork Before Progress The U.S. Department of Agriculture regulates use of the “organic” label on foods and consumer products. USDA organic oversight is a great thing for consumers because it reduces dishonest greenwashing from manufacturers and gives everyone a common understanding of the benchmarks that make a product organic. The USDA now has an important role to play in the public’s desire to address global warming. USDA leadership recognizes agriculture’s role in solving the problem, and it is taking action to assist. This explains why the agency patted itself on the back last year, when it set up a new program to encourage organic farming by allowing farmers to seek up to $500 in credits toward applying for organic certification. This sounds great—until you think about it.

The USDA charges for organic certification. Elaborate paperwork is involved. The agency easily could have encouraged more organic applications by lowering its own fees by $500. Instead, it created a new program with a new application and gave both itself and would-be organic farmers more paperwork to manage. It’s comical, really. Government makes itself a punchline by assuming that the solution to every problem is more forms and paperwork.

A Matter of Time The cannabis industry is full of innovators who are frequently more interested in meeting consumer demand than following the law. This is true at all levels of the THC spectrum. So, I hope marijuana operators are watching closely to see how government bureaucracy stymies innovation for legal, low-THC hemp cultivators and the broader farm industry. Everyone knows the United States will eventually legalize marijuana. The argument for prohibition has been so thoroughly debunked at this point that even the biggest marijuana critics realize federal legalization is a matter of when, not if. But whenever and however marijuana legalization happens, an even bigger job awaits the industry. And that job

Government makes itself a punchline by assuming that the solution to every problem is more forms and paperwork.”

14 MJBizMagazine | November-December 2021

is crafting government regulations that protect consumer safety without stifling business innovation or creating needless red tape, as in the USDA’s organic “discount.”

Pushing Back It’s no secret that anyone who wants to do business in marijuana needs lawyers and compliance consultants. State and local governments have piled a staggering amount of red tape and regulation on an industry that is, frankly, too thrilled to be legal to complain. Luckily, complaining is what farmers do best. (I say this with love!) Let’s hope the hemp industry takes the lead in pushing back against even wellintentioned government programs that turn into bureaucratic headaches. Kristen Nichols covers hemp for MJBizMagazine. Reach her at kristen.nichols@hempindustrydaily.com.

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CompanyNews | U.S., Canada & International

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

By MJBizDaily and Hemp Industry Daily staff

SPAC and Beau Wrigley’s Parallel Scrap $1.9B Deal to Take Firm Public Chewing gum heir William “Beau” Wrigley Jr.’s multistate marijuana company Parallel and music mogul “Scooter” Braun’s Ceres Acquisition Corp. mutually called off their $1.9 billion blockbuster merger, gumming up Wrigley’s plans to take his MSO public. The collapse of the deal to take Atlanta-based Parallel public via Ceres, a special purpose acquisition company in the Los Angeles area, also might reflect a cooling of SPAC activity in recent months as the investment vehicles have come under greater regulatory scrutiny. Ceres, which is listed on Canada’s NEO Exchange and the U.S. over-the-counter markets, said it would continue to look for another private company to take public. The SPAC has until March 3, 2022, to make a transaction, unless that date is extended by its shareholders.

The stock component of the deal includes 6.5 million Glass House shares issued to the unidentified holder of an option to buy the facility, at a price of $10 per share. A further 3.5 million shares may be issued “upon satisfaction of certain contractual indemnity obligations.” The option holder could earn up to $75 million worth of earnout shares.

Skymint Secures $78 Million In Financing, Acquires Retailer Vertically integrated Michigan marijuana operator Skymint landed $78 million in funding while also acquiring 3Fifteen Cannabis, which has 12 stores in the state, for an undisclosed sum. Privately held Skymint did not disclose terms of the loan or the equity investment. According to a news release, a $70 million senior secured term loan from Tropics LP, a SunStream Bancorp affiliate, and an $8 million equity investment from Merida Capital Holdings will give Skymint “a strong balance sheet to execute on accretive opportunities in and outside of Michigan.”

Cannabis REIT Enters Missouri, Extends Goodness Growth Deal

Florida-based multistate marijuana operator Trulieve Cannabis announced it was on the verge of raising $350 million of capital through the private sale of fiveyear notes at an 8% annual interest rate. Separately, the company said it completed an all-stock purchase of Arizona-headquartered Harvest Health & Recreation. When the deal was announced in May, it was valued at $2.1 billion and billed as the largest U.S. marijuana transaction to date. Despite the large acquisition, Trulieve has managed to keep its borrowing costs relatively low. The 8% annual interest rate for five-year notes is one of the lowest yet for a public MSO, and the $350 million raise is believed to be one of the largest as well.

Innovative Industrial Properties (IIP) extended its geographic footprint into Missouri through a saleleaseback deal with CPC of Missouri-Smithville, a subsidiary of Massachusetts-based multistate operator Calyx Peak. According to a news release, the San Diego-based real estate investment trust (REIT) has agreed to pay CPC $1.5 million for an industrial property and will reimburse the company up to $26.7 million for construction costs. IIP also extended its relationship with Minneapolisbased Goodness Growth Holdings, which leases property from the REIT in New York. IIP purchased 92 acres adjacent to Goodness Growth’s property, where the tenant can build a cultivation and processing facility. According to a news release, the purchase price of the land was $10.2 million, making the total value of the deal $56.3 million.

Glass House Closes $93 Million California Marijuana Greenhouse Purchase

Curaleaf Faces Oregon Lawsuits Over THC-CBD Mix-up

California marijuana and hemp company Glass House Brands finalized its acquisition of a Ventura County greenhouse facility for $93 million in cash—$25 million less cash than the original price—plus stock.

Marijuana multistate operator Curaleaf has been hit with multiple federal lawsuits in connection with a product-labeling error in Oregon

Trulieve Finalizes Harvest Acquisition, Nets $350M From 8% Debt Financing

18 MJBiz Magazine | November-December 2021

Recent deals, acquisitions and other announcements from cannabis companies that resulted in some customers ingesting high-THC instead of CBD wellness drops. The case involves the Oregon-based brand Select, which Curaleaf acquired as part of the Cura Cannabis deal in February 2020. According to the lawsuits, at least three people went to hospital emergency departments after suffering adverse reactions. The Oregon Liquor and Cannabis Commission, which issued an expanded product recall on Sept. 24, said 13 people reported taking the mislabeled drops. Curaleaf said it has worked with Oregon regulators to recall the two batches in question.

The Parent Co. to Buy Coastal for Up to $56.2M The Parent Co. in San Jose, California, agreed to acquire 100% of the equity of California-based Coastal Holding Co. in a cash-and-stock deal worth up to $56.2 million. In a news release, The Parent Co. said it will pay for the transaction with up to $16.2 million in cash and another $20 million in its common stock upon signing

management-services agreements at each Coastal location and another $20 million in stock “contingent upon the successful transfer of Coastal’s cannabis licenses.” The vertically integrated operator also said it will inherit a minority stake that Coastal holds in a Southern California dispensary and an option to purchase the remainder of that business for $9 million in cash. The transactions are expected to close next year.

AFC Gamma to Raise $100 Million in Notes and Expand Loans Florida-based cannabis business real estate lender AFC Gamma announced plans to raise $100 million through an upcoming debt offering. According to a news release, net proceeds from the offering of senior unsecured notes will be used to fund loans and commitments and provide working capital. Separately, AFC Gamma loaned an additional $30 million to Arizona-based multistate marijuana operator Devi Holdings, which does business as Nature’s Medicines.

November-December 2021 | mjbizdaily.com 19

CompanyNews | U.S., Canada & International AFC Gamma said that $20 million of the loan went to expanding the credit facility, with $10 million “syndicated to an affiliate.” The credit facility now totals $62.5 million, secured against Nature’s Medicines’ “owned real-estate and other commercial-security interests.” Chicago-based Justice Cannabis Co. also secured an augmented loan from AFC Gamma, with the new amount reaching $75.4 million. The company plans to use the additional capital to further develop cultivation and processing operations in New Jersey and Pennsylvania, purchase assets and refinance existing debt. AFC Gamma CEO Leonard Tannenbaum said Justice Cannabis “has one of the best license stacks for a multistate operator.”

state’s fast-growing adultuse market. The purchase will be funded with $25 million in cash and 25 million shares of stock, 4Front said in a news release. The cash portion will be financed partly through proceeds from the sale of $15 million of three-year convertible notes, 4Front said. The NECC acquisition will more than double 4Front’s total flower canopy in Massachusetts to 30,000 square feet, with the potential of adding an additional 10,000 square feet. The acquisition, expected to close in the fourth quarter, will roughly triple 4Front’s kitchen, processing and distribution space.

Marijuana MSO 4Front Expands With $55 Million Acquisition

Akerna Raises $20 Million, Inks $17 Million Acquisition

Phoenix-based multistate operator 4Front Ventures signed a definitive agreement to acquire Massachusetts cannabis cultivator New England Cannabis Corp. (NECC) for $55 million, a move intended to expand 4Front’s wholesale operation in the

Colorado-based marijuana technology company Akerna raised $20 million of capital to support a recently announced acquisition, future growth and investments in

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its enterprise software infrastructure. The company said it will net $14.6 million from the financing. Akerna indicated that $4.5 million of proceeds from the capital raise will be used to close the acquisition of Las Vegas-based software firm 365 Cannabis for $17 million in cash and stock. Akerna will pay $4 million in cash and $13 million in stock to acquire 365 Cannabis with a potential earnout of $8 million, according to a news release. The acquisition is expected to close by year-end and is subject to customary closing conditions.

SEC Accuses Hemp Co-founders of $15 Million Fraud Scheme U.S. investment regulators are accusing two co-founders of New York hemp company CanaFarma of scamming $15 million from investors and using at least $4 million for personal use. Securities and wire fraud charges filed by the U.S. Securities and Exchange Commission allege that

Vitaly Fargesen and Igor Palatnik gave CanaFarma investors baseless revenue projections and committed other crimes. The SEC seeks permanent injunctions, disgorgement and prejudgment interest as well as civil penalties against Fargesen and Palatnik.

Cannabis Firm Agrify Buys Two Sinclair Scientific Brands Ancillary cannabis business Agrify in Billerica, Massachusetts, said it acquired two marijuana- and hemprelated equipment and services brands from Sinclair Scientific in Troy, Michigan, for at least $50 million. The acquired brands are: • Precision Extraction Solutions, described as “the industry leader in cannabis and hemp extraction equipment, technology, lab design and site planning.”

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CompanyNews | U.S., Canada & International • Cascade Sciences, which produces processing equipment such as vacuum ovens and evaporators. The $50 million acquisition includes $30 million in cash and $20 million of Agrify stock. The price might reach $65 million based on the companies’ 2021 performance.

Item 9 to Acquire Retailer for Unity Rd. Franchise Vertically integrated cannabis company Item 9 Labs in Phoenix signed a deal to buy an unspecified licensed marijuana store in Adams County, Colorado, for an undisclosed sum. The acquisition is part of a broader acquisition strategy in Colorado, according to a news release. The location will become the first corporate-owned store under Item 9’s franchise brand Unity Rd. The

store is anticipated to open in the next four to six months, Item 9 said. The company closed its acquisition of Denver-headquartered One Cannabis Group and its Unity Rd. franchise model in March. Unity Rd. is one of several cannabis retail franchise brands aiming to make inroads in multiple states, including Arizona, Montana and Oklahoma.

Cannabis Store License Revoked by City After Owner Pleads Guilty to Bribery The California town of San Luis Obispo announced it was revoking a business license for Natural Healing Center, a cannabis shop whose owner, Helios Dayspring, pleaded guilty to two felony charges. Dayspring pleaded guilty in July to one charge of filing a false federal tax return and one charge of bribery for allegedly paying off a county supervisor. Natural Healing Center had not yet opened in San Luis Obispo but was poised to do so as one of three retailers granted an initial permit. The store now will not be allowed to open because of the criminal case. The

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retail company operates three other cannabis stores and had another slated to open.

Crain Buys MJ News Brand Green Market Report Detroit-headquartered media company Crain Communications acquired Green Market Report, a digital outlet that covers financial news in the cannabis industry. Terms were not disclosed. New York-based Green Market Report was launched in 2017 by Debra Borchardt, a financial journalist and former Wall Street executive, and Cynthia Salarizadeh, a public relations expert and legal cannabis industry insider.

Cannabis MSO Ascend Wellness to Acquire Two Ohio Dispensaries New York-based cannabis multistate operator Ascend Wellness Holdings is expanding its vertically integrated medical marijuana operation in Ohio.

According to a news release, Ascend completed the acquisition of BCCO, a medical marijuana dispensary operating as Ohio Provisions in Carroll. It also entered into an agreement to acquire Coshocton-based dispensary Ohio Cannabis Clinic. Terms of the deals were not disclosed.

MJBiz Is a Finalist in Folio’s Eddie Awards for Series of Articles MJBizMagazine and the cannabis news website MJBizDaily were selected as finalists in the 2021 Folio: Eddie and Ozzie Awards, which recognize excellence in magazine editorial and design. The publications’ joint entry, “Pandemic Pivot,” was honored in the business-to-business category and featured a variety of web and magazine content about the cannabis industry’s response to the coronavirus.

November-December 2021 | mjbizdaily.com 23

CA N A DA D E V E LO PM E N T S

CompanyNews | U.S., Canada & International Marijuana Company Hexo Achieves Carbon-neutral Goal

Sundial Buying Alcohol, Cannabis Retailer Alcanna for $277 Million Calgary, Alberta-based cannabis producer Sundial Growers said it has reached a deal to buy Alcanna, Canada’s largest private liquor retailer, for $277 million (CA$346 million) in stock. Edmontonheadquartered Alcanna is the largest shareholder of Nova Cannabis, with an approximately 63% stake in the retailer. Earlier this year, Sundial bought Inner Spirit Holdings, another cannabis retailer, for approximately $107 million. Once the deal with Alcanna closes, Sundial said it will have 170 cannabis stores in six Canadian provinces. The deal is subject to approval by Alcanna’s shareholders.

24 MJBiz Magazine | November-December 2021

Cannabis producer Hexo Corp. reached its target to become carbon neutral, the Ottawa-Ontario-based company announced. The publicly traded business purchased carbon-offset credits from Offsetters, a Vancouver, British Columbia, sustainability and carbonmanagement provider. The company also closed its acquisitions of Ontariobased cannabis producers Redecan and 48North for a combined $450 million and has plans to carry its carbonneutrality targets into both of those businesses and into its U.S. businesses, according to a statement.

Aurora Cutting 8% of Workforce, Closing Facility in Edmonton Aurora Cannabis is closing its manufacturing facility at Edmonton International Airport, a move that is expected to impact approximately 8% of its global workforce, the company confirmed in an email to MJBizDaily. The Aurora Polaris facility opened in January. Medical distribution will move to Aurora Sky, and manufacturing from the site will shift to Aurora River in Bradford, Ontario.

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

High Tide Acquires Majority of Scotlandʼs Blessed CBD

Village Farms Eyes Dutch Marijuana Market Village Farms International struck a deal that gives the British Columbia-based cannabis company an option to purchase an 80% stake in Netherlands-based Leli Holland B.V., one of 10 lottery winners selected to cultivate and distribute adult-use marijuana to retailers under a government-backed pilot program unique for Europe. The option comes with a price tag of $58,400 (50,000 euros). Exercising the option to acquire 80% of Leli’s shares would cost Village Farms $4.6 million, of which $1.1 million will be payable immediately.

Canadian cannabis retailer and e-commerce company High Tide acquired 80% of Blessed CBD, a hemp-derived CBD brand based in Scotland, in a deal worth more than $12.4 million (9 million British pounds). The deal includes a three-year option to acquire the remainder of the Blessed CBD brand. High Tide is paying $6.8 million worth of High Tide shares plus $5.8 million in cash for Blessed CBD, which makes CBD oils, creams, gummies, capsules and other products. Have a company announcement you want us to consider? Send a news release or general information to omar.sacirbey@mjbizdaily.com. (Note: We’re looking for news about expansions, financing, deals, partnerships and similar developments, not product 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 U.S. Senators Ask Justice Department to Deschedule Marijuana U.S. Sens. Cory Booker and Elizabeth Warren sent a letter to U.S. Attorney General Merrick Garland in October, urging the Department of Justice to remove marijuana from the federal Controlled Substances list. The senators wrote that descheduling marijuana “would allow states to regulate cannabis as they see fit, begin to remedy the harm caused by decades of racial disparities in enforcement of cannabis laws and facilitate valuable medical research.” The letter cites President Joe Biden’s 2020 campaign trail words that “nobody should be in jail for smoking marijuana” and notes that the federal Controlled

26 Marijuana Business Magazine | November-December 2021

Substances Act empowers the U.S. attorney general to initiate proceedings to deschedule or reschedule a drug.

Ontario Making Cannabis Delivery Permanent for Stores in Province Ontario, Canada, plans to permanently enable cannabis stores to offer delivery and curbside-pickup services, a move that likely would provide a major boost for many of the province’s pandemic-hit, adult-use marijuana retailers. Stores in Canada’s largest cannabis market were first temporarily granted the ability to offer delivery in April 2020, after the coronavirus pandemic forced the province to shut down most retailers to curb the spread of COVID-19.

“The Ontario government is proposing to permanently enable cannabis retail stores to offer popular delivery and curbside pick-up services,” the province said in a news release. “This would also enable retailers to continue supporting physical distancing and general public health directives.” The move still requires legislative approval.

Licensed Hemp Acreage Tanks 24% In Third Year of Nationwide Production More farmers jumped off the hemp bandwagon for a second consecutive year, causing a dramatic drop in acres dedicated to growing the crop in 2021.

This decline follows the production boom in 2019 that outpaced consumer demand and filled storage barns across the United States. Continued uncertainty about federal regulations on hemp-derived CBD, an immature supply chain, risky farming conditions in a record-setting year for drought, low wholesale prices and a surplus of leftover flower and biomass from past seasons were all factors that played into a significant reduction of hemp acreage this year. As of late September, U.S. producers licensed an estimated 284,793 acres in 2021, a drop of 24% from 2020 and 44% from 2019, according to data from the USDA Farm Service Agency.

November-December 2021 | mjbizdaily.com 27

IndustryDevelopments | International & State WA MT

MN ID

TN AR

SC MS

DE MD

RI PA

LA FL

■ Medical ■ Recreational HI

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

State News Alabama

State Treasurer John McMillan will take the reins of the Medical Cannabis Commission to oversee business licensing and regulation of Alabama’s nascent MMJ market. His pay starts at nearly $210,000. McMillan held the state treasurer role since 2018 and previously served as Alabama’s agriculture commissioner. In related news, Commission Vice Chair Rex Vaughn said the group is working with the state on legislation to speed up the timeline for beginning marijuana cultivation, with sales potentially starting as soon as fall 2022.

Arizona State regulators announced a list of 87 state ZIP codes where applicants for 26 social equity retail marijuana licenses must have recently resided. The 2020 ballot measure passed by voters to legalize an adult-use marijuana market requires the state health department to issue 26 licenses to applicants “from communities disproportionately impacted by the enforcement of previous marijuana laws.” Applicants must have lived in a chosen zip code for at least three of the past five years. Other scoring criteria include past marijuana convictions of the applicant or family member as well as household income. The list appears to focus on ZIP codes near Native American reservations.

28 Marijuana Business Magazine | November-December 2021

California At least four California marijuana companies sued the state after regulators revoked their provisional business licenses, alleging they were treated unfairly and not allowed to appeal the revocations to an independent mediator. Roughly threequarters of all cannabis licenses remain classified as “provisional,” the technical term for temporary permits. Department of Cannabis Control spokeswoman Christina Dempsey told MJBizDaily via email: “DCC has filed proposed regulations to establish a process for notifying provisional licensees when their provisional license is at risk of suspension or revocation, or their application is being considered for denial.” In legal filings, however, the California attorney general’s office has argued that provisional license holders are not entitled to any due process, particularly under the U.S. Constitution’s 14th Amendment, because the companies in question operate in a federally illegal business. So far, at least some of the four cases have had an impact: Two have been resolved, with regulators reinstating the companies’ business permits; the other two cases are ongoing.

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November-December 2021 | mjbizdaily.com 29

IndustryDevelopments | International & State Florida The state announced an emergency rule to issue one license designated for a Black farmer to compete in the state’s billion-dollar medical marijuana industry. The beginning of the licensing process comes four years after lawmakers established the requirement to address past racial discrimination issues.

Georgia State regulators are asking the Department of Agriculture for help overseeing Georgia’s limited medical marijuana program. During the first meeting of the Medical Cannabis Commission’s Oversight Committee, state Rep. Micah Gravley noted that marijuana “is an agricultural product. We’re an agricultural state.” Georgia approved a limited medical marijuana program in 2019, but the market has been slow to launch. State Agriculture Commissioner Gary Black leans in favor of hemp and not medical marijuana. He also said the commission should focus on finding labs to test cannabis for the legal program.

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Illinois Chicago is easing zoning restrictions that will allow recreational marijuana stores to expand. The City Council voted to lift the cap of seven marijuana zones in the municipality, while limiting the number of retail stores. The largest city in Illinois, Chicago, has permitted 18 adult-use cannabis retailers so far; there are 110 statewide. The approved proposal also will shrink the downtown zone where marijuana retailers aren’t allowed to operate, though they’ll still be banned from opening on a strip between Michigan Avenue and State Street as well as south Michigan Avenue. Marijuana retailers can now open without special approval from Chicago regulators. Retailers will be permitted where manufacturing operations are allowed, provided they are 650 feet from a residence. This also means cannabis retailers can bypass the zoning lottery to sell marijuana.

Maine The state’s recreational cannabis market continues to grow, even though less than 10% of the towns and cities in the state are allowing adult-use sales. Only 47 of Maine’s roughly 500 towns and cities have chosen to allow recreational marijuana retail sales, and just 29% of the state’s residents live in those municipalities. Even with that limited market, the state posted its strongest sales month in August, totaling $10.2 million among the 53 licensed adult-use retailers.

IndustryDevelopments | International & State Massachusetts Hemp growers in the state can now sell smokable flower and hemp extracts to the 236 marijuana retailers in Massachusetts. The new rule gives Massachusetts hemp farmers instructions for testing and labeling their products for sale to adult-use or medical marijuana shoppers. The change was made by Massachusetts lawmakers late last year and applies only to farmers growing hemp in the state; out-of-state hemp products remain off-limits for Massachusetts marijuana retailers. The state has about 65 hemp farmers on 407 acres and 95,000 indoor square feet.

Michigan A series of bills aimed at medical cannabis caregivers introduced in the Michigan Legislature—and supported by large marijuana businesses—was met with backlash from MMJ patients who want the caregiver system to remain untouched. The legislation, aimed at cracking down on the state’s illicit cannabis market, pits big industry players against grassroots activists and MMJ patients. The three bills would shrink the number of allowed patients per MMJ caregiver from five to one, reduce the overall number of marijuana plants each caregiver is allowed to cultivate and decrease the amount of MMJ that caregivers are allowed to have on hand. The Michigan Cannabis Manufacturers Association is the highest-profile supporter of the bills.

32 Marijuana Business Magazine | November-December 2021

Minnesota The state Court of Appeals says that a liquid mixture containing THC is a Schedule 1 Controlled Substance under state law, even if it is derived from hemp. The court used the ruling to uphold a criminal conviction involving a man convicted of two counts of possession in June 2019. Justices ruled that the law does not make any exception for hemp or for a substance or mixture with a concentration of 0.3% delta-9 THC or less on a dry-weight basis, said cannabis attorney Neil Willner with New York law firm Royer Cooper Cohen Braunfeld. The court’s decision could have a far-reaching impact on the Minnesota hemp industry, Willner said.

Mississippi A legislative group agreed on a proposed medical marijuana program that would be more limited than what voters overwhelmingly approved at the ballot box last November. The proposed measure would enable local governments to opt out of cultivation, processing and retail sales in their jurisdictions, but residents could petition for an election to reverse that decision. In addition, cultivation would be required to be indoors. The next step is for Gov. Tate Reeves to call a special session so the Legislature can pass the proposed measure into law. But lawmakers have accused the governor of making "unreasonable demands."

November-December 2021 | mjbizdaily.com 33

IndustryDevelopments | International & State Missouri A federal judge in Missouri struck down the state’s residency requirement for medical marijuana businesses, opening the fast-growing market to out-of-state operators. The permanent injunction barring the state from enforcing the residency requirement wasn’t a surprise because Judge Nanette Laughrey had issued a similar preliminary injunction in June, writing that the state had failed to meet the legal burden of showing how the residency requirement would achieve its goal of preventing marijuana from being trafficked out of state. The Missouri residency rule required that medical marijuana businesses be at least 51% owned by state residents. It had defined residents as those who had lived in Missouri for at least one year.

Nevada Recreational marijuana sales in Nevada surpassed the $1 billion mark for fiscal year 2021, according to data from the state. The Nevada Department of Taxation said adult-use retailers in Nevada brought in $1,003,467,655 in taxable sales. The bulk of those sales were in Clark County, home of Las Vegas. The 2021 fiscal year ran from July 2020 until June 2021.

34 Marijuana Business Magazine | November-December 2021

New Jersey State regulators missed a Sept. 25 deadline to begin accepting adult-use marijuana business license applications for the projected $1 billion market. The legalization law required the application process to open within 30 days of initial rules being adopted. Sales appear likely to start around spring 2022, unless medical marijuana operators are given a head start.

New Mexico The state’s cannabis industry is in an uproar over “weedgate,” or allegations of favoritism by New Mexico regulators. In June, the lead agency overseeing medical marijuana companies quietly reopened applications for business licenses, awarded one permit and then closed the window again. The health department awarded a license to Albuquerque-based GH just before all industry oversight was transferred to the new Cannabis Control Division. As an indicator of how much interest there is in New Mexico marijuana permits, the Cannabis Control Division received nearly 900 applications in August for cultivation licenses.

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IndustryDevelopments | International & State New York The state marijuana regulatory agency amended its medical cannabis program, broadening the sale of flower and who can recommend MMJ as a treatment. The newly formed Cannabis Control Board will allow a wide range of medical professionals to recommend medical marijuana, from midwives to dentists. Allowing smokable flower for patients likely will provide a revenue boost for the state’s medical cannabis companies, as flower is typically more affordable than infused products.

Ohio State regulators will allow medical marijuana growers to request an expansion of their cultivation operations, a move that could ease product shortages, boost sales and allow cultivators to better meet patient demand. Permission to expand will be granted to growers who have maxed out their space and can prove they need more room to meet demand. The growers also must be in good standing with regulators, including the Ohio Department of Commerce. Ohio has 20 cultivators who are licensed for up to 25,000 square feet of canopy and 15 cultivators who may grow up to 3,000 square feet. The new rules would allow licensees to expand to 75,000 square feet and 9,000 square feet, respectively. Separately, state Rep. Jamie Callender, a conservative from Concord, plans to introduce a bill to legalize recreational marijuana, marking the second such bill the state Legislature will consider this year.

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Pennsylvania Democratic lawmakers are trying again to legalize adult-use cannabis through legislation. State Reps. Jake Wheatley and Dan Frankel introduced House Bill 2050, which would create a recreational marijuana market with limited licensing, a social equity emphasis and a retail sales tax rate that would begin at 6% and gradually go up to 19% by the fifth year. Pressure has increased on Pennsylvania to legalize recreational marijuana sales now that neighboring New Jersey is preparing to launch a market next year. Gov. Tom Wolf has been urging lawmakers to legalize recreational marijuana since last year. But the GOP-controlled Senate still is considered a major obstacle, as it has been during previous efforts.

Oklahoma The Cherokee Nation in Tahlequah is seeking recommendations from a sevenmember committee by May 31 on marijuana and hemp opportunities for the tribe. The group will make recommendations about how the tribe can get involved in growing, processing and selling marijuana and hemp—and what role medical cannabis might play in the nation’s health-services system.

IndustryDevelopments | International & State Oregon Marijuana growers report that wholesale flower prices in the state are improving, which is welcome news for recreational cannabis cultivators in one of the country’s previously most oversupplied MJ markets. The changed business climate is even leading some growers to expand facilities and ramp up production. Growers in the state report per-pound wholesale flower prices are averaging $2,400 for high-quality indoor, $1,400 for mid-quality indoor, $1,000 for low-quality indoor and $800 for outdoor-grown cannabis.

South Carolina Delta-8 THC isn’t legal even if derived from hemp that meets federal THC limits, according to a nonbinding opinion from Alan Wilson, South Carolina’s attorney general. Wilson wrote that delta-8 THC is an isomer of the better-known delta-9 THC that isn’t protected under state and federal hemp laws. He told state law enforcement that “any and all” THC isomers beyond trace amounts naturally occurring in a hemp plant are illegal. Additionally, a licensed South Carolina hemp producer who was accused of growing hemp illegally has filed a lawsuit against the state agriculture commissioner and law enforcement, claiming they violated the law for arresting him and destroying his crops.

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LOOKING BACK. PRESSING FORWARD. ALWAYS INNOVATING.

South Dakota The campaign to legalize recreational marijuana in South Dakota is officially underway, again. The South Dakota secretary of state’s office approved a draft of a statewide ballot measure for 2022, meaning the campaign—South Dakotans for Better Marijuana Laws (SDBML)—can start collecting the 17,000 voter signatures it needs by Nov. 8 to get a spot in next year’s election. South Dakota voters already approved recreational legalization in 2020 through Amendment A, but Gov. Kristi Noem has so far stalled the implementation of the amendment with a lawsuit, forcing marijuana advocates to return to the ballot in 2022 if they wanted to be certain adult-use cannabis is legalized in the state.

Virginia Hemp pectin waste left from CBD extraction is getting a new look as a strengthener for plywood and other wood composites. Virginia Tech reports that researchers at its College of Natural Resources and Environment looked at using the waste pectin, a jelly-like material that exists in the cell walls of most plants, as a modifying agent in the production of wood-based materials. Chip Frazier, director of the Wood-Based Composites Center at Virginia Tech, said hemp offers new options for alternative biological materials. “Not a lot of research has been done on hemp,” undergraduate researcher Emilie Kohler said, “and this could be the start of something important.” Note: Entries sourced from MJBizDaily, Hemp Industry Daily and other international, national and local news outlets. These developments occurred before this magazine’s publication deadline, so some situations might have changed.

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What Consumers Want Cannabis education, demographics and product familiarity all play a role in what wins over buyers By Omar Sacirbey and Andrew Long

42 MJBizMagazine | November-December 2021

Consumers have a variety of goals for their cannabis use. If executives can better understand these objectives, their marijuana businesses are more likely to prosper. The team at MJBizMagazine scoured mountains of data and interviewed dispensary executives nationwide. Among the findings: • Flower might slip slightly in market share, but it remains the undisputed king of cannabis products—especially when pre-rolled joint sales are included. • Following flower, vape cartridges are the next-most popular product. Vape sales have largely recovered from the 2019 vaping health crisis. Concentrates also continue to gain in popularity. • Edibles tend to be the next-most popular category, followed by products such as topicals, tinctures, patches, capsules and other formats. • Men continue to be the largest purchasers of cannabis, especially in the concentrates category. But purchases by women are on the rise. • As markets mature and cannabis consumers become increasingly at ease with consumption, they are more likely to try new product formats.

The trajectory of retail flower sales between January 2018 and September 2021 is shown in adult-use marijuana markets tracked by Seattle-based analytics company Headset. Adjusted to begin at the same point, the distinct growth patterns between states—California, orange; Colorado, dark blue; Nevada, pink; Oregon, green; and Washington, light blue—can be attributed to age of market, wholesale flower supply, retail density and other factors. Graphic by Katie Ruland

November-December 2021 | mjbizdaily.com 43

What Consumers Want

Basket Composition

The key to understanding buying patterns of cannabis consumers is to look at the contents of their baskets. For example, flower shoppers rarely spend outside of that category, while beverage purchases tend to be add-ons. A look at basket composition through Oct. 11 for the combined CA, CO, NV, OR and WA markets.

Spend on category Average

Spend on other categories Average

Flower

$49.48

$12.10

Capsules

$45.83

$52.30

Vape pens $21.98

$45.43 $45.34

Tinctures & sublinguals

$45.04

Concentrates

$36.99

$23.37

Topicals $36.63

$44.89

$33.13 $21.80 $20.86

Edibles

$34.08

Beverages

45.54

Pre-rolls

$21.72

How to read the chart: The average basket spend on concentrates was $36.99. Those customers also spent an average of $23.37 on other categories. Add-ons: Categories with a high spend on other items usually indicate the category is an add-on purchase.

Source: Headset

he marijuana industry has never been so replete with cannabis product formats: flower, vape cartridges, concentrates, edibles and infused beverages as well as topicals, tinctures, capsules and other offerings. For marijuana executives, these choices present opportunities and challenges that are best navigated by understanding what consumers want from their cannabis products. Answering that question is especially tricky because marijuana consumers are so varied—different genders, age groups and income classes, to start—and their goals for cannabis consumption can be very different. Nevertheless, sales data and anecdotal evidence reveal nationwide trends, although there is some variation by region and store. For example, flower remains the No. 1 product format—although its market share has waned over time as different formats have become available and consumers have become more open to trying them. Flower is typically followed by vape

cartridges, concentrates, edibles and infused beverages—then topicals and other products. What compels consumers to buy certain cannabis products mostly depends on the individual, each customer’s goals and experience level with cannabis. Dispensary executives cite multiple factors that play into the decision, including: • Potency. • Effect. • Terpenes and secondary cannabinoids. • Ease of use and convenience. • Familiarity. • Price. • Extraction methods. • Aroma and taste. Some of these attributes are important across product niches—such as potency and price—while others drive more interest to specific products. For example, “familiarity” played a significant role in driving new or return cannabis consumers to flower, edibles and infused beverages but less so with concentrates. “Ease and convenience,”

44 MJBizMagazine | November-December 2021

meanwhile, helped drive pre-roll and vape cartridge sales but weren’t traits sought out by consumers of flower, concentrates and other formats.

TIDE OF TRENDS

“They’ve become far more sophisticated,” Ann DeMarco, general manager at Highland Health, a recreational marijuana store in Trinidad, Colorado, said of cannabis consumers. “There’s so much information available now to consumers that they come in already with a lot of knowledge. Consumers become more sophisticated more quickly than a few years ago because budtenders are better educated about products than before and can pass that knowledge on to consumers. “Eight to 10 years ago, you had to search and search and search to find reliable, accurate information.” Now, DeMarco noted, “we have consumers coming in telling us about products we haven’t heard of. They ask about extraction methods, or if we carry the edibles with the new fast-acting nanotechnology.”

The Top Brands in 2021

Cannabis brands have started to establish dominance across several states in various categories. A look at the top brands in Western states as of Oct. 11, 2021. Top five brands in category

E California

F Colorado

g Nevada

k Oregon

u Washington

Total share of category sales.

Beverage

Edible

Flower

Cann Social Tonics 19.2% Lagunitas Brewing Keef Cola Habit Manzanita Naturals

Kiva 28.4% Wyld Kanha/Sunderstorm Plus Smokiez

House Brand 4.39% CannaBiotix (CBX) Pacific Stone Claybourne Co. Glass House Farms

Stiiizy 20.7% Raw Garden Heavy Hitters Select Buddies

Stillwater 36.8% Keef Cola Dixie Elixirs CannaPunch Marqaha

Wana Brands 27.8% Wyld Dixie Elixirs Tastebudz Coda Signature

House Brand 60.6% Nectarbee Veritas Fine Cannabis Willie's Reserve Public Utility

OpenVape 7.5% Craft / Craft 710 Spectra EvoLab Eureka!

Sip 58% CannaPunch Select HaHa Cann Social Tonics

Wyld 23.5% HaHa Kiva Select Incredibles

House Brand 8.7% Cookies Flower One NLVO Shango

AiroPro 10.5% Stiiizy Select Rove Cannavative

Magic Number 25.9% Mule Extracts Hush Mellow Vibes Dirty Arm Farm

Wyld 32.1% Drops Grön Mule Extracts Golden

House Brand 11.1% Meraki Gardens Prūf Cultivar Uku Eugreen Farms

Buddies 18.6% Select White Label Extracts Hellavated Winberry Farms

Major 46.2% Dogtown Pioneers Sinners & Saints Happy Apple Blaze Soda

Craft Elixirs 12.7% Magic Kitchen Hot Sugar Journeyman Ceres

Phat Panda 7.1% Northwest Cannabis Solutions Artizen Cannabis WA Grower Buddy Boy Farms

Northwest Cannabis Solutions 10.9% Mfused SPP Leafwerx Hellavated

Vape

Source: Headset November-December 2021 | mjbizdaily.com 45

What Consumers Want

Consumer preferences in cannabis might change between the first day of sales, seen above in Calgary, Alberta, and when a market matures years later.

Photo by Lindsey Bartlett

Mature Markets, Sophisticated Consumers

Business owners in older legal markets report increased interest in terpenes, edibles and vapes—but passion for flower remains By Omar Sacirbey

arijuana businesses in new markets can expect consumer knowledge and tastes to change over time, but not by much. According to retailers in mature recreational marijuana markets, flower remains the most popular product format. Nevertheless, business owners should be ready to adapt to a more educated consumer who will want to know about terpenes, secondary cannabinoids, extraction methods and other aspects of products as markets develop. “Over time, people become more

educated,” said Dominic Cundari, general manager at ArborSide in Ann Arbor, Michigan. “Then you see other product categories like edibles and cartridges start to compete.” Cundari attributed the popularity of infused edibles and vapes to familiarity and ease of use. “Picking up a lot more consumers over time, increasing that market size overall, is going to lead to certain products taking off and that demographic changing.” Jeff Finnerty, head of marketing at New York-based multistate operator

46 MJBizMagazine | November-December 2021

Ayr Wellness, agreed. “We see consumers educating themselves more around elements of not only flower but the other categories. We see people asking for not just THC but also more about the other cannabinoids and their effects.”

INTEREST IN TERPENES

Ayr Wellness did a recent customer survey around marijuana concentrates that confirmed as much. The company asked consumers what percentage of terpenes they wanted combustible products to have

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What Consumers Want

Med Pharm dispensary in Broken Arrow, Oklahoma, tried all available advertising outlets after the state legalized medical marijuana in 2018. Photo by Sean Capshaw

and offered choices of 0%-2%, 2%-3%, 4%-6% and 6.5% and above. Executives assumed people would pick the biggest number. But roughly 18% of people said they didn’t have a point of view, which the executives interpreted to mean 82% of consumers believe they have enough cannabis knowledge to know the amount of terpenes they want. “There is a clear evolution of understanding around the terpenes,” Finnerty said. Twenty-seven percent of respondents selected the 4%-6% range, whereas 15% said they wanted more than 6.5% terpenes.

ADVERTISING PLAYS A ROLE Another consumer influence in new cannabis markets will be advertising,

especially as marketing restrictions loosen up, Cundari said. Billboards and other types of advertising have become common in Michigan, helping normalize cannabis in the state while promoting brands. “As restrictions on advertising and regulations find a happy medium, we’ll see edibles and most likely (vape) carts take a bit of a bigger market share overall,” he said. “Flower is going to be king for as long as I’m around. But I do see some of those other … products take a bigger market share over time.” Ann DeMarco, general manager of Highland Health in Trinidad, Colorado, agreed. “When marijuana first became legal, everybody was like, ‘Oh, cool, I can just go get all the pot I want.’

48 MJBizMagazine | November-December 2021

This is not like alcohol, and let’s go have a party and see how messed up we can all get,” she said. “There are consumers that consume for those purposes. But we’re finding more and more of the community that we serve are trying to accomplish something with their cannabis. … They’ve become far more sophisticated. There’s so much information available now to consumers that they come in already with a lot of knowledge.” DeMarco believes change will come slowly. “I think that eventually … maybe 10, 15 years down the road, people will start becoming more concerned with safer ways to consume cannabis,” she said. “That will lead us away from smoking. But I don’t see it in the near future.”

What Consumers Want

What’s Hot in Flower?

Consumers might have more choice than ever when it comes to flower, but some strains, products and sizes still dominate the combined flower markets in CA, CO, NV, OR and WA.

Segment breakdown

Flower sales by segment from January 2020 to September 2021. $300M Hybrid

$250M

September YOY 2021 Sales % change

$200M

1. Hybrid

$150M $100M

Indica Sativa Popcorn

$50M $0

2020

$233M

-13%

$66M 2. Indica 3. Sativa $43M 4. Popcorn $24M 5. Other $8M

-14% -21% -9% -38%

2021

Top package size

Top products*

Top strains/types

1. 3.5g (1/8oz) 2. Bulk 3. 14g (1/2oz) 4. 28g (1oz) 5. 7g (1/4oz)

1. Caliva: Alien OG 3.5g (1/8oz) 2. CannaBiotix (CBX): Cereal Milk 3.5g (1/8oz) 3. Pacific Stone: Wedding Cake 3.5g (1/8oz) 4. Top Shelf: Whoa-Si-Whoa 3.5g (1/8oz) 5. Pacific Stone: 805 Glue 3.5g (1/8oz)

1. Wedding Cake 2. Sativa dominant 3. Ice Cream Cake 4. GG4 5. Blue Dream

*Excludes house brands

Source: Headset

Flower Power Price and potency drive most bud sales, but educated consumers show interest in terpenes and minor cannabinoids

By Omar Sacirbey

lower is the undisputed champion of marijuana products, making up more than half of market share—and often more when including pre-rolls. Although flower’s dominance has slipped slightly over the years as more formats have become available, business

owners anticipate that flower will continue to hold a dominant position in the future.

PUMP UP THE POTENCY

Marijuana retailers say that potency is still the main trait that consumers seek in the flower they buy.

50 MJBizMagazine | November-December 2021

“Consistent with most of the market, it’s THC percentage and potency that are going to drive sales. If people see THC percentage in excess of 30%, (consumers are) always going to be immediately attracted to those options,” said Dominic Cundari, general manager at ArborSide, a medical and recreational cannabis

What Consumers Want

store in Ann Arbor, Michigan. Flower accounts for 50%-60% of the store’s revenue on any given day, depending on what products are being promoted or discounted, Cundari said. At Trinidad, Colorado-based retailer Highland Health, flower accounts for 60%-70% of sales. The store’s general manager, Ann DeMarco, agreed that THC levels and potency are most important to consumers—especially younger ones—but noted that as regular customers become more educated about terpenes and secondary cannabinoids, those are increasingly important as well. “We have an awful lot of consumers who ask for specific terpene profiles to help them achieve certain outcomes, such as something to help them sleep, something that will help with

Flower Market Share

Flower traditionally dominates market share based on sales, but the growth of other categories is putting pressure on the leader. State

Who’s buying A look at flower and pre-roll buying trends for September in the combined markets of CA, CO, NV, OR, WA.

Flower Women: 29% 4%

Boomers

Gen Xers

14% 4%

Men: 70% 10%

35% 8%

Gen Zers

Pre-rolls Women: 36% 5% 8% 18%

Boomers Gen Xers

Men: 64%

Gen Zers

2020

Other categories

2021

J F M A M J J A S O N D J F M A M J J A S

California

$3.6B

50%

Colorado

$1.5B

50%

Nevada

$774M

50%

$997M

50%

Washington

$1.2B

14% 34%

Millennials

Flower

Oregon

17%

Millennials

Flower market share by monthly sales

Total flower sales Jan. 2020 - Sept. 2021

May not add up to 100% due to rounding.

Source: Headset

52 MJBizMagazine | November-December 2021

50%

Source: Headset

What Consumers Want

pain, something that will help relieve migraines,” DeMarco said. Observers noted that consumers of all ages and genders will buy flower, but the most prolific purchasers are younger males.

The Rise of Branded Flower

The sale of branded flower continues to take market share from house brands. And while individual brands might dominate in their areas, house brands still collectively bring in more revenue. $80M

ALL ABOUT THE MONEY

Price is another important factor. “The majority of people that we see are budget-conscious consumers,” Cundari said. “Not that we don’t want the higher-end consumer, we’re always going to have higher-end products. But, predominantly, you find people are looking for something that’s just going to get them through their day or through their week without putting a huge hole in their pocketbook.” Flower strains that are most popular at ArborSide combine “fruity or tropical elements” and “cakey, vanilla-type terpene profiles with that sharp gasoline back end, like a Sour Diesel or a GMO Cookies,” he added.

Top brands by sales

A look at the top 10-selling brands by total sales for September 2021 and their sales since 2017 in CA, CO, NV, OR and WA. $70M

$60M

Sept. 2021 $51.5M

$50M

PRE-ROLL SALES ON THE RISE Pre-rolled joints are becoming an increasingly important flower factor. At stores owned by New York-based multistate operator Ayr Wellness, flower accounts for nearly half of all sales. And while flower’s market share has slipped by a percentage point or two recently, that loss has been offset by gains in pre-roll sales, said Jeff Finnerty, Ayr’s head of marketing. Flower and pre-rolls together account for 53%-57% of Ayr’s sales, depending on the market, he said, with pre-rolls comprising 8.5%-10.5% of the total. Why have pre-rolls increased in popularity, especially during the coronavirus pandemic? Finnerty believes that portability and convenience are major reasons. Still, marijuana retailers believe flower will remain king. “Whole flower continues to be the most familiar format—not only to experienced users but folks that are unfamiliar with cannabis,” Finnerty said.

$40M

House brands

$30M

$20M

House brands accounted for 61% of flower sales in September 2021, down from 71% in 2019.

House brands 61%

Other brands 39%

House brand

Old Pal

CannaBiotix (CBX)

Kings Garden

Pacific Stone

N.W. Cannabis Solutions

Artizen Cannabis

Phat Panda

Flow Kana

Sept. 2021 $7.1M

$10M

54 MJBizMagazine | November-December 2021

0 2017

2018

2019

2020

2021

Source: Headset

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alk into any dispensary and you will see a dizzying alk into any dispensary and you will see a dizzying variety of cannabis packaging, from pre-roll pop-tops, variety of cannabis packaging, from pre-roll pop-tops, to eye-catching edibles boxes. Distinctive product packaging to eye-catching edibles boxes. Distinctive product packaging can influence consumers just as much as the product itself. can influence consumers just as much as the product itself. That’s why so many dispensaries and vendors partner with That’s why so many dispensaries and vendors partner with DIZPOT. We keep our eyes on the ever-changing market so that DIZPOT. We keep our eyes on the ever-changing market so that we can create thoughtful and dynamic packaging for you! we can create thoughtful and dynamic packaging for you!

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What Consumers Want

High-Potency, Higher Sales Concentrates and vape products maintain dominance among consumers looking for high levels of THC By Omar Sacirbey

ape cartridges and concentrates generally follow flower and pre-rolls in terms of popularity among customers. Unlike the flower category—where “house” brands dominate—vape and concentrate brands seem to hold more sway over consumers. “We have customers that come in and ask for specific brands of concentrates,” said Ann DeMarco, general manager of cannabis retailer Highland Health in Trinidad, Colorado. “The consumers who are interested in concentrates are very, very sophisticated, and they know exactly what they want. “People want to know extraction methods, for example. Our consumers … are very loyal to brands, and so that leads me to believe that they’ve done their research, they’ve had an opportunity to try our various concentrate lines.”

The Vape Market Returns

While vape sales in CA, CO, NV, OR and WA have recovered since the 2019 crisis, total market share for the category has not.

Sales

Vape pen sales have increased 78% since 2019.

Sept. 2021 $184M

$150M $100M $50M

2019

2020

2021

Market share

Vape market share is closing in on 2019 numbers. Sept. 25% Aug.

2021 21%

2019 24%

20%

INCREASINGLY KNOWLEDGEABLE

Internal research at New York-based multistate operator Ayr Wellness found that consumers were increasingly knowledgeable and opinionated about concentrates. In the past two years, for example, the number of Ayr consumers who reported knowing little to nothing about the extraction method used to create their concentrates fell from 45% to 22%. New concentrates developed in recent years have given consumers more choice than ever before. However, none of the products—shatter, wax, budder, rosin, live resin, diamonds, crystals and

Aug. 2019 $155M

$200M

15%

2019

2020

2021

others—has emerged as a real leader in the category. In a survey Ayr conducted of its concentrate customers, each concentrate type scored within 4% of the others.

LESS FOCUS ON NEW AND UNUSUAL

Dominic Cundari, general manager at marijuana retailer ArborSide in Ann Arbor, Michigan, observed that today’s concentrate consumers care less about

56 MJBizMagazine | November-December 2021

Top brands

By total sales since 2019 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Stiiizy Select Raw Garden Heavey Hitters Buddies ABX/AbsoluteXtracts Platinum Vape AiroPro (IndigoPro) Rove Jetty Extracts

Segment growth

Year-over-year as of Oct. 5, 2021 Cartridge

15.1%

All-in-one disposable

23.1%

All-in-one rechargeable

66.4%

Refill/E-juice

53.7%

Source: Headset

format. They aren’t necessarily looking for new or hard-to-find concentrates, he said, because many stores already have those products. “There’s a huge market for shatter still,” Cundari said, referring to one of the earliest, cheapest and most basic concentrate formats. “I think people got caught up in the terp-sugars and having those shiny or wetter, diamond-type consistencies. And everyone’s got that at this point.

What Consumers Want

California-based Stiiizy is the top-selling vaporizer brand overall in cannabis markets tracked by Headset.

Courtesy Photo

“The concentrate companies have maintained a healthy amount of shatter in their repertoire that can be sold at a lower wholesale cost—even though it’s not the most terpy stuff, it’s very popular with consumers.” Price continues to be important as well. “You’re really not seeing a whole lot of people spending a lot of money on live resins or concentrates that are priced between $50 and $60 (per gram) on up, unless it is live rosin,” Cundari said. It’s worth noting that concentrates have the largest gender disparity of any marijuana product. Nearly 75% of concentrates buyers are men, compared with only 26% women. Industry experts agree that male consumers are more likely to seek products with higher THC levels, while microdosing is a trend that has proved popular with women.

RETURN TO VAPES

While concentrates continue to make inroads with consumers, vape cartridges seem to have largely recovered from the vape crisis of 2019. Brands have played an important role in that thawing of consumer attitudes.

“Now that people have brands that they can associate with positive experiences, I think that trust is being rebuilt, and they’re very popular again, depending on the brand and price point,” Cundari said. However, “some former vape consumers will never come back,” he said. “They’ve moved on to edibles and also swore off flower. That may have been the final straw as far as inhalables go.”

VAPING PREFERENCES

Some vape products have performed better than others. Sales of vape cartridges and all-inone disposable products are up over the past year, while all-in-one rechargeable and refillable vape sales are down more than 50% since October 2020. Part of the appeal could be the convenient and easy-to-use nature of cartridges and disposables—especially smaller sizes, because of their portability. “People are educated; they know what’s going on,” Cundari said. “Overall, I think that familiarity and ease of use are always going to be pretty consistent with your recreational market.”

58 MJBizMagazine | November-December 2021

Who’s buying

A look at the vape pen and concentrate buying trends for September in the combined markets of CA, CO, NV, OR and WA.

Vape pens

Women: 35% 4% 9% 16%

Boomers Gen Xers

Men: 66% 5% 14% 35%

Millennials

Gen Zers

12%

Concentrates Women: 26% 2%

Boomers

Gen Xers

14% 5%

Millennials Gen Zers

Men: 74% 4% 12% 44% 14%

May not add up to 100% due to rounding.

Source: Headset

What Consumers Want

The Most Popular Edibles this Year It’s no secret that gummies are the top seller among edibles consumers. Here’s how the other edibles compare based on total sales through September in CA, CO, NV, OR and WA.

Other $1.2M

Savory edibles Cooking $1M ingredients $1.5M

Cookies $19.8M

Chocolates $94.8M

Caramels, chews and taffy $81.9M

Gummies $601.9M

Brownies, blondies and cereal bars $9.3M

Honey, sugar and sweeteners $1M Candy, lozenges and gums $26.7M

Mints $22.7M

Source: Headset

March of the Gummies

Edibles and beverages are popular choices with new cannabis users, but some retailers claim there’s less bang for the buck By Omar Sacirbey

eeriness over respiratory hazards is one factor that drives some cannabis consumers away from flower and vapes and toward edibles and infused beverages, industry observers said. “I do see people come in that … have a 20-year history with cigarettes, and the

last thing they want to do is put more combustibles in their body. So you find that they lean more toward edibles,” said Dominic Cundari, general manager at ArborSide in Ann Arbor, Michigan. He said edibles outsell concentrates at his store, defying national trends.

60 MJBizMagazine | November-December 2021

BRANDING OPPORTUNITIES

Cundari and others believe edibles will continue to gain market share for reasons that include ease of use, familiarity, popular brands and new innovations. “Another factor that really plays a big part in people’s minds is brands,”

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What Consumers Want

Infused Beverage Growth

Infused beverages don’t command the market share of other categories but are continuing to grow. Here’s how the category has faired over the past five years in CA, CO, NV, OR and WA.

Monthly sales

Market share

In millions

Percentage of total

Sept. 1.5% $12.2M

$15M $12M

Sept. 1.4%

$0.25

Sept. 2020 1.0%

1.2%

Sept. 2020 $9M

Average price

Unit price per gram

$0.20

.09%

$0.15

$6M

.06%

$0.10

$3M

.03%

$0.05

$9M

Sept. 2020 $.19

Sept. $.13

17 18

19 20

Source: Headset Sip Elixirs own 58% of the infused beverage market share in Nevada. Courtesy Photo

Cundari said. He explained that as the Michigan market has stabilized and grown since recreational marijuana sales began in 2018, there is much more cannabis advertising. “Now that we’re in a legal and licensed market, we’ve got multistate-operating businesses across the board in Michigan. People are used to seeing advertisements and branding for a lot of these companies,” he said.

PREDICTABLE EFFECTS

Jeff Finnerty, head of marketing at New York-based multistate operator Ayr Wellness, agreed more consumers are taking an interest in edibles and infused beverages. He attributes the uptick in sales partly to familiarity and partly to innovations such as nanotechnology, which creates a faster and morepredictable onset of effects. Edibles and infused beverages can be especially popular among newer cannabis consumers, Finnerty said. For newbies who might be nervous about traditional cannabis consumption methods including smoking and vaping,

something more “familiar” such as a beverage could be a popular entry point. That’s part of the reason Ayr recently acquired Levia, a Massachusetts-based infused seltzer company. Levia sales have surged in Massachusetts, and Ayr is betting it can also happen in other states. “Levia is a great way to bring new people into the market because they are already familiar with the seltzer (trend), and that is something that will appeal to people looking to replace alcoholic beverages,” Finnerty said. But edibles and infused beverages are only a small portion of sales at Highland Health, a marijuana retailer in Trinidad, Colorado. General Manager Ann DeMarco said the products are even outsold by accessories at her location. “As a consumer, it’s because you get a bigger bang for your buck with the flower,” DeMarco suggested. “A chocolate bar is $20 for 100 milligrams (of THC). And we have a large percentage of the population—myself included—that gets absolutely no effect from ingested cannabis, and so they’d rather buy flower.”

62 MJBizMagazine | November-December 2021

Who’s buying A look at infused edibles and beverage trends for September in the combined markets of CA, CO, NV, OR and WA.

Edibles Women: 40%

Men: 60%

12%

Boomers

12%

18%

Gen Xers

16%

25%

Millennials 3%

Gen Zers

Beverages Women: 40% 6% 12% 18%

Boomers

Men: 61% 8% 17%

Gen Xers

30%

Millennials 4%

Gen Zers

May not add up to 100% due to rounding.

Source: Headset

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What Consumers Want

Best of the Rest

Topicals, tinctures and capsules lag other categories but are popular with women and older consumers

By Omar Sacirbey

Who’s buying A look at buying trends for September in combined markets of CA, CO, NV, OR and WA.

Topicals Women: 48%

Men: 52%

16%

Boomers

15%

Gen Xers

15%

Millennials 2%

18% 4%

Gen Zers

Tinctures, Sublinguals Women: 45% Boomers

15%

Gen Xers

17%

14%

Millennials 2%

64 MJBizMagazine | November-December 2021

Gen Zers

Women: 37% Finnerty, head of marketing at New York-based multistate operator Ayr Wellness. “Things like capsules, tinctures and topicals, which have a wellness or medical connotation, do better in places like Florida than, say, Nevada or California,” he said. Dominic Cundari, general manager at ArborSide, a marijuana retailer in Michigan, believes these products

20%

Capsules

The Cannavative brand owns nearly 85% of the cannabis capsule market in Nevada. Courtesy Photo

small but growing segment of the industry belongs to products such as topicals, tinctures and capsules. While their appeal is not broad, they still have a reliable customer base and are worth having on store shelves. This allure is especially noticeable in states with a high proportion of older cannabis consumers, noted Jeff

Men: 55%

14%

10%

Boomers

Men: 63% 14%

13%

Gen Xers

21%

12%

Millennials

24%

Gen Zers

May not add up to 100% due to rounding.

Source: Headset

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What Consumers Want

Papa & Barkley has the top-selling products in Californiaʼs topicals, tinctures and sublinguals categories. Courtesy Photo

will grow in popularity as cannabis is normalized. “As cannabis consumption becomes more prevalent—and it becomes more of a lifestyle habit that is normalized and treated as more of a routine—I think you’ll see more and more people use topicals for their daily joint ailments and things like that.”

Brand Dominance

The packaging and marketing of consumer packaged goods in cannabis lend themselves to brand loyalty and dominance. A look at the brand winners through Oct. 11, 2021. Top brand market share

Papa & Barkley

30.9%

17.4%

52%

1906

House brand

Escape Artists

60.4%

14.3%

29.4%

Cannavative

City Trees

Bask

84.5%

18.8%

42.7%

Oregon

Not available

Select

High Desert Pure

13.7%

54.8%

Double Delicious

Green Revolution

Ceres

38%

40.9%

41.4%

Colorado

Nevada

k Washington

Omar Sacirbey is a reporter for MJBizMagazine. You can reach him at omar.sacirbey@ mjbizdaily.com.

Topicals

Level

California

A PRODUCT FOR EVERYONE

While most cannabis product categories are dominated by male consumers, sales of topicals, tinctures and capsules are split nearly 50-50 between men and women. Many products in this category—THC- and CBD-infused creams, lip balms, bath soaks and transdermal patches—are marketed for beauty and wellness, which have traditionally appealed more to women than men. The power of brands is also evident in this product segment. California-based Papa & Barkley topicals outsell the next 19 brands combined in that state, according to data from Seattle-based cannabis analytics firm Headset.

Capsules Tinctures & Sublinguals

66 MJBizMagazine | November-December 2021

Source: Headset

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68 MJBizMagazine | November-December 2021

CANNABIS LEADERS A new generation of up-and-coming marijuana entrepreneurs is making its mark

By John Schroyer

he modern marijuana industry is nearly three decades old. The first wave of industry pioneers—those who fought federal and local crackdowns and persevered through IRS audits and threats of civil asset forfeitures by U.S. attorneys—have been slowly handing the reins of the industry over to a new generation. Now, a good chunk of cannabis entrepreneurs are one-time employees who started their careers at the lowest rungs in the industry and worked their way up. MJBizMagazine sat down with three such entrepreneurs to learn about their starts in the industry, what they learned and how those initial jobs acted as springboards to launch their own cannabis companies.

Dani Walton

Co-founder at Nxtlvl Delivery and High Kitty Oakland, California Having cut her teeth at the famed Oakland dispensary Harborside for more than a decade, Dani Walton could easily claim that her real-world experience is equivalent to a doctorate in the cannabis sector. Between 2008, when Walton was hired at Harborside, and 2019, when she departed the company, she worked her way up from budtender to personal assistant for CEO Steve DeAngelo and manager of wholesale and distribution operations. That high-level experience—not only on the operations side but the amount of networking needed—perfectly positioned Walton to set up Nxtlvl Delivery, a marijuana transport business in the San Francisco Bay Area, along with High Kitty, a premium indoor flower brand.

MEETING DEMAND

Walton said that keeping tabs on the “pulse of the market” across California as Harborside’s distribution and wholesale

Some of the newest cannabis entrepreneurs began their careers working under industry leaders. Under their tutelage, they learned valuable business lessons, including: • Keep your ears open to learn where true demand exists in the cannabis supply chain. • Be prepared to stand up for yourself and your company. • Mainstream corporate skills and talents have a place in the cannabis industry. • Be ready to adapt. Laws, regulations and trends are always changing. • Network and sustain relationships with those you meet.

manager helped her learn where the true demand existed for consumers. “Some of the data I was able to learn … made it easier for me to start a delivery operation that was really focused on having the biggest legal concentrate menu,” Walton said, adding that she The High Kitty flower brand is geared toward heavy caters to a very “niche market” of cannabis users. Courtesy Photo marijuana concentrate lovers. She also credited her time at Harborside for helping her develop a serious network, particularly in the Los Angeles metro area, where she says High Kitty is getting traction with consumers. “I really wanted to market to more of the heavy cannabis user, and I knew there was a big market for us” because of market demographics, Walton said.

GUARDING THE PERIMETER

Walton also learned a fundamental lesson of business and life while watching Harborside co-founders Steve DeAngelo and his brother, Andrew, fight the federal government for years. The high-profile dispensary was more often than not in the crosshairs of federal agencies.

November-December 2021 | mjbizdaily.com 69

CANNABIS

LEADERS “I really learned how to fight the government and how to stand up for yourself,” she said. “I definitely adopted that mentality.” For instance, Walton said she’s had to fight to keep her delivery company alive through licensing hurdles and having to relocate headquarters.

“I had to reach out to all my political lobbyists and get their help in making sure we didn’t have to close down. I knew Steve would never give up and would do anything to make sure Harborside stayed open, and we made sure to do the same,” Walton said.

Tre’Von Dorsey

Founder, CEED Takoma Park, Maryland A veteran of the U.S. Marine Corps, Tre’Von Dorsey got into the legal cannabis industry in late 2017, starting out as an employee at a medical marijuana dispensary in Maryland. Though he couldn’t share the name of the dispensary because of a nondisclosure agreement, Dorsey said his previous experience quickly led to his promotion to general manager. He wound up managing the dispensary for about a year and a half.

A NEW ENDEAVOR

Dorsey is still working in the cannabis space, this time with a different direction: He founded an app aimed at helping other marijuana entrepreneurs network and get the connections they need to build teams, hire the right personnel and find the professionals they need to both win licenses and build out their businesses. The app is called Community for Entrepreneurs Engaged in Development, or CEED for short. Dorsey launched the company in 2019 and has been actively fundraising to get the app more exposure in the industry. The idea for the app, he said, came from both the dispensary-management job and an attempt he and a small team of colleagues made to win MMJ licenses in Maryland. “Going into the industry and seeing what was going on—what they lacked, what was good, what was bad—that was critical for me,” Dorsey said. “I saw where a lot of their mistakes were.” The biggest thing he learned? “Whatever you’re good at, just infuse that with cannabis,” Dorsey said.

PEEKING BEHIND THE CURTAIN

After Dorsey left the dispensary-management job, he said he encountered a lot of entrepreneurs trying to break into the industry, and he thought a platform could help.

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CEED stands for Community for Entrepreneurs Engaged in Development. Courtesy Photo

“There’s a lot that goes into having a cannabis business. It’s more than talking to a consultant, talking to a lawyer. It’s about building the right team. That’s the most important thing we all saw when we applied,” Dorsey said. “You’ve got to build a team from scratch. You’ve got to trust them.” That’s where CEED comes in. Dorsey describes the app as a “collaboration and business workspace,” but, he added, it also facilitates industry networking to help professionals find each other. CEED also builds on many of the templates that states have been using for both marijuana and hemp business permits, since a lot of the applications have similar requirements. “They’re using the same framework; that’s what we should do,” Dorsey said. In the meantime, he’s paying the bills working in IT and as an engineer, but he has not lost his focus on CEED and other marijuana businesses. And he hasn’t forgotten the value of his dispensary-management experience. “It all is rooted in the dispensary that I came from,” Dorsey said of his new career.

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Founder and CEO, Emerald Farm Tours San Francisco After working in corporate marketing for the better part of a decade, Victor Pinho got an opportunity to meld his career with his personal passion for marijuana in 2014, when he secured a job as marketing director at Berkeley Patients Group (BPG), a dispensary in Berkeley, California. It was a dream come true that ultimately led Pinho to found his own company, Emerald Farm Tours, just before California’s recreational market launched in January 2018. “Everything kind of came together—career, education, cannabis—it all came together under BPG … and it’s really where I developed a lot of those skills that have me where I am today,” Pinho said of (BPG).

During his nearly four years at BPG, Pinho said he learned the industry “end-to-end.” “I really did get a chance to do some very unique things very early in the industry with BPG, and if I wasn’t with BPG or a Harborside, those opportunities would not have been possible,” he said. For instance, when Pinho was hired in 2014, he became one of the first marketing directors for a medical marijuana dispensary. And during his three years at the company, he often focused on “operational problems” that are unique to the cannabis industry, given its semi-legal status. Pino said the experiences at BPG taught him how to adapt. In addition to fostering connections for Emerald Farm Tours, which provides guided tours of California marijuana businesses, the dispensary experience gave Pinho something to fall back on when the COVID-19 pandemic hit in 2020. Though the cannabis tourism business was booming through 2018 and 2019, it ground to a halt when the pandemic hit in March 2020, and so Pinho returned to what he learned at BPG: cannabis retail. “I fell back on those skills that I learned at BPG, to go back

Though the cannabis tourism business was booming through 2018 and 2019, it ground to a halt when the pandemic hit in March 2020, and so Pinho returned to what he learned at BPG: cannabis retail. into the industry and find a temporary job, making some money,” Pinho said. Plus, he added, BPG has such a sterling reputation that it further escalated his marijuana industry credentials. “The fact you have BPG on your resume is huge to people. People look at that and say, ‘This guy came from a company that had a lot going on.’”

John Schroyer is senior correspondent for MJBizDaily. You can reach him at john.schroyer@mjbizdaily.com.

Victor Pinho launched Emerald Farm Tours in conjunction with the debut of California’s recreational marijuana market. Courtesy Photo

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Avoiding

Eviction Marijuana companies have the same rights as other businesses in state-legal markets, but an ironclad lease is recommended By Margaret Jackson

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Avoiding

Eviction

Real estate experts recommend cannabis companies be transparent about their businesses with potential landlords, even writing the nature of their enterprise into the lease.

n most states where marijuana is legal, the license to operate a cannabis business is tied to the real estate where it’s located, making it critical for companies to maintain good relationships with their landlords. “Being evicted is a death sentence for a cannabis business,” said Cara Thornton, a partner with Denver-based legal firm Fortis Law Partners. “You have a customer base, you have your facilities and the tenant improvements you’ve made. You can’t just resell everything on Craigslist or eBay.” The good news is that cannabis businesses are treated like any other company that enters into a lease agreement with a property owner, and landlords can’t evict them if they comply

with the state’s marijuana laws and have upheld the terms of the lease. Mainstream retailers’ rent often is based on a percentage of sales, but that formula does not work for cannabis businesses because landlords can't accept a percentage of sales from the marijuana business, Thornton said. Protections that should be written into a lease include a provision that if the tenant complies with state and local laws, there is no basis for eviction. Cannabis companies should be transparent with potential landlords about the type of business they will be operating on the premises. A lease should include language that provides a tenant an option to terminate the lease if a business license is revoked or not renewed, Thornton said.

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Marijuana businesses are treated like mainstream companies when it comes to leasing property. Those that comply with state laws governing the cannabis industry and abide by the terms of their leases cannot be evicted. Even so, there are measures those companies should take to ensure they’re protected, including: • Maintain good communication with the landlord and pay rent on time. • Keep your cannabis business license current and in good standing. • Hire a good real estate attorney to review your lease and make sure you have the opportunity to renew.

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Avoiding

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“The more detail you have, the better off you’re going to be and the better protected a cannabis business will be,” she said.

“The main thing is to pay your rent. Failure to pay is the No. 1 reason businesses get evicted.” - Cara Thornton

PLUG AND PLAY Cultivators must ensure there’s enough electricity to power their grow operations—or, if there isn’t, ensure they can get it. Other things to watch out for include finding a location that doesn’t have vagrants and other people loitering nearby who could adversely impact the license. “A lot of cannabis businesses are in industrial or commercial areas where homeless encampments are encroaching, and it’s causing issues,” Thornton said. “If the landlord doesn’t keep the area free of that, then they’re breaching that lease. People smoking weed outside a cannabis business can cause issues for its license, while a regular retail shop isn’t going to

get shut down if that occurs.” But even if the cannabis company is doing everything correctly, there are still

some landlords who will try to throw them out—whether it’s technically an eviction or not.

PRICE GOUGING Ryan George, founder of the Sacramento, California-based marijuana and hemp real estate marketplace 420 Property, cites a case where the landlord was happy to lease her old, dilapidated warehouse to a cannabis business for five years for fair market value of a non-MJ company. The landlord wasn’t aware that many property owners charge much more to lease warehouse space to cannabis companies, so when the renewal came due, she performed a market study and found that the going rate was much higher. The landlord ultimately gave the company notice to move out and listed the property for lease at a higher rate, George said. Retailers and cultivators invest a significant amount of money in tenant improvements—sometimes more than $1 million. At minimum, they should have language in their lease that provides the option to renew.

“If you’re leasing a spot, and you’re only five years along and the landlord says you have to get out, you’re out all those tenant improvements,” George said. He also said some greedy landlords know they have one of the few places to rent in a particular area and will charge above-market price for the space. “I’ve seen a 2,000-square-foot distribution facility go for $10,000 to $15,000 a month; it’s astronomical,” he said. “If there are only going to be 10 retail licenses available in a given area, and there are 12 potential locations, the companies will fight over those locations to see who can get the best one.”

CHANGING OWNERSHIP If the owner of a cannabis company decides to sell the business and transfer the license, he must get landlord approval so the new operator can use the space.

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Avoiding

Eviction

Unlike traditional commercial real estate, landlords cannot wander unescorted through cultivation sites. Photo by Mark Blinch

Joe Caltabiano, CEO and director at Choice Consolidation Corp., said the best thing cannabis companies can do to avoid issues with their landlords is to hire a competent real estate attorney. “People in cannabis try to do things in-house or have a friend do it,” he said. “Surround yourself with professionals that understand all the nuances as they relate to real estate.” It’s also important to communicate regularly with your landlord—especially if things aren’t going well. Landlords generally don’t want to evict tenants, because it costs them time and money in legal fees, Caltabiano said. “Most are very willing to work with tenants if there is constant dialogue and some ability to pay,” he said. “What frustrates a landlord is someone not willing to pay their rent and then pull up in a Range Rover and say they don’t have the money.” Even if a landlord sells the property, the tenants cannot be evicted, said Rob Sechrist, president of Newport Beach, California-based Pelorus Equity Group,

Tom Downey

which provides financing to cannabis companies. “You can’t evict a tenant unless he breaks the terms of that lease for No. 1, not making the payment, or No. 2, not being compliant in the covenants of the lease,” Sechrist said. “If the tenant loses the license with the state cannabis board, that is an immediate breaking of the lease and we can evict them.”

FEWER PROTECTIONS While cannabis businesses must be treated like any other tenant, they don’t

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have the full protections that mainstream businesses enjoy because of the industry’s federally illegal status, said Tom Downey, a regulatory attorney and shareholder at Denver law firm Ireland Stapleton. “It’s the same as any other business,” Downey said. “As long as there is a legalized marijuana structure in the state, they don’t treat marijuana differently than any other business.” Landlords face their own set of challenges when leasing to marijuana businesses. First, because marijuana is so highly regulated, building owners cannot just show up at a cannabis company to inspect the premises. They first must present identification and get buzzed into the sales area. They are not permitted behind the counter and, unless they have authority from the state, they can’t wander unescorted where the plants are grown, Downey said. “Normally, a landlord can go on the premises and make sure everything is OK,” he said. “With a cannabis tenant, you have to make an appointment and be escorted around.”

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BestPracticesInRetail | Solomon Israel

Ceres Natural Remedies dispensary in Vermont, acquired by Slang Worldwide as part of its deal to buy High Fidelity. Courtesy Photo

Exit Here How to sell your marijuana retail store without selling yourself short

hether it’s a single-store deal or the sale of a multiple-outlet chain, successfully navigating the acquisition of your cannabis retail business takes stamina, foresight and emotional intelligence. “If you’re going to be building a business, you need to understand exit strategy as a concept,” said Matt Walstatter, who founded Pure Green, a medical and recreational marijuana store, with his wife, Meghan Walstatter. The couple later sold the business in Portland, Oregon, in a deal that closed in early 2019. Walstatter is one of several cannabis retail owners and leaders who shared best practices for those seeking an acquisition.

Motivations for Selling Marijuana store owners don’t just sell their businesses to cash out, although that’s certainly a motivation for some.

For the Walstatters, selling Pure Green to Vancouver, British Columbia-based vertically integrated cannabis company C21 Investments made sense in a crowded local retail environment. The couple had considered opening more stores but ultimately decided against it. Selling Pure Green allowed the couple to pay off Pure Green’s outstanding debt and bills. “Then we paid ourselves back for the investment that we made,” Matt Walstatter said. Some of the profits went into Siren Cannabis, the Walstatters’ separate cultivation business. In Vermont, Shayne Lynn realized that his vertically integrated cannabis business, High Fidelity, which operated four dispensaries and two cultivation sites, needed more fundraising capacity to prepare for the state’s pending recreational market. The company’s acquisition

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Some marijuana store owners end their retail journey by selling the business to a bigger company. Being acquired can be financially rewarding, but the process is also fraught with challenges and risks, not to mention an intimidating amount of paperwork and sometimes-grueling negotiations. Cannabis business executives and attorneys who have successfully navigated the choppy waters of acquisitions recommend: • Understanding your motivations for selling, which might go beyond simply making money. • Taking steps to make your business acquisition-friendly and considering post-acquisition opportunities to stay engaged in the acquired company. • Hiring a cannabis-focused business lawyer who understands the intricacies of M&A. Then, acting reasonably during negotiations. • Putting yourself in the shoes of staff members who might be worried about what the acquisition means for them. • Appreciating the emotional toll of selling the business you built.

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BestPracticesInRetail | Solomon Israel Legal Considerations for Selling a Retail Business Griffen Thorne is a Los Angeles-based attorney with the law firm Harris Bricken. He has experience representing both buyers and sellers in cannabis M&A transactions, including retail acquisitions. Legal fees for an acquisition deal generally run into the Griffen Thorne tens of thousands of dollars, Thorne advised, with the cost increasing for more complicated deals. Lawyers in major urban areas will generally cost more, he added.

Retail chain Friendly Stranger Holdings in Ontario, Canada, was acquired by Fire & Flower, a larger national chain. Courtesy Photo

by Toronto-based cannabis consumer packaged goods company Slang Worldwide closed in August. “That’s where a publicly traded company like Slang (is) great. They have that experience, they can go out into the marketplace, and they can raise that money,” Lynn said. He also felt a responsibility to High Fidelity’s early Shayne Lynn investors. “I had shareholders that were really patient, but there did come a time—probably during the pandemic—(when) it was like, ‘Wow, I’ve had these people’s money for a long time.’”

Building an Acquisition-friendly Business In Ontario, Canada, multistore operator Friendly Stranger Holdings was built for sustainability, said former President James Jesty, who helped shepherd the company through its acquisition by cannabis retailer Fire & Flower in late 2020. Jesty said his philosophy was focusing on “creating a great guest experience” and building a successful business. “If it gets acquired, great; somebody’s going to see the value in that. Fire & Flower saw the value in the business we had built and (in) our customer base,” he said.

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Sellers are free to forgo a lawyer, but Thorne recommended enlisting a cannabis-specific attorney who’s familiar with local regulations. “The buyer’s going to have a lawyer,” he said. “They’re going to put together a purchase agreement and send it to the seller. And if the seller doesn’t know what they’re reading—or doesn’t know some of the finer points or dynamics in an M&A deal—they’re going to miss out on opportunities to negotiate.” LOOKING UNDER THE HOOD Thorne compared buying a cannabis business to buying a used car: The buyer will want to look under the hood for any signs of trouble. Sellers should be prepared to respond to due-diligence questions and disclose financial records or risk the buyer walking away. If your store has problems—unpaid taxes or pending lawsuits, for example—Thorne said it’s in your best interest to disclose them upfront. “You might have to accept a haircut on the purchase price or some other part of the deal, but that’s much better than spending three years in court and getting hit with a punitive-damages award.” Thorne advised against rushing a deal, especially if it’s being done to hide something. But overnegotiating brings its own problems, he said, by drawing out the process and adding to the cost of legal fees. “At the beginning of a negotiation, sure, just shoot for the moon,” Thorne said. “But after a while, one side will end up putting (a contentious) clause in, the other side takes it out, the other side puts it back in. … There’s only so long people are going to want to deal with that” before scrapping the deal entirely. – Solomon Israel

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BestPracticesInRetail | Solomon Israel In the context of the Ontario cannabis market, Friendly Stranger’s real estate strategy also paid off. The acquisition provided Fire & Flower with retail locations that were already open along with promising future locations.

Showing Your Work Pure Green co-founder Matt Walstatter advises would-be sellers to focus on professional-level bookkeeping from the outset. “If you can’t show your financials for the life of your business, you can’t get bought,” he said. Lynn said High Fidelity’s acquisition was simplified because the company’s investor notes were all structured in the same, straightforward way. “We didn’t deviate from those notes that we put out,” he said. “They were the same for everybody.”

Going Steady Working through an acquisition can be “kind of like dating,” Lynn said. “It takes a while to go through all those conversations. Then you bring in the lawyers, of course, and they bring up all the things that you don’t ask your date … and you start having those hard conversations.” Lynn observed that contentious aspects of a negotiation can test the relationship between a business and its would-be buyer. But he found success by “maintaining a positive rapport throughout the process, even when the lawyers were fighting with one another.” “We’d step back and be like, ‘Let them fight. We’re still friends, and (we) want to be business partners.’” Matt Walstatter recommends finding at least one adviser who’s sold a company and can serve as a sounding board throughout the process.

Cash, Stock and Beyond It’s also worth carefully considering how to be compensated for the acquisition, Walstatter added. “If you

The former Pure Green cannabis store in Portland, Oregon, was sold to a larger company. Courtesy Photo

are taking a significant amount of stock, you really need to be sure about this company,” he said. Stock might have more potential upside than cash, but it can also lose value rapidly and leave the seller empty-handed. Walstatter reminded would-be sellers that cash or shares aren’t the only ways to get paid. For example, he negotiated a one-year consulting contract with C21, and Meghan Walstatter received a yearlong employment contract that paid her a salary in line with the responsibility of a district manager overseeing multiple stores. “I encourage people to be creative in thinking about how you structure those transactions,” Walstatter said.

Reasonable Valuations Former Friendly Stranger President Jesty recommends sellers set a reasonable value on their business. He added that Ontario business owners are still asking for “really big dollars” for their retail stores. “If you’re at the corner of Main and Main, and you’ve got a fully built store, maybe you’ve got a bit more of a price (that) you can ask” for, he said. “But I

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James Jesty

would say, if I was looking at it today, I would love to cover my costs and maybe make a bit of money. You’re not retiring on it anymore.”

Telling Your Staff Generally speaking, a retailer’s frontline staff won’t be aware of an acquisition until it’s publicly announced. It’s important for sellers to be prepared for their reactions. Jesty counsels “overcommunicating” and being “clear and concise” about what the sale means for employees. Have answers from the acquiring entity ready to go, he advised. Matt Walstatter said transitions such as an acquisition are likely to create anxiety, and he emphasized the need for honesty and accessibility. “Once we knew what was going to happen, we got everyone together,

BestPracticesInRetail | Solomon Israel we told them (about the acquisition), we told them how it would potentially affect them,” he explained. “We gave them all the information that we could … and then we made ourselves available individually for anyone who wanted to talk to us about it.” Lynn said he prioritized maintaining High Fidelity employees’ benefits and pay as he negotiated the deal with Slang Worldwide. When the deal was announced, he said, workers were particularly concerned about their benefits. Beyond keeping their jobs, Lynn said that High Fidelity employees potentially have more opportunities for career advancement after the acquisition by Slang Worldwide.

Post-acquisition Opportunities Selling a business doesn’t mean that the seller can’t stay involved, as Lynn’s experience shows. He is now president of Slang Vermont and sits on Slang Worldwide’s board of directors. “I’m looking forward to that partnership and building something together in the end that’s bigger than what (High Fidelity) could have done alone.” Aside from a job for Meghan and a consulting contract for Matt, the Walstatters negotiated another opportunity when they sold Pure Green to C21: The store was supposed to buy a minimum amount of flower from their Siren cultivation business every month, as were any other stores C21 opened in Oregon. Unfortunately, said Walstatter, C21 ultimately changed its business model, never acquired any more stores in Oregon and ultimately closed the Pure Green store. “I would definitely caution people that if it’s a situation where you’re staying involved and continuing to work for the business—going to work for the other company, taking stock—then you really need to be mindful of who these people are,” Walstatter said.

Consumers, above, look at products at the former Pure Green store sold by Meghan and Matt Walstatter, below.

Letting Go Selling your business can take an emotional toll. For his part, Matt Walstatter compares Pure Green to having a child. “It’s just like being a parent: You raise your kid, and then you send them off into the world and hope that they call you once in a while,” he said. Walstatter still drives by the old Pure Green location, which he said has “a boarded-up window and a bunch of graffiti all over the building.” “It’s sad, because there was so much value in that brand, and it got squandered,” he said.

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Walstatter’s advice for coping with those emotions? “Get paid enough that you can just pay attention to that.” Having the business you founded get acquired can be “emotional, you definitely have attachment,” Lynn said. He said sellers should recognize that “‘I have to let go of that attachment. And there are going to be other things I can focus on, that I have to share this now.’” Lynn said some of the leaders of Slang Worldwide had been through mergers and acquisitions themselves, and they understood his emotional response. Now that the deal is done, he said, he feels better. “I think it’s better now that we’ve closed, actually. … I’m ready to move forward and start working on things versus looking at merger documents for half the day.” Solomon Israel is a reporter for MJBizDaily and MJBizMagazine. You can reach him at solomon.israel@ mjbizdaily.com.

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IndustryPlayers | New Hires & Promotions

Leandre Johns

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Flowhub Picks Former Uber General Manager as New COO

he power of personal contact can’t be undervalued. Just ask Leandre Johns, a former general manager at Uber who recently joined Flowhub as chief operations officer. Johns said a major reason he took a newly created post at the Denver-based cannabis retail software company was because he was able to meet face to face with Flowhub founder and CEO Kyle Sherman several times before accepting the job offer. Sherman had moved to Dallas, Johns’ hometown, a few months before a recruiter called him about Flowhub’s new COO post. Johns, who spent six years at Uber before briefly joining Metropolis, another transportationlogistics company, and then moving into investing and consulting, was curious about the opportunity to work in a new and emerging industry. But he also wanted to vet the company. “That gave me an opportunity to really sit down and get to know (Sherman) and for him to download to me a lot more about Flowhub—where they’re currently at, what the trajectory of the organization

CFO Trades One Brand in California for Another Glass House Brands, a vertically integrated cannabis company based in California, announced that Mark Vendetti has been appointed chief financial officer. Vendetti replaced Derrek Higgins, whose last day with the company was Sept. 30. Before joining Glass House Group, Vendetti was the chief financial officer for Canndescent, a producer

is, what opportunities are there for other growth in the industry, and how I might step in and really be effective,” Johns said. “That really was different, just having that access to the CEO. That definitely helped build that relationship between us and get a sense of trust between us.” One difference between working for Uber and Flowhub is that Uber had far fewer competitors than Flowhub, Johns said, and it’s also challenging to learn the universe of companies that Flowhub works with. “What I’m trying to get my head around is all the players in the industry, how they connect, how we can help each other and who are those that we’re really going to be more competitive with,” he said. One of Johns’ goals for his new job is fostering internal leadership. “I consider myself a leader,” he said. “I want to be able to distill some of those leadership principles down to folks who are going to be leaders. … I want to make sure that we’ve built that kind of culture to bring up leaders.”

of California cannabis, from 2019 to 2021. Vendetti also has worked for well-known consumer companies such as Abercrombie & Fitch, Mattel, Procter & Gamble and XM Satellite Radio. He has 30-plus years of finance and accounting experience, with a focus on strategy development, M&A and due diligence, cash flow and liquidity management, dashboard implementation and analytics, organizational design and

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development as well as compliance and internal controls.

Texas Cannabis Firm Expanding Texas Original Compassionate Cultivation (TOCC) has a new chief financial officer, Steven Yoo, and a new director of product management, Meghan Clough. Yoo previously served as vice president of corporate development at Tilray and as a principal at Subversive

A look at some recent hiring moves in the marijuana industry Capital. Yoo entered the cannabis space in 2015, when he joined Privateer Holdings, an institutionally backed venture firm focusing on the cannabis space. Clough most recently served as senior product manager at Yeti and brings considerable experience in product strategy for outdoor apparel, outerwear and consumer sporting goods companies such as Black Diamond Equipment, G-Form, Thule and The North Face. TOCC also promoted William Doolan to vice president of product operations and Jason Sanders to director of cultivation. Doolan holds five utility and two design patents from the United States, Canada and the European Union. Sanders manages the company’s growing cultivation operations, optimizing plant development, research and production.

p Former Congressman Joins MSO Red White & Bloom Brands, a multistate cannabis operator and brand company with headquarters in Toronto, appointed former U.S. congressman Ryan Costello to its board of directors. Costello represented Pennsylvania’s 6th District in the House of Representatives from 2015 to 2019, serving on the

Committee on Energy & Commerce and the Veterans Affairs Committee as well as building a reputation as one of Congress’ most bipartisan members. Before Congress, Costello was an attorney in private practice, representing clients on regulatory compliance and permit approvals involving government agencies, real estate acquisitions, financing and project approvals; he also served as counsel for various agencies. Currently, Costello is a consultant who advises companies and investors on public policy and strategic objectives including health care, energy, environmental, technological and transportation matters.

Flower One Intercepts New CFO From Las Vegas Raiders Flower One Holdings, a leading cannabis cultivator and producer in

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IndustryPlayers | New Hires & Promotions Nevada, hired Araxie Grant as chief financial officer. Grant was most recently controller for the Las Vegas Raiders of the NFL. She also has served as chief financial officer to the Arena Football League and was previously a key financial executive at Las Vegas Sands Corp., where she spent seven years building the company’s finance department. Grant is a certified public accountant.

cannabis expertise by serving in several cannabis industry positions such as educator and founder of Benevolent Roots Consulting.

Chalice Promotes Cultivation Executive to COO Chalice Brands, a vertically integrated business in Oregon, promoted Meghan Miller to chief operating officer. Miller had been chief cultivation and cannabis community officer since February 2021. Before beginning her work with Chalice Brands in 2019, Miller honed her

p Growing Ancillary Firm Taps Veteran CEO for Board GrowGeneration Corp., a large chain of specialty hydroponic and organic

garden centers, announced that Eula Adams has been elected to its board of directors. Adams served most recently as CEO of Neuromonics, a global medical device company providing stand-alone and cloud-based software and hardware solutions for the treatment of tinnitus. Adams previously served as president and chief operating officer at Xcore Corp., a computer hardware design, assembly and distribution company. He also was senior vice president of Sun MicroSystems, chief operating officer of Pay By Touch and Western Union as well as president of numerous divisions of First Data, now part of Fiserv. Earlier in his career, Adams spent 19 years with Deloitte in the Atlanta area and in New York City, where he was an audit partner.

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CPG brands and pharmaceuticals in its move. Before joining Irvine-based Medterra, Reeder was Pfizer’s global wellness lead of consumer health care. He started his career in product development and brand management at Procter & Gamble.

Ontario Cannabis Company Adds VanderMarel to Board p Medterra Elevates Pfizer, P&G Alum to CEO California CBD maker Medterra elevated its managing director for international operations to CEO. Gregory Reeder replaces founding CEO Jay Hartenbach, who will remain chair of the board and transition to chief innovation officer. The company noted Reeder’s experience with major

Eve & Co., an Ontario-based license holder, appointed Canadian cannabis industry veteran Jeannette VanderMarel to the board of directors. VanderMarel is the co-founder and president of cannabis company Good & Green. Previously, she co-founded The Green Organic Dutchman, an early Health Canada-licensed producer of medical marijuana.

VanderMarel was a registered nurse and a certified nurse in critical-care pediatrics and previously served as chair of the Family Advisory Council at McMaster Children’s Hospital in Hamilton, Ontario. VanderMarel replaces Yasir Naqvi on the board of directors. Naqvi resigned after being elected as a member of parliament for Ottawa Centre in Canada’s recent federal election. The board also appointed Kim Arnel as interim chief financial officer to replace Rory Taylor. Arnel previously served as the company’s controller and has nearly 20 years of experience in senior financial roles in the agricultural and greenhouse industries. The company also welcomed David Hackett as financial consultant. Hackett brings more than 25 years

IndustryPlayers | New Hires & Promotions of public company experience, most recently with 48North Cannabis Corp., a vertically integrated marijuana company in Canada.

p OTC Health Care Group Taps CBD Executive A lobbying and advocacy group that represents over-the-counter drug

makers selected an executive from California CBD company CV Sciences to lead its cross-functional dietary supplements team. Duffy MacKay, CV Sciences’ senior vice president, will join the executive team of the Consumer Healthcare Products Association, a Washington DC-based industry group that dates to 1881. The association represents consumer health care companies that make over-the-counter medicines, dietary supplements and consumer medical devices.

Vertosa Science Advisory Board. A distinguished professor at the Department of Food Science at the University of Massachusetts, Amherst, McClements studies food and agriculture science. He holds 12 patents, has published more than 1,100 scientific articles in peer-reviewed journals and has written a few textbooks on the science of emulsions and nanoemulsions and their application for incorporating bioactive ingredients into foods.

Vertosa Gets Emulsion Pioneer for New Science Board

Vicente Sederberg Bolsters Michigan Presence

Vertosa, an Oakland, Californiabased business that creates active ingredients for infused products, appointed David Julian McClements as founding member of the

Looking to expand its offerings in Michigan, national cannabis law firm Vicente Sederberg tapped local cannabis attorney Travis Copenhaver as a partner. Copenhaver focuses

94 MJBizMagazine | November-December 2021

on cannabis business licensing, intellectual property and regulatory compliance. He advises new and existing medical and adult-use marijuana companies on initiating, developing and expanding their presence in the Michigan cannabis market. He also provides consultation on brand development and trademark applications, maintenance and enforcement. Copenhaver is an inaugural member of the Cannabis Law Section of the State Bar of Michigan. He entered the cannabis law space in 2015, when he began working with a key author of the Michigan Medical Marihuana Facilities Licensing Act. He later served as a member of the Michigan Marijuana Regulatory Agency’s Stakeholder Workgroup for Special Licenses.

p MJ Marketing Agency Appoints Indepdent Director to Board Petalfast, a sales and marketing agency for cannabis brands, appointed Jennifer Dooley to its board of directors. She is the company’s first independent director.

Previously, Dooley served as chief strategy officer for Chicago-based Green Thumb Industries, a leading national cannabis consumer packaged goods company, where she focused on brand identity, brand growth and new markets. Dooley also led Green Thumb’s strategic business development, investor relations, communications, marketing and information technology functions. Before Green Thumb, Dooley led strategic brand development and innovation at Storck USA, a top-10 global confectioner known for brands such as Werther’s Original, Toffifay and Riesen. Hired or promoted someone for a senior-level position? Send a news release or general information to Omar Sacirbey at omar.sacirbey@ mjbizdaily.com.

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SeedtoCEO | Sound Bites from the MJBiz Podcast

SEED TO CEO

veryone wants to get in on the cannabis market. The new podcast “Seed to CEO” gives marijuana entrepreneurs an edge. Each week, MJBiz CEO Chris Walsh interviews a cannabis executive to learn the stories behind their successes and failures. To hear from those who have been there and done that, visit mjbizdaily.com/podcast or listen to “Seed to CEO” wherever you get your podcasts.

Tune In Today!

These “Seed to CEO” podcast guests answered:

What can the cannabis industry teach mainstream businesses?

DALE SKY JONES

BERNER

ALBERT GUTIERREZ

Executive chancellor, Oaksterdam University Oakland, California

Co-founder and CEO, Cookies San Francisco Bay Area

CEO, MedPharm Holdings Denver

I think the No. 1 thing is how to adapt to change. The cannabis industry is constantly forced to adapt, and I think that’s something we can teach every other industry. You have to learn how to move when that change comes. That’s what I’ve learned from the cannabis industry: It’s never going to be the same; things are going to change all the time.

We all cooperate and work together—but we’re also each other’s competition. That’s one of the biggest things we can learn … and take to the mainstream world. A lot of times everybody’s trying to get ahead of the next guy and knock them down. The cannabis industry was built on pioneers coming together to create this industry and move it forward. And the only way (to do that) was really working together. Even though we have our separate companies, even though we all work in different ways, we all work together. I think that’s going to be the biggest thing that the mainstream world can learn from us.

Cannabis makes everything a little bit better. When you’re bringing cannabis into your (business) practice, you’re interfacing with the cannabis industry, you’re part of a compassionate industry or organized religion—I consider that a compassionate industry—there are ways to make it better. Even if you’re an otherwise-lawabiding citizen, cannabis just might make it a little bit better.

“Even if you’re an otherwise-lawabiding citizen, cannabis just might make it a little bit better.” – Dale Sky Jones

Comments have been edited for length and clarity. 98 MJBizMagazine | November-December 2021

MJBizDaily Buyers Guide Cannabis Greenhouse Components

Buyer’sGuide

A Tailored Growing Experience Modular, easily assembled and designed to last, Wachsen Pro’s new Rolling Benches are here to raise the industry’s standards Consider these optional add-ons to fully optimize your Wachsen Rolling Bench:

Wachsen’s Trellis Supports

ince 2018, when Hydrotek Hydroponic launched its Wachsen Pro line, professional growers took notice of the then, new, product line and gave them a fair chance. They were pleased. Now, in 2021, Hydrotek Hydroponics has unveiled a new rolling bench line of products and accessories that is as tough, durable, and smartly engineered as their cloning carts, drying racks, and bud sorters. While certainly not the first rolling bench on the market, the Wachsen Pro Rolling Bench could be shaping up to be one of the best on the market.

Wachsen’s Rolling Benches

operation. Consider these features that are available with each and every Wachsen Pro Rolling Bench: • • •

Adjustable height Tilt-proof design Lockable, reinforced nylon fiber feet

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10 inches of travel span on either side (20 inches total) All hardware made of SS304 Stainless Steel Corners made of heavy duty polypropylene for extra durability

Wachsen Pro’s Rolling Benches offer a tailored growing experience. Like all of Wachsen’s quality product, these benches are designed with the needs of the professional grower in mind. These built-to-last, modular rolling benches are customizable to fit easily into any sized

Wachsen rolling benches can be assembled more quickly and with more ease than

grow room. Each bench is extendable and can accommodate various add-ons to make

their competitor’s rolling benches. With a handful of common tools, and no

them uniquely, and seamlessly fit into your operation.

specialized labor required, these benches can be out of the box and in use in little time. These benches help you to utilize your available square footage more profitably. They are easily installed and maintained, helping to keep labor costs down, because we know that your time is just as valuable as your crops. Reduce the cost per square foot of your operation with these extremely user-friendly benches.

Wachsen rolling benches come in two convenient sizes that will fit perfectly into your grow spaces. Available in 4 foot and 5 foot widths, they are ideal for almost any growing environment. Whether you just need one, or a whole array, there is a Wachsen rolling bench made for your

43 MJBiz Magazine | August 2021

• •

Wachsen manufactures trellis supports to bolster your high value crops growing on their benches. No need to stake each individual plant and no need for concern that your plant will not be able to grow to its full potential. Like the rolling benches, there are several sizes available, sold separately, so that you can customize your setup. Wachsen’s trellis supports install easily onto any of their rolling benches. They will help keep your crops growing upright and strong. Available with 4’ or 5’ horizontal posts that attach to the upright trellis support posts. Keep those heavy, valuable buds up high. Optional 6.5’posts are available for additional strength and support. Mesh sold separately.

Wachsen’s Plastic Trays Wachsen also manufactures trays that are designed to fit like a glove into their rolling benches. Made from non-BPA high impact ABS plastics, these optional, modular trays are available in a full range of sizes and drainage options. At 6.5 feet long and widths ranging from 3 to 6 feet, there is a tray that will fit your bench. Wachsen manufactures trays that interlock, with left and right ends and multiple middle sections. No matter the size of your table, or what crop you grow, Wachsen has tray options to fit any bench or table setup.

MJBizDaily Buyers Guide Cannabis Greenhouse Components

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INTRODUCTION Building a greenhouse and choosing the components that will aid in efficiently producing a high-quality cannabis crop is more complicated than building a house and picking out the furniture that goes inside. Developing an ideal environment for high-value cannabis production can be full of obstacles, from zoning and building approval to ensuring there is enough power and quality water on the building site, not to mention the actual construction process and evaluating the environmental controls and growing systems that are needed.

Laura Drotleff MJBizDaily

But all these considerations are important and getting it right the first time can mean savings down the road when it’s time to scale your business. That’s why MJBizDaily has developed the Cannabis Greenhouse Components Buyers Guide. We want to provide greenhouse producers with all the considerations needed for building and outfitting a greenhouse, floor to roof and everything in between. In addition to a list of greenhouse structure and components suppliers, greenhouse owners and facilities managers will find smart content from industry experts covering: • Building a profitable greenhouse. • Designing an irrigation system. • Choosing the ideal benching system. • Greenhouse automation. All of this is accompanied by checklists and a glossary to help sort out the terms and considerations that will optimize the growing environment. We appreciate the efforts of contributor Georgie Smith for her work on this guide. We hope you find this content helpful in aiding the decisions you need to make in your next building project, and we welcome any feedback at laura.drotleff@hempindustrydaily.com.

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HOW TO DESIGN AND BUILD A PROFITABLE CANNABIS GREENHOUSE There’s no such thing as being too prepared when it comes to designing and building out a cannabis greenhouse facility. Once up and running, a profitable cannabis greenhouse facility successfully balances operational costs with a high-quality, uniform harvest. It’s common to undermine success from the start of the project if detail isn’t top of mind through each step, from design to build-out, and selecting operational components such as benching systems and environmental controls. Greenhouse cannabis producers should start with their business goals and think backwards. What do they want their brand to represent in the marketplace? “It comes down to understanding your craft and what you’re going for. Knowing what you want will increase or decrease what you’re going to spend on that greenhouse,” said Hamilton Nelson, a veteran cannabis producer and the sales and operation manager at Square One Starts, a hemp young plants provider in Aurora, Oregon. At an estimated $35 to $50 per square foot in upfront costs, greenhouse cannabis producers can save significant money by spending the time on a well thought-out and executed plan. The last thing a grower wants to do is retrofit their greenhouse after they built it because it doesn’t work well for growing cannabis.

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CHOOSING A GREENHOUSE STRUCTURE AND LOCATION Producers should start by asking what they want in a greenhouse, said Derek Smith, executive director of the Resource Innovation Institute, a non-profit organization working to promote efficiency in resource-intensive agricultural sectors like cannabis. Greenhouses can be built from many different materials. For example, polyethylene-covered hoop houses with roll-up sides are relatively inexpensive and straightforward compared to large glass or polycarbonate facilities using sophisticated environmental controls. “In other words, how much of a controlled environment is it? There’s a huge difference between a hoop house and a state-of-the-art, fully sealed, highly automated greenhouse that is, to some degree, operating like an indoor environment but with sunlight,” Smith said.

A cannabis greenhouse buyer’s checklist What to Know and What to Ask Before purchasing anything (including land) ask:

F How can labor costs be reduced through greenhouse design, workflow and choice of components?

F What are the goals of my cannabis business? Is quality or quantity more important?

F Does the builder have an engineer that specializes in greenhouses for cannabis growers, along with a proven track record?

F How much volume is needed to meet business goals? F How many plants will we grow in each greenhouse zone?

Ask cannabis greenhouse and component manufacturers:

F What are my plans to scale the business?

F Have they worked with cannabis growers?

F What will the company ultimately need for infrastructure?

F How long is the design and build process?

F How will we access needed electricity and water?

F What kind of information and support do they provide?

F What state and local zoning and permitting regulations will affect the proposed operation?

F What can be done in advance to avoid delays in the design and build process? F What information do they need from the beginning?

F What are the chances the site will not be approved and what is our contingency plan?

F Can their equipment be integrated with other systems in the greenhouse?

F Will my marijuana production license include deadlines to get the build completed?

Don’t be afraid to: F Get multiple quotes.

F What is the water quality at the site?

F Talk to fellow growers, especially in your chosen location.

F What are the light levels at the site? F What outside temperature extremes should be built into my plans?

F Visit manufacturers and operating greenhouses.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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Next, think about where the greenhouse is located. Climate and light levels can significantly influence construction materials and other greenhouse components. For instance, location can impact your heating and cooling systems and lighting needs, and ultimately determine fundamental requirements such as electricity, Smith said. Understanding total infrastructure needs can also help drive efficiency. “You’ve got to understand what your power needs are and then determine the right mix of energy that you can bring to the site,” Smith said. “You may need propane, natural gas or delivered fuels. You could set up a micro-grid and do on-site renewables in tandem with natural gas …but it all starts from knowing how much power you’re going to need.” Another crucial consideration is the water table and soil composition at the construction site, Nelson said. Install drainage before building if a site is located on top of a high water table or downhill from areas of significant run-off.

THE PERMITTING PROCESS Growers also need to think about the planning and permitting process, said Johnny Burgoon, solutions architect for the cannabis greenhouse division of Prospiant, a Cincinnati-based controlled-environment greenhouse solutions provider.

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Many states have time limits on their licenses, requiring growers to be in operation or at least show significant process, Burgoon said. West Virginia has a six-month requirement. “We’ve had people lose their license because they didn’t get up and running fast enough,” Burgoon said. Zoning is another complication most greenhouse operators don’t consider beforehand, Burgoon said. Local approval will depend on land-use regulations, which typically include buffering requirements or proximity to other public facilities, like a church or a school. The population density of an area can also restrict zoning for a greenhouse facility. Other local land-use regulations might include odor management, noise requirements, impact on traffic, signage and even the facility’s appearance, Burgoon said. This is above and beyond typical state licensing requirements for marijuana growers for requirements such as security. “Before you even get into the actual building permits and codes, zoning is the most important thing because that will let you know if you can even have it there or not,” Burgoon said. Marijuana growers need to understand that since marijuana production is governed under per-state manufacturing rules, not a federal agricultural rule like hemp, their greenhouse will be required to meet standard building codes. Not all greenhouse designs meet building requirements for things like snow load, wind or fire suppression, Burgoon said. However, hemp greenhouse facilities are typically exempt from needing building permits, providing more flexibility for hemp greenhouse facilities.

MJBizDaily Buyers Guide Cannabis Greenhouse Components

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Ideally, growers consult with him before they start anything else, Burgoon said. “Quite often, we get people that come through who don’t have all three necessities — they’ve got a license, but they don’t have a property and they don’t have funding,” Burgoon said. “It’s really smart on their part if they engage a design-build before they even have all three.”

MINIMIZING PROJECT DELAYS Expect about 12 to 16 months of designing and building time for a standard, non-expedited cannabis greenhouse project, Burgoon said. That time frame can increase significantly every time the plan changes and something has to be redesigned or engineered. Greenhouse operators typically follow one of two processes — a design-build or a design-bid-build, Burgoon said. In a design-build, they hire a single entity to “handle the project all the way through to fruition,” Burgoon said. In a design-bid-build, they hire an architect to design the facility and then send the plans out for bid from a general contractor. If speed-to-market is important, Burgoon strongly recommends going with the design-build process, which can deliver a project up to 30% faster than the design-bid-build process.

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“The earlier you can get a design-build contract in, the earlier you will get to market, get open, and get revenue coming in as fast as possible,” Burgoon said. This can be especially important for operators in a newly legal state, where first-to-market is an important brand strategy, according to Burgoon.

HIRE EXPERIENCED BUILDERS Regardless of the design-and-build process they choose, greenhouse cannabis growers should use a builder with cannabis greenhouse-building experience. Cannabis is a high-value crop with requirements that can be affected for better or worse during the building process, including: • Light deprivation and supplementation. • Strict temperature and humidity control. • Odor mitigation. • Security requirements. Whether it’s building the structure or installing the components inside the greenhouse, don’t use a general contractor who says, “yeah, I can figure this out,” said Michael Williamson, director of cultivation for vertical grow rack manufacturer Pipp Horticulture Inc. in Walker, Michigan. “This is a really big issue in the cannabis industry across the board,” Williamson said. “(Operators) buy a high-quality greenhouse and spend millions of dollars. And then the installation is just really done wrong and has to be redone. That costs more money.” Because builders with cannabis greenhouse experience are limited, Nelson recommends investing the resources to visit builders before hiring them.

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Because builders with cannabis greenhouse experience are limited, it's wise for growers to visit builders and greenhouse manufacturers before hiring them. Courtesy Photo

He also advises cannabis greenhouse growers to skip the “mega-store” providers and go directly to those who deal with cannabis greenhouses specifically. They understand the specific requirements of cannabis and have the components that work for growing it. “Not that you couldn’t grow amazing ornamentals in a cannabis greenhouse, but you know, cost-wise, it just doesn’t pan out the other way,” Nelson said.

SELECTING GREENHOUSE SYSTEMS The systems installed in the cannabis greenhouse can be just as important as the structure itself. Ideally, the structure and the components in it are designed to work in tandem, but deciding which greenhouse components to buy is often determined by the operation’s budget, Burgoon said. “We typically recommend everyone have everything put in their facility. But they may not have the budget for that,” Burgoon said. “It’s like a car. (You start) buying all the bells and whistles, but it’s out of your price range, so you start backing off.” There are obvious necessities in a cannabis greenhouse facility, like blackout curtains and supplemental lighting, but operators should also consider several other factors. Almost everyone ends up coming back for some level of dehumidification if they didn’t initially install it, Burgoon said. “The biggest battle everyone fights with this product is powdery mildew,” Burgoon said. “Keeping humidity levels at bay (is critical) unless you live out West, where it’s more arid.”

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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He pointed out that 60% of the North American coastline has high ambient humidity. Another add-on that manufacturers often get calls for is odor sanitization, which also has to do with powdery mildew, Burgoon said, although in this case it’s using an odor sanitization process to control powdery mildew outbreaks when they do happen. Nelson recommends taking a close look at the insect pressure based on the operation’s location. That can determine whether a producer needs to invest in screening off the equipment, vents, and structure to prevent insect infestation. Next come systems like benching, irrigation and environmental controls that might seem like a significant upfront cost, but that can make a huge difference in labor costs once the greenhouse is up and running. “We have a lot of people who choose to hand water, which is just another useless labor cost,” Burgoon said. “A little bit of investment up front can save you long-term in the labor pool.” Plan to build enough space and utilities to power machinery and equipment that will reduce labor costs, Nelson said.

PLANNING FOR SCALE AND EFFICIENCY WITH PROPER INFRASTRUCTURE Cannabis producers need to design and build greenhouse facilities with future expansion in mind, Nelson said “Everybody should be thinking on the expansion scale, even though you may never get there. Build it with that in mind,” he said. Developing infrastructure at the beginning of a project can end up saving significant costs in the long run, Burgoon said. Some states, like Ohio, are limiting growers to an initial 30,000-square-foot facility, with the potential to build additional greenhouses. Understand the final project goal. Consider things like how much power the site will eventually need or whether the operation will eventually need more water pressure — and therefore bigger pipes. Many clients underestimate how much infrastructure they will need to run the facility, which ends up costing them as they scale, Burgoon said. “You want to understand your final plan and really use your money wisely,” Burgoon said. “Why develop a property twice?”

11 Copyright 2021, MJBizDaily, a division of Anne Holland Ventures Inc. You may NOT copy this report, or make public the data and facts contained herein, in part or in whole. For more copies or editorial permissions, contact CustomerService@MJBizDaily.com or call 720.213.5992 ext. 1.

MJBizDaily Buyers Guide Cannabis Greenhouse Components

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AUTOMATING THE CANNABIS GREENHOUSE Environmental controls are a must-have for efficient greenhouse cannabis production. But it’s not just efficiency for efficiency’s sake. Automating the cannabis greenhouse is about understanding and putting the crop’s needs first, said Henry Vangameren, regional marketing manager for the Americas at Vineland Station, Ontario-based Priva North America, a global provider of controlled environmental agriculture (CEA) solutions. “You have to approach automation from the plant’s perspective,” Vangameren said. “If you start with the greenhouse and build your way to the plant, the plant is never going to thrive. You have to start from the plant.” That means anticipating plant needs and integrating all systems in the greenhouse to work together toward that goal, Vangameren said. For instance, when the shades open or the lights come on, the plants will need irrigation and start to transpire. The HVAC system should automatically turn on, lowering the humidity before it has a chance to get too high and encourage disease. “Having integration, allowing all systems to talk to each other and anticipate what is going to happen to that plant before it happens, puts that plant in a perfect place to thrive,” Vangameren said. CEA enterprise software systems connect monitors, alarms and sensors with operational greenhouse equipment such as lighting, HVAC systems, fans and irrigation, allowing the grower to monitor and control the greenhouse from computer, tablet or smartphone. The software systems also collect data as they go, becoming “smarter” and better able to anticipate crop needs. Automation can be applied to every aspect of greenhouse management. Light, temperature, CO2, humidity, irrigation, fertigation and water conservation, energy efficiency and even labor management can be managed through the software.

THE CASE FOR AUTOMATION Growing cannabis in a greenhouse involves more variables than growing cannabis in an enclosed indoor environment, said Hamilton Nelson, sales and operation manager at hemp young plants provider Square One Starts in Aurora, Oregon. Natural light in a greenhouse varies at different times of the year due to outside weather conditions. That means growers “don’t have a perfect schedule all the time,” Nelson said. And greenhouses make factors such as CO2 enrichment more complicated. For example, open a roof vent and all the CO2 escapes. But that doesn’t mean automation isn’t worthwhile - it’s a matter of understanding cannabis needs in the greenhouse and dialing them in, Nelson said. Johnny Burgoon, solutions architect for the cannabis greenhouse division of Prospiant, a Cincinnati-based provider of controlled-environment greenhouse solutions, agrees. “At the end of the day, it’s a giant recipe. You’re trying to create the best environment for these plants,” Burgoon said.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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SCALING AUTOMATION A good greenhouse control system should scale with the operation, Vangaremen said. Scale could mean adding more greenhouses on the same property, or even controlling multistate facilities through the same software system. Greenhouse operators vetting environment control manufacturers should discuss how they envision scaling before they purchase a system. “The last thing (growers) want to do is invest in a costly system and then find they have to invest in another system because it can’t grow with them,” Vangaremen said.

ENERGY MANAGEMENT AND CROP CONSISTENCY Energy management plays a “huge part” in greenhouse control systems, Vangaremen said. Integrating all the different systems means less energy is needed to help plants thrive. For example, turning on the HVAC, opening vents and activating fans after the air becomes too humid may force those systems to work hard to bring the humidity back in range. But because an integrated, automated system takes care of this before it’s needed, less energy is used to achieve the same goal. “When systems aren’t working together, they are inefficient,” Vangaremen said. Automated systems can be set up to take advantage of site-specific savings, like turning on lights during non-peak electricity hours to save growers on their power bills. Another big benefit to greenhouse automation is crop consistency, Vangaremen said. A cannabis company building its brand aims for a consistent product that customers can depend on. “If the company cannot grow a consistent cannabis product, customers are not going to ask for that product anymore,” Vangaremen said. “How do you deliver on that? You need precision controls that work together and provide the best environment for that plant.”

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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Every time a grower changes their plan, more money must be spent on engineering and finding the right parts. Typically, that causes a project delay. Courtesy Photo

DESIGNING A GREENHOUSE IRRIGATION SYSTEM The biggest challenge to designing and installing an effective irrigation system in a cannabis greenhouse is settling on a plan. Growers need more than simply a “basic idea” before they begin the design process, said Kurt Becker, executive vice president at Dramm Corp., a commercial irrigation supplier in Manitowoc, Wisconsin. Even deciding to add 20% more plants changes everything in a drip irrigation system and can be the difference between a functioning system and one that doesn’t irrigate and fertigate uniformly or well. Cannabis greenhouse operators often use overhead boom irrigation for propagation and young seedlings, but the industry standard in cannabis is drip irrigation at the plant base for maturing plants. Drip irrigation helps avoid moist conditions that perpetuate mold and disease as the plants start to flower. It also conserves water and reduces fertilizer needs. “We encourage growers as they design (to) really think about how they plan to crop the facility early on in the process, really get that nailed down,” Becker said. Every time a grower changes their plan more money must be spent on engineering and finding the right parts. Typically, that causes a project delay, Becker said. Especially since the COVID-19 pandemic began, supply chain shortages have made it difficult to keep different sizes of PVC in stock. A changed crop plan can equal more time waiting on supplies. “Nobody who is putting a cannabis facility together wants delays,” Becker said. “Figure out what you’re doing up front; don’t change the design midway through.”

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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If growers do end up adding more plants after the design is installed, that can compromise the entire irrigation system. Becker said that when growers complain they have a pressure issue in a zone, the first thing he asks is, “Did you add plants?” Even though growers typically design their systems to handle more capacity, many exceed that once they are operating and, as a result, run into problems. “(Adding plants) impacts the drippers, the plumbing, the tanks, the pumps. It impacts everything that is touching your water, including the HVAC system that is now handling (more capacity),” Becker said.

THE IRRIGATION DESIGN PROCESS The first step in designing an irrigation system for a cannabis greenhouse is knowing the water source. Quite often, growers don’t think about what they will use for water until after they have bought property, Becker said. That can be a costly mistake. “Your water source is what delivers everything to your plants,” Becker said. “Every plant is touched by your water. Water should be a primary consideration.” Once a grower has a water sample, the design process moves into the filtration stage. With city water, chlorine typically needs to be removed. With surface water, there will need to be a process for removing particulates. After that, a grower should look at how to store enough water to accomplish all the irrigating needs—typically in an 8-hour period with the ability to refill the tank within 24 hours, Becker said. That means understanding how many plants a grower will have, how many are in a zone and what irrigation cycles are needed. With that information, the grower can size the right tank. Once the tank system is engineered, a grower can add in water treatment, such as ozone, to prevent pathogens from growing in the plumbing system. “Once you put water in your pipes, biofilm starts growing,” Becker said. “If you have a pythium outbreak, it will end up living in your pipes and reinfecting your plants.” From there, a grower pressurizes the system and plans for fertigation. Depending on what growers want to fertigate with and how often they want to change fertigation needs to different zones, growers must choose between a batch tank and an on-demand fertigation system. Finally, at that point, the design process moves into accommodating the plants in the room.

RECONSIDER REVERSE OSMOSIS Most cannabis growers believe they need to have a reverse osmosis (RO) system installed, but that is not the case for most of Becker’s clients. “Ninety-five percent of (cannabis growers) don’t really need RO, but 75% of them buy it,” Becker said. The push for RO came from fertilizer manufacturers who advised stripping out the ions in water so they would not bind to the fertilizer and interfere with delivery. But cannabis plants like most of the ions that are naturally in the water. Growers are finally starting to “get smart” and are asking fertilizer companies to make a custom mix that works with their water, according to Becker. “You don’t want to pay for a jug of fertilizer with water already in it. You want to buy a bag of water-soluble fertilizer,” Becker said.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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Plus, an RO system ends up discarding 40% to 50% of the water that comes into the facility, according to Becker. “Are you paying for water? Plus, you may not be allowed to throw that water away. The municipality may not want it, the state may not want it,” Becker said. “RO isn’t a quick, ‘Yeah we’ll get RO’ (decision). You have to think about it and go through the process.”

PLUMB FOR FUNCTION OVER BEAUTY Growers should look at ways they can conserve water and reduce their water needs, said Johnny Burgoon, solutions architect for the cannabis greenhouse division of Prospiant, a greenhouse provider in Cincinnati. Growers can collect the condensate off their HVAC system and use it, plus they can capture and treat water that has already gone through the system for reuse. Not only will that save on a grower’s water bill, but local municipalities often have restrictions on dumping wastewater. “If you can collect, retreat it and reuse it. You save on nutrients and on water consumption as well,” Burgoon said. Finally, the grower should make sure the plumber installs the irrigation system for function, not beauty, Becker said. That means, avoid elbows that allow a change of direction. Multiple elbows can end up reducing pressure; that can lead to failures of uniform water delivery, Burgoon said.

Cannabis growers don’t often think about water quality until after they have bought property, but that can be a costly mistake.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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Crowding plants on benches can sacrifice plant quality. Courtesy Photo

CHOOSING THE RIGHT BENCHING SYSTEM FOR A CANNABIS GREENHOUSE A successful greenhouse cannabis benching system balances maximizing space for the most plants possible with labor needs, good growing practices and a budget. Growers tend to focus on the operational impacts of the benching system while investors want to get as many plants in a facility as possible, said Michael Williamson, director of cultivation for Pipp Horticulture Inc., a manufacturer of mobile vertical grow racks in Walker, Michigan. But prioritizing quantity over quality could restrict space and increase labor. “Sometimes it’s worth it and sometimes it’s not,” Williamson said.

LABOR IS THE PRIMARY CONSIDERATION Labor, labor, labor is what Williamson preaches when it comes to choosing a benching system. Fixed costs like electricity might have some seasonality to them, but they’re predictable. Labor costs can come as an unwelcome surprise, he said.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

While running five 1-acre greenhouses, Williamson discovered that reducing any individual human task by just 5 seconds saved up to 27 hours of human labor to get the entire project done. That saved him about $500 in labor costs per project. He uses that anecdote to frame the conversation about why proper benching systems can have such an impact on the long-term operational costs. “How do you get equipment in? How do you do your tasks? You’re either going to grow more product to make more money, or you’re going to reduce labor,” Williamson said. “Ideally, you do both.” Hamilton Nelson, sales and operation manager at Square One Starts, in Aurora, Oregon, is a fan of the Dutch-style (palletized) benching systems in cannabis greenhouses because they reduce his need for labor. Instead of having to send employees out to lift and move every plant between different growing zones or to bring product to the headhouse, he moves tables. “You can’t just throw labor at it every time you have a task,” Nelson said. “For certain tasks that’s going to have to happen, like trimming. But you need to save money in your overhead for those specific tasks and reduce labor anywhere else you can.” Another place to consider labor cost is in the cleaning and sanitizing of your benches, Williamson said. Stationary benches and rolling benches that can’t be moved easily are hard to clean and sanitize underneath. As a result, employees will have to crawl or squat underneath the tables to get the task done. That’s hard on employees and reduces morale, Williamson said.

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Pros and cons of common cannabis benching systems Stationary Benches—Benches that are not designed to be moved. Pros: Inexpensive. Can be made from various materials and sized in different ways. Irrigation is easy to set up. Cons: Least efficient benching system as far as labor and space. Hard to clean and sanitize underneath. Rolling Benches—Benches with a fixed leg but the benchtops are supported on a rolling frame that can be rolled from side to side, creating a single, movable aisle. Pros: Saves aisle space, which allows more room for plants. Sturdy, not a lot of parts to break. Inexpensive. Cons: Requires employees to move plants to the headhouse or between zones. Hard to clean and sanitize underneath. Narrow aisles. Can’t be adjusted to have more than one aisle open simultaneously. Palletized Rolling Benches (aka Dutch trays)—A container benchtop system. Plants are held in trays that can be moved in both directions. Pros: Easy to rotate the crop within the greenhouse space or take to the headhouse. Saves labor and space. Easy to clean and sanitize underneath. Can use automated systems for moving, sanitizing and storing benchtops. Cons: More expensive, complicated system typically requiring automation and additional moving parts. Can be complicated to set up irrigation. Vertical Rack on Carriage System—Vertical racks installed on a carriage system allow moving the entire frame. Prevalent in indoor operations but also greenhouse systems with enclosed rooms. Pros: Uses vertical space. The carriage structure creates a movable aisle system, maximizing floor space, and can be opened for wide aisles. Racks can be easily adjusted to accommodate different sizes of plants. Easy to clean and sanitize. Cons: Expensive. Requires lighting since rows of plants are stacked.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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CONSIDER BENCH LENGTH AND HEIGHT Decide the best height and length for greenhouse benches before taking delivery. Removing benchtops to chop down legs because you chose the wrong height equals operational downtime, Williamson pointed out. Many cannabis growers are now starting to install shorter benches for mother plants, Williamson said. Because those plants are typically quite tall, having a lower bench height for them to sit on means fewer ladders needed and less chance of employee injury. Vertical racks based on pallet racking frames are nice for adjusting for plant height because rack heights can be self-adjusted to accommodate different sizes of plants. Williamson cautions against going for long benches, advising growers to choose benches no more than 40 to 65 feet in length. “I’ve had rolling benches as long as 120 feet. It was great in theory that they were so long, but from a labor standpoint, they weren’t great,” Williamson said. “Not only is it a long distance to travel, but it’s a big climate to control. You can see pretty big temperature swings depending on how well the greenhouse is set up between the back and the front of the row.”

TRELLISING AND IRRIGATION Don’t forget to consider trellising. Many generic horticultural benching systems aren’t built to accommodate the heavy-duty support cannabis requires. “Oftentimes, you’ll see very weak (trellising tubes) that aren’t well-braced. Over time, they start to flex in and get loose,” Williamson said. Irrigation is more complicated in automated benching systems, Williamson said. In non-cannabis horticulture, automated benching systems are typically used with overhead or misting watering systems. But cannabis growers often install drip irrigation to prevent disease. Since irrigation is usually installed per table, use quick disconnects to save labor when it comes time to rotate and move tables, Williamson said. It adds some time to the process but will still save labor in the end.

BENCH CONSTRUCTION AND INSTALLATION Bench construction is essential to consider. “You pay for what you get. Not all benches are the same. There’s a lot of qualitative differences,” Williamson said. He recommends going to a factory or visiting another operation using the benching system before you purchase it. The facilities manager often will have hands-on experience, advising on what worked and what needed to be adjusted or fixed, Williamson said. Installation is another place where new cannabis greenhouse operators make mistakes. He’s seen rolling benches installed incorrectly with sharp galvanized metal edging that ends up injuring employees. “It’s not uncommon to buy a high-quality product that gets installed improperly. It won’t function as designed,” Williamson said.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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PLANNING FOR SCALE The more expensive, automated palletized benching systems are costlier up-front than fixed rolling benches or standard bench systems. Still, the automation component is usually a one-time purchase that growers won’t need to buy again when it comes time to scale up, Williamson said. For instance, a grower can install an automated picker and stacker system in a palletized system that picks up a bench and brings it to the sanitation tank for cleaning and stacking for storage. If the operation expands, that system can usually accommodate more benches. By comparison, scaling up with stationary or non-palletized rolling benches is a “redundant expense” of more benches, offering minimal or no savings, Williamson said. Vertical racking on carriage systems are conducive to scaling up, Williamson said. If growers oversize their initial racking height in phase one of the project, they only need to add more horizontal beams and buy more trays when they get ready to expand. There’s no “messy construction, you don’t have to pull any permits,” Williamson said when it comes to scaling up a vertical racking system. “You can essentially phase and scale your project over a weekend versus months (spent) on contractor and biosecurity issues.”

Irrigation is more complicated in automated benching systems. Since drip irrigation is usually installed per table, use quick disconnects to save labor when it's time to rotate and move tables.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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UNDERSTANDING CANNABIS GREENHOUSES (AND EVERYTHING THAT GOES IN THEM) A glossary of common terms The language surrounding cannabis greenhouse operations is a mishmash of horticulture and growing terminology specific to cannabis, combined with names of the various greenhouse systems, equipment and control options. Cannabis greenhouse operators should understand the most common terminology and have a solid grasp of the concepts they will need to understand to successfully navigate design, purchase and build-out of a profitable cannabis greenhouse facility.

Airflow fans: Hanging circulation fans to facilitate air exchange. Not the same as exhaust fans. Airflow management: A system of managing airflow to prevent mold and mildew by reducing humidity and condensation.

Benching systems: Raised platforms that support cannabis plants. Different benching systems are used, including stationary benches, rolling benches, palletized rolling benches and vertical tray racks.

Boom irrigation system: A system used to uniformly and automatically provide overhead watering, reducing labor and water waste. Typically used on young cannabis plants and plugs, while maturing plants are often watered with drip irrigation to prevent disease.

Canopy area (or canopy space): The surface area used to produce mature plants, calculated by square feet, often used to permit licensed marijuana growing facilities.

Canopy management: A term for the techniques and considerations used to maximize the efficiency of cannabis grow space.

CO2 enrichment: Providing additional carbon dioxide in an enclosed greenhouse system to support cannabis plant growth.

CO2 generator: A piece of equipment that produces carbon dioxide, typically using natural gas or propane. It can be set to turn on and off automatically.

Dehumidification: A system of evacuating excess condensation inside a commercial greenhouse. May be accomplished through venting, heating and venting, using dehumidifier units or a heat pump to capture humidified air and exchange it with warm, dry air or a desiccant dehumidification system.

Desiccant dehumidification: Uses chemicals to absorb liquid and reduce humidity with the ability to reuse the heat from the regeneration process for additional heating. Diffused roof coverings: A roof covering that improves the light penetrating the crop and generates better and more even growth. It does so by diffusing the light, reducing excess heat and crop stress while eliminating shades caused by structural elements in the greenhouse. 21 Copyright 2021, MJBizDaily, a division of Anne Holland Ventures Inc. You may NOT copy this report, or make public the data and facts contained herein, in part or in whole. For more copies or editorial permissions, contact CustomerService@MJBizDaily.com or call 720.213.5992 ext. 1.

MJBizDaily Buyers Guide Cannabis Greenhouse Components

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Drip irrigation: An irrigation system that slowly drips water to cannabis plants. A low-pressure and lowvolume system can also deliver fertilizer (aka fertigation).

Environmental controls system: An automated system that controls all the growing processes in a greenhouse to maximize efficiency and standardize quality. Typically uses wireless sensors.

Exhaust fans: Fans that draw in cooler air through vents, louvers or doors. Evapotranspiration: Water movement and loss (aka transpiration) via evaporation of water at the leaf surface.

Fertigation: Delivery of nutrients through a watering system. Greenhouse glaze: The material used to cover a greenhouse that includes properties to diffuse direct sunlight, which promotes better growth. Materials may be single- or double-layer polyethylene film, corrugated polycarbonate, double-strength glass or multiwall polycarbonate. Headhouse: A section of a greenhouse facility that serves as a work center without sacrificing growing space. May act as storage, office, seeding and potting, harvest and shipping space. HPS: High-pressure sodium (HPS) lamps are high-intensity light bulbs that produce large amounts of light and considerable heat energy. They had been the industry standard for horticultural (and cannabis) lighting until the advent of LEDs. HVAC: Heating, ventilating and air conditioning. Should be engineered per greenhouse to accommodate the size, amounts of plants and temperature requirements depending on location and growing goals.

Insect screening: A system of screening to prevent insects from getting into a cannabis greenhouse facility. Screens might include vent screens or screening for equipment like HVAC systems or the greenhouse itself.

Insulated wall panel: Insulated wall panels are used to enclose grow rooms and provide a solid moistureresistant barrier and help prevent contamination from mold, pests and airborne pathogens.

LED: Light-emitting diode (LED) lights. More energy efficient at producing high intensity than HPS lamps. Used to provide supplemental lighting in a greenhouse.

Light deprivation greenhouse: A greenhouse set up to artificially control the amount of light cannabis plants receive. Typically done by manual or automatic shade covers.

Odor misting: High-pressure fogging techniques typically on automated controls that eliminate cannabis odors. May be required, depending on the location of a cannabis greenhouse operation.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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Palletized rolling benches (aka Dutch trays): Benches with tabletops that roll in both directions in a greenhouse, perpendicular and parallel to the headhouse. Palletized rolling benches allow the benches to double as the plant material handling system. Polyethylene: Common plastic used to cover many cannabis greenhouse structures. Relative humidity (RH): The amount of moisture in the air. It must be controlled to prevent the development of mold and disease in cannabis plants. Rolling benches: Benches designed with rolling tabletops that move from one side to another, eliminating non-efficient aisleways. Rolling screen: Improves energy management and blackout for sidewalls, preventing unwanted sunlight and heat from entering. Roof vents: Vents on the roof of a greenhouse structure that open to reduce heat and humidity. Often set up on automatic controls and used in conjunction with side vents to encourage natural ventilation. Shade systems: A system of shading out light to provide blackout times to meet cannabis light-deprivation needs and induce flowering. Typically a mounted curtain that can be rolled out or in as needed. Shuttle rolling bench system: A type of palletized rolling bench system equipped with an automatic greenhouse cultivation system, including ebb-and-flow irrigation devices and an operational control system. Side vents: Vents in the sidewall of a greenhouse that open to reduce heat and humidity. Often set up on automatic controls and used in conjunction with roof vents to encourage natural ventilation. Supplemental lighting: Providing plant-appropriate lighting either in addition to natural sunlight or in enclosed areas of the greenhouse to meet the cannabis plant’s specific light needs for that period of the plant’s growth.

Trellis system: A system of supporting and organizing cannabis plant growth to promote airflow and space that encourages fuller flower formation, without protecting against bud rot and mold. May consist of wooden, plastic or metal frames and typically a square netting draped over the plant that it grows through.

Vapor pressure deficit (VPD): Calculating the exact combination of temperature and relative humidity to achieve peak plant performance.

Vertical racking system: A tiered racking system that takes advantage of vertical space and stacks plants on multiple racks. Used with supplemental LED lighting. Can be installed on carriage systems to automate moving the racks. Zone segmentation: Areas within a greenhouse separated for different growing requirements like propagation versus vegetative stages. Typically achieved with inside gable walls or sidewalls and properly designed HVAC systems with good environmental controls.

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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COMPANY NAME

WEBSITE

Accelerated Growth Solutions LLC

ag-solutions.net

AIR Sniper

www.airsniper.ca

Atmosphere Inc.

www.atmosphere.com

CGEE Solutions

www.CGEEsystems.com

Coldcore Inc.

www.coldcoreinc.com

Current Culture H2O

cch2o.com

gPod by Data Aire

gpod.dataaire.com

DAG (DominionAG)

www.dagfacilities.com

Envirotech Cultivation Solutions

www.envirotechcultivation.com

FabricAir, Inc.

www.fabricair.com

FolioGrow

www.foliogrow.com

AiroClean420

www.airoclean420.com

MJ12 Design Studio, Inc.

www.mj12designstudio.com

Next G3N Greenhouse

www.nextg3ngreenhouse.com

Nudo Products, Inc

www.nudo.com

Porta-King Building Systems

www.portaking.com

Surna Cultivation Technologies

www.surna.com

urban-gro, Inc.

www.urban-gro.com

Van der Hoeven Horticultural Projects B.V.

www.vanderhoeven.nl/en

Sevenpoint Interiors

www.sevenpointinteriors.com

Multifan

www.vostermansusa.com

CaNavis International

www.canavis.ca

ZeroCool Systems

www.zerocoolsystems.com

Tricarico Architecture and Design PC

www.tricarico.com

CandyWorx

www.candy-worx.com

Nuform Building Technologies Inc.

www.nuformdirect.com

Merchney Greenhouses

www.merchneygreenhouses.com

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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COMPANY NAME

WEBSITE

DASERCO CANN

daserco.com

SRS Conveyors

www.srsconveyors.com

Cannabis Facility Solutions

www.cannabisfacilitysolutions.com

Bud Construction

www.buildwithbud.com

Lead Funding LLC

leadfunding.com/cannabis

DVO

www.dvoeng.com

Argelith Ceramic Tiles

www.argelithusa.com

Tate

www.TateInc.com

Estes Construction

estesconstruction.com

Acoustic Ceiling Products (ACP)

acpideas.com

Atlas Greenhouse

atlasgreenhouse.com

Patterson Fan Co.

www.pattersonfan.com

Crane Composites

cranecomposites.com/cultivation

Pro Grow Builders

www.Progrowinc.com

Ameriwater

www.ameriwater.com

Roberts Gordon LLC

www.robertsgordon.com/greenhouseinfrared-heating

ARCO/Murray

www.arcomurray.com

JPT Architects

www.jptarchs.com

Advanced Extraction Labs

www.advancedextractionlabs.com

Echelon Constructors

echelon810.com

Trusscore

trusscore.com

Mi Farm Pod

www.mifarmpod.com

SmartBee Controllers

www.smartbeecontrollers.com

Enwave Corporation

www.enwave.net

Greenbox Builders, Inc

greenbox.build

Agricova

www.agricova.com

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MJBizDaily Buyers Guide Cannabis Greenhouse Components

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COMPANY NAME

WEBSITE

EASYROOTS

easyroots.com

Sichuan Green Triangle Technology Co., Ltd

www.gtgreenhouse.com

Blade Filters

www.bladefilters.com

Capstone Green Energy

www.capstonegreenenergy.com

Constellation Cannabis

constellationcannabis.com

Hansen-Rice

Hansen-Rice.com

Boxvana

www.boxvana.com

IDC

idcsupply.com

Britten Woodworks

brittenwoodworks.com

Global Garden

www.globalgardenco.com

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