Creating a best-selling edible in a crowded market

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Crop storage+ strategies Vape industry overview Getting a grow NO off the ground

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President and CEO Cassandra Farrington Who’s Behind This Magazine? [email protected] Vice President of Editorial Chris Walsh [email protected] Senior Editors Roger Fillion [email protected] Kevin Huhn Inclusiveness [email protected] Integrity Connecting the Staff Writers Bart Schaneman Unbiased in ormation entirety o the without paid in luence cannabis community is [email protected] delivers the highest the oundation o the Omar Sacirbey value to all industry’s success. [email protected] participants. John Schroyer [email protected] Data and Charts Eli McVey [email protected] Our 5 Contributors Margaret Jackson, Jaimy Lee, Joseph Peña, John Rebchook, Core Pro essionalism Tom Kelsey Mainstream Responsiveness acceptance hinges on Sales Mary Pemberton Serving the industry’s Values elevating the [email protected] rapidly changing industry’s business Molly Ford needs requires practices. listening and [email protected] adapting. Angela Toney [email protected] Brooke Moore Quality [email protected] Sound business Marketing Christopher Day decisions are driven by Kendra Branch-Brett reliable news, data and insights. Andrea Evers Seth Mitchell Technology Amy Davis, Jeff Farrington Laura Femino Graphic Design Brian Gilbert Founded in early 2011, Business Daily™ ocuses solely Subscriber Services Lisa Burstein on cannabis businesses and the investors who back them. Customer Service [email protected] I you are leading or inancing a cannabis-related company, we 401.354.7555 ext. 1 help you prosper via trusted inormation services and Co-founder Anne Holland exceptional events.

To start/change/cancel your subscription, visit Our publications have the highest business readership in the MJBizMagazine.com, call us at 401.354.7555 x1 or email us at industry. Our events are sellouts, year aer year aer year. [email protected]. Marijuana Business Magazine And, we’ve been cited everywhere rom Harvard Business subscriptions are currently free to qualified US cannabusiness Review and the Wall Street Journal to Forbes, Fortune and professionals and investors age 21 and over only. Fast Company. To advertise with us, email [email protected] or call us at 401.354.7555 x 2. Do you need practical inormation, real-lie data or industry connections to help your business grow? You’ll ind what you Marijuana Business Magazine, Volume 4, lssue 8, September 2017 need in one o our publications or at our national events. lSSN 2376-7375 (print); lSSN 2376-7391 (online) We are here to help the multibillion-dollar cannabis industry Marijuana Business Magazine is currently published ten times per year by prosper. Let us know how we can serve you. ™, a division of Anne Holland Ventures Inc. POSTMASTER: Please send address changes to: Marijuana Business Daily, 2750 S. Wadsworth Blvd., Suite D200, , CO 80227. Copyright 2017 by Marijuana Business Daily, a division of Anne Holland

Ventures lnc. All rights reserved. Materials may not be reproduced in whole A division of Anne Holland Ventures Inc. or in part without written permission. For reprints of any article, please Marijuana Business Daily Headquarters 2750 S. Wadsworth Blvd. Suite D200, Denver, CO 80227 [email protected] • Phone: 401.354.7555 x1 contact Customer Service. Twitter: @MJBizDaily • www.MJBizDaily.com http://MJBizMagazine.com

ln This lssue FEATURES

36 Crop Storage Strategies Proper storage is crucial – otherwise cannabis growers risk seeing their harvest go bad and 36 their profits vanish down the drain. 46 Part Art, Part Science Some edibles makers go the extra mile by using not only culinary but mathematical know-how to ensure accurate dosing of products.

56 No Apologies MedMen CEO Adam Bierman has transformed the company into a marijuana juggernaut – while ruffling feathers in the cannabis industry along the way.

70 Let’s Make a 56 (Real Estate) Deal Financial sweeteners and a professional approach can help win over a wary landlord.

78 Alternative Advertising Barred from social media advertising, -based CBD companies use education, SEO and physicians to reach consumers.

78 COVER PHOTO by Tom Kelsey

6 • Marijuana Business Magazine • September 2017 PRlNT +

PDF DOWNLOADMarijuana Business DEPARTMENTS aFctbook 2017 10 Cannabusiness by the Numbers: Impact of Chronic Pain on

MMJ Businesses $24900 A state’s decision to add chronic/severe pain to its list of qualifying medical marijuana conditions is a key factor Marijuana in determining how large – and potentially how viable – Business Daily® the program will be. 16 Five Questions with David Bronner, CEO of Dr. Bronner’s Marijuana David Bronner talks about the need for the marijuana Business industry to adopt standards, business opportunities for organic or socially responsible cannabis, and hemp’s Factbook 2017 future in the . Exclusive Financial Data For Cannabusinesses & Major lnvestors 86 Cultivation Business Strategies: Prime Your Grow From the Get-Go cannabis entrepreneur Erik Briones shares tips for getting your grow off the ground and perfecting it over time.

92 Infused Business Strategies: Building a Best-Seller Colorado-based Americanna used a cannabis leaf shape, sour flavors and distilled oil to create a popular gummy line. All-new research from From the CEO's Desk...... 8 lnvesting & Funding Corner...... 12 the editors of Marijuana My Favorite Things...... 14 lndustry Developments...... 18 Trends and Hot Topics...... 32 Business Daily Hire Learning...... 96 In Focus...... 104 Company News...... 112 Movers & Shakers...... 116 Order now at Market at a Glance: ...... 121 Advertiser lndex...... 122 MJBizFactbook.com lnsightful lndustry Observations...... 124 or call 401.354.7555 x1 FROM THE CEO'S DESK

The Growing Dilemma

ere at MJBizDaily, we have a running joke – not that it’s really a joke – that there are as many new business ideas as there are working days in the year. H I’m sure many of you can relate to this dilemma. With new states (and countries!) announcing progress in their fledgling medical and recreational cannabis programs seemingly every single day – and with new scientific, technological and business advances opening new opportunities in this industry – where does your company devote its limited time, financial resources and strategic focus? It’s tough to pass up great ideas that are a great fit with your core competencies. But the reality is that without the appropriate focus, most if not all those efforts will wither. One of our most important roles as leaders of our companies is to pick the best of the best ideas, then arrange the business to give them every possible oppor- tunity to succeed. The newest winning idea here at MJBizDaily is to begin deep coverage of the Canadian cannabis industry specifically for the Canadian-based companies and executives driving forward what’s expected to become the world’s largest federally legal recreational marijuana marketplace. And that’s just the start of our expansion up north – stay tuned for future announcements on our Canadian plans. Our reporter, Matt Lamers, will be on the ground and in the weeds (no pun intended) with the people and businesses propelling the Canadian industry and writing content for this magazine and Marijuana Business Daily. In addition to providing tips and strategic insight into running Canadian mari- juana businesses, he’ll closely follow regulatory developments that will define the business opportunities. And in classic MJBizDaily fashion, the business news of the day will be delivered straightforwardly, without bias or influence from paid sponsor- ship or advertisements. Delivering independent, news-based perspective, analysis and insight as well as actionable business information is what the industry needs to help all businesses (including yours) grow. And that’s what we’re here to do. Matt has been on the job for about six weeks now and is ready to hear from you. Contact him at [email protected] with your story ideas, source leads, questions or concerns about what’s going on in your business and share what issues you’d like to learn more about. And to get the Canada-specific stories from Matt and the rest of the MJBizDaily team delivered directly to your inbox, sign up for the free news- letter at mjbizdaily.com/canada.

All the best, Cassandra Farrington President & CEO

8 • Marijuana Business Magazine • September 2017 POOR CLIMATES CAN BE SUFFOCATING. ESPECIALLY FOR PROFITS.

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¬mpact of Chronic Pain on MMJ Programs

state’s decision to add chronic/severe pain to its list of qualifying medical marijuana conditions is a key factor in determining how large – and A potentially how viable – the program will be. To wit: It’s the No. 1 condition treated with MMJ in nearly every state where the treatment is allowed, with New Mexico being the only exception. That’s of par- ticular relevance to entrepreneurs eyeing new medical marijuana markets, many of which have chronic/severe pain in their list of qualifying MMJ conditions. Here’s a closer look at the impact chronic/severe pain can have on programs:

Average portion of the pa- tient base using MMJ to treat chronic/severe pain in the 11 states that publicly release 62% patient counts by condition 30Number of states – plus Washington DC – Average number of medical marijuana where medical patients per 1,000 residents who are marijuana is legal at least 18 years old in states where chronic/severe pain is a qualifying MMJ condition. That ratio is 4.7 times higher than in states where MMJ is not allowed 18.1 for treatment of chronic/severe pain

Average increase in the number of registered MMJ patients six months after chronic/severe pain 24Number of states – was added as a qualifying plus Washington DC – condition in New York and where chronic/severe 144% Minnesota – the only two pain is a qualifying states to add it as a qualify- MMJ condition ing condition in 2016

Sources: MMJ program websites, U.S. Census Bureau 2015 population estimates

10 • Marijuana Business Magazine • September 2017 Exclusively distributed by Greenlane Dispensary Services. Call 877-916-0480 to order. lNVESTlNG AND FUNDlNG CORNER Smart cultivation solutions rooted in experience.

Marijuana ¬nvestments on the Rise in 2017

nvestors have been dipping their toes in the cannabis industry for the past several years, but 2017 looks to be a banner year for marijuana investment. Global investment activity midway through the year has already outpaced ¬ funding totals for all of 2016. Marijuana-related businesses worldwide raised nearly $1.3 billion in capital through June 2017, according to Viridian

Capital Advisors, a New York-based market intelligence firm focused on the cannabis industry. POWER SOLUTIONS/COGENERATION DESICCANT DEHUMIDIFICATION The size of the individual investments is what’s driving the gains in 2017. The average equity funding deal during the first half of the year was more than double that of 2016. And the average debt raise was more than six times that of last year. It’s yet another indication that investors are becoming more comfortable financing cannabis businesses. Here’s a breakdown of global investment activity in the marijuana industry through the first half of 2017:

FERTIGATION/WATER RECIRCULATION ENERGY EFFICIENT LIGHTING

Global Investment Activity in the Cannabis Industry:

2016 vs 2017 Year-To-Date MOBILE PLANT TRANSPORT CONSTRUCTION/INSTALLATION Equity Raises Total Capital Raised (USD) Debt Raises

2017 2017 YTD $200.1M $1,090.6M (Thru 6/30/17) ADVICE: PLANNING & DESIGN HIGH PERFORMANCE SUBSTRATES 2016 $207.1M $1,006.1M

$0M $200M $400M $600M $800M $1,000M $1,200M $1,400M

Average Deal Size (USD)

2017 2017 YTD $$99..99MM $13.7M (Thru 6/30/17)

2016 $1.6M $$55..44MM

$0M $5M $10M $15M $20M $25M $30M You know EnviroTech. But did you know our roots throughout the entire Source: Viridian Deal Tracker industry run especially deep? It’s true. From design to fertigation Copyright 2017 Marijuana Business Daily, a division of Anne Holland Ventures Inc. All rights reserved. to installation and beyond, our expertise knows no bounds.

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Plants, People, Passion

12 • Marijuana Business Magazine • September 2017 Smart cultivation solutions rooted in experience.

POWER SOLUTIONS/COGENERATION DESICCANT DEHUMIDIFICATION

FERTIGATION/WATER RECIRCULATION ENERGY EFFICIENT LIGHTING

MOBILE PLANT TRANSPORT CONSTRUCTION/INSTALLATION

ADVICE: PLANNING & DESIGN HIGH PERFORMANCE SUBSTRATES

You know EnviroTech. But did you know our roots throughout the entire industry run especially deep? It’s true. From design to fertigation to installation and beyond, our expertise knows no bounds.

Visit envirotechcultivation.com for answers to all your questions.

Plants, People, Passion ach month we survey a group of executives in a specific sector of the marijuana industry, asking them to name a favorite item – such as a E trimmer, extraction technology or point-of-sale software. We welcome your suggestions for topics. Email us at [email protected]. This month we’ve asked five infused product executives to share their favorite ingredients for making edibles:

JULIANNA CARELLA Founder and CEO, Auntie Dolores Oakland, | Pick: Coconut oil Coconut oil is fantastic for extracting and is excellent for both sweet- and savory- infused edibles. You can use infused coconut oil as a sauce base, as a butter alternative or even as a topical. Coconut oil and cannabis seem to have a marriage made in heaven!

ATA GONZALEZ Founder, G FarmaBrands San Rafael, California | Pick: Lemon fruit concentrate A favorite ingredient of ours is the real lemon fruit concentrate, which we use in our G Drinks lem- onades. It's not flavored water with a bunch of chemicals to mask the taste of the cannabis oil, but rather a real fruit concentrate with real pulp and fruit pieces. I can't lie that we've tried to replace our formula with an easier and more inexpensive method, which would be flavored water and chemicals like most drinks on the market are. But we refuse to put anything on the market that is of lesser quality. Consumers really appreciate the flavor and consistency of the lemonades.

JULIE DOOLEY President, Julie’s Natural Edibles Denver | Pick: Clarified butter, coconut oil and cranberries We love using clarified butter and coconut oil to increase the fat content, thus ensuring a highly effective edible. Once fat surrounds the THC, the THC gets metabolized in the liver, which is respon- sible for the 11-Hydroxy THC conversion. This is a highly effective form of THC and produces intense effects. Another favorite ingredient is cranberries. They have a terpene profile that’s similar to can- nabis and, once combined, that increases the effectiveness of the edible.

MERA LOVETTE Owner, Mama Mera’s Edibles Los Angeles | Pick: Cannabis coconut oil We prefer to use our own ingredient, "Mama Mera’s cannabis coconut oil,” which is the main ingredi- ent in all of our edibles. We choose cannabis coconut oil as it is the healthiest and is more beneficial versus butter and other oils and tinctures.

DAN ANGLIN Founder and CEO, Americanna Boulder, Colorado | Pick: Sugar Sugar is simply the most popular ingredient in all foods in the world. All people enjoy sugar (if their diet allows them to do so), and it is simply more satisfying than sugar substitutes. We’ve added fruit juice to our gummies as a way to cut back on other sweeteners like corn syrup. But real sugar is the key to delicious candy. Also, cannabis and sugar do not create a negative flavor, like some other food products, and the sweetness of candy allows adults to actually enjoy the they are consuming.

14 • Marijuana Business Magazine • September 2017 BOOST PROFITS BY CREATING YOUR IDEAL GROWSPAN GREENHOUSE

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Organic and Fairly Produced Cannabis Five Questions with David Bronner, CEO of Dr. Bronner's by Bart Schaneman

r. Bronner’s iconic soap – packaged with its Where do you see the business opportunities for wordy, offbeat label – has for decades been a organic or socially responsible marijuana? D favorite among consumers of natural products. Everywhere. The Vista, California-based company also has been a Consumers who have legal access want to be assured pioneering force in the growing popularity of hemp the products they are buying and putting into their bod- consumer goods. ies align with their personal and moral values. As CEO of Dr. Bronner’s and the grandson of the It’s also a question of safety – the current lack of stand- founder, David Bronner has watched as the natural prod- ards in the industry allows for the sale and distribution of ucts, hemp and marijuana industries have shifted from cannabis products that are highly contaminated with all fringe to mainstream. sorts of toxic pesticides. And exploitative labor practices To accelerate that shift, Dr. Bronner’s announced in are unfortunately not uncommon in the industry. June it would contribute $125,000 in funding for a newly formed marijuana industry standards group, the Canna- How do you see the future of the hemp industry bis Certification Council. The council is composed of an unfolding? organic cannabis association and an ethical labor prac- I expect we will have federal legalization of hemp farm- tices organization, with Dr. Bronner’s providing continued ing this year. I see hemp farming as a revitalizing crop financial and logistical backing. for American farmers, with huge growth markets in food, In an email interview with Marijuana Business Maga- fiber and medicine. zine, Bronner discussed the need for the marijuana industry to adopt standards, business opportunities for Any key business opportunities come to mind for hemp? organic or socially responsible cannabis, and hemp’s There is huge opportunity in the CBD market, but also future in the United States. with food, biocomposites, construction and clothing.

16 • Marijuana Business Magazine • September 2017 The council’s standards certify that cannabis products are organically grown and fairly produced.

Do you have any advice on how a CBD or hemp What made you decide to support the company should market to consumers? Cannabis Certification Council? I would like to see CBD products regulated in the mar- We are committed to making socially and environmen- ket as dietary supplements, not as pharmaceuticals. This tally responsible products, and a major part of our suc- means these products would be available for purchase cess is organic and fair trade integrity. We are excited for in the vitamin aisle of a natural retailer and would not the Cannabis Certification Council to begin driving that require a prescription to obtain or consume. CBD prod- ethos in the cannabis industry. uct manufacturers should hold themselves to the same The council’s standards certify that cannabis products high standards for product quality, sourcing and organic are organically grown and fairly produced. labeling as other supplements. The organic integrity of cannabis is important for health and environmental reasons, and whether cannabis is grown under just and fair working conditions is impor- tant for all workers involved. ◆ ¬NDUSTRY DEVELOPMENTS What’s Happening: National & ¬nternational News Developments

DEA Slow to Move on Marijuana Grow Applications Uruguay Kicks off Recreational Marijuana Sales Almost a year after the U.S. Drug Enforcement Uruguay made history, becoming the first nation to Administration pledged to grant more licenses to grow begin recreational sales of marijuana after a law regulat- marijuana for research purposes, the agency has yet to ing the transactions took effect. approve any of the applicants. In mid-July, marijuana aficionados lined up at pharma- The DEA has received at least 25 appli- cies across Uruguay to be among the first in the South cations from those interested in growing American nation to legally buy cannabis. cannabis for medical research, but none Authorities said nearly 5,000 people had registered have been approved or rejected, lead- as consumers, allowing them to buy up to 40 grams of ing some to question whether last year’s cannabis per month. The price is set at the equivalent promise was a red herring. of $1.30 per gram, with 90 cents of that going to the two “What has progressed with the DEA businesses chosen to cultivate marijuana. over the past year? Nothing,” said Rachel Gillette, a Colorado marijuana attorney. “I would be sur- prised if we had another conversation in five years and they had granted another license.” Meanwhile, the DEA is proposing a reduction in the amount of marijuana and other drugs it plans to produce for research purposes.

Provinces in Canada Weigh Public Feedback to Craft New Rules Most of Canada’s provinces are soliciting input from medical cannabis companies, the public and other stake- holders to help shape the regulatory foundations of the country’s recreational marijuana industry. The results could have a profound impact on existing and future Canadian marijuana businesses. Officials with the provinces say they will incorporate the feedback into their rules on everything from where recreational marijuana can be purchased and consumed to how it is taxed, which types of businesses can sell it and how cannabis products should be packaged.

18 • Marijuana Business Magazine • September 2017

State News Developments

WA ● ■ VT NH ● ● ME MT ND ● OR ● ◆ ✶ ● MN ■ ● MA ●✶ ID SD WI NY MI ● WY ● RI ● PA NV IA CT● NE ◆ NJ ● ● OH ■ IL IN ◆ ◆ DE● UT CO ● CA ● WV MD ◆ ● ■ KS MO VA DC ● ✶ KY NC AZ TN ● OK NM AR SC ● ◆ MS AL GA TX LA ◆

FL AK ● ■

■ - States that have passed medical marijuana laws ■ - States that have passed both medical marijuana & recreational cannabis laws ● - States with operating medical marijuana dispensaries ◆ - States with planned medical marijuana dispensaries ■ - States with operating recreational marijuana shops HI ✶ - States with planned recreational marijuana shops ● Note: This map does not include states that have legalized only CBD-based oils. Medical marijuana dispensaries in started early recreational sales in July but licensed rec shops have not yet opened.

© 2017 Marijuana Business Daily, a division of Anne Holland Ventures, Inc. All rights reserved. Data is current as of 8/11/2017

Alaska Arkansas The Last Frontier is making strides toward becoming the Texarkana became the first municipality to approve local first state in the nation to allow customers to consume rules that will govern medical marijuana companies that marijuana in recreational shops. The Marijuana Control operate within its borders, setting the stage for the rest Board voted to begin drafting rules for onsite consump- of Arkansas to follow suit. Texarkana’s board of direc- tion. The regulations would range from where and how tors approved business license fees for dispensaries much marijuana can be consumed on premises to and medical cannabis growers. Growers must pony up restrictions on ventilation. The public will have 60 days to $50,000 for a business permit, while dispensaries will comment on the proposed rules. have to pay an initial $7,500 and then $11,000 for yearly license renewals.

20 • Marijuana Business Magazine • September 2017

California Colorado The government is taking steps to prevent a product Four federal agents visited Colorado to meet with public shortfall when the state’s recreational marijuana program officials about the state’s marijuana policy and over- launches Jan. 2. The state plans to provide temporary, sight. The delegation included representatives from the four-month licenses to some marijuana growers, test- Department of Justice, the Office of National Drug Control ing labs and distributors to ensure there will be enough Policy, the Domestic Policy Council and the State Depart- product to keep retailers supplied. The decision was ment. “Our purpose was to convey to them the strength prompted by a supply shortage in Nevada after the state of our regulatory system and our enforcement system launched its recreational program July 1. and our policies and practices,” said Mark Bolton, Gov. John Hickenlooper’s marijuana adviser.

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Creating custom horticultural heating & cooling solutions for over 30 years Delaware District of Columbia The General Assembly passed a resolution creating an The DC Council passed an emergency bill that gives Adult Use Cannabis Task Force to study “a model for regu- minorities preference in the application process for medi- lation and taxation” of a legalized recreational marijuana cal marijuana licenses. A spokeswoman for Mayor Muriel program in the state. The resolution directs the group E. Bowser said the administration was reviewing the bill to study specifics such as taxes, banking issues, local but was moving ahead to fulfill it. The nation’s capital is authority and control, packaging and labeling require- the latest jurisdiction to grant minority applicants prefer- ments and consumer safety. The group will report on its ence to help reverse their underrepresentation in the findings to the assembly and governor by Aug. 31, 2018. cannabis industry.

Tested Child Resistant Exit Bags - Made To Order - Choose Your Color - Low Minimums - Choose Your Size Florida Hawaii A cannabis advocate who was instrumental in passage Seventeen years after Hawaii legalized medical marijuana, of a medical marijuana law filed suit against the state to the state recorded its first MMJ sales. Maui Grown Therapies get smokable MJ included in the program. Attorney John of Kahului opened for business in August after getting the Morgan argued in the lawsuit that marijuana is go-ahead from the Hawaii Department of Health. Another the best way to administer it to some patients. Smok- dispensary in Hawaii is selling medical marijuana. able MMJ could entice patients to join the program and Shortly after, Aloha Green opened its doors in Honolulu. subsequently increase revenue for the state’s medical Hawaii was among the first states to legalize medical mari- cannabis industry. juana in 2000, but dispensaries weren’t legalized until 2015. Problems with seed-to-sale tracking software and a dearth of licensed testing labs undermined the program’s rollout.

Marijuana Business Daily - Half Pg Bleed - Submitted Feb 2

Louisiana Southern University has received seven applications from Medical marijuana patients spent $2 million on edibles private companies bidding to run the school’s medical mari- products in dispensaries in 2016, making it the fastest- juana cultivation operation, including three that failed to growing segment of the state’s MMJ industry. The tally win a similar contract with Louisiana State University. The represents about 7.4% of the overall $26.8 million spent at university received applications from Advanced Bio Medical; Maine’s eight dispensaries last year. By contrast, Mainers AquaPharm; Citiva Louisiana; Columbia Care; Med Louisi- spent $1.2 million on edibles at medical marijuana dispen- ana; Southern Roots; and United States Hemp Corp. saries in 2015, or about 5.4% of the total purchases.

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BudBarDisplays.com Gov. Larry Hogan overhauled the 16-member medi- Gov. Charles Baker signed into law a recreational marijuana cal cannabis commission, making 10 appointments and bill that will allow the state to launch an adult-use program doubling its minority representation. Hogan filled three approved by voters. Soon afterward, the first members of vacancies on the panel, replaced six commissioners the Cannabis Advisory Board were appointed. The new law whose terms had expired and reappointed a 10th com- came about after House and Senate negotiators reached missioner, Assistant Comptroller John Gontrum. Critics an agreement that would allow retail MJ sales to be taxed of the Maryland Medical Cannabis Commission have at a maximum 20% rate. Lawmakers also compromised on charged the panel lacked diversity and failed in a man- the dispute over local control of marijuana businesses. date to ensure minorities are represented among grow and dispensary licensees.

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(740) 809-1160 *consumables not included [email protected] | www.apekssupercritical.com Montana New York The health department has issued temporary emergency Gov. Andrew Cuomo signed legislation aimed at boosting rules for the state’s medical marijuana program. Parts of production of hemp and committed $10 million in state the program took effect as state regulators develop per- funds to ramp up the industry. The new law mandates that manent regulations, which must be in place by April 30, industrial hemp be categorized as an agricultural product 2018. The emergency rules, which expire in late October, and be given the same considerations as other crops and include clarifications on how the Department of Public seeds; requires state agencies to collaborate on funding Health and Human Services will regulate marijuana test- and support for hemp research and businesses; sets up an ing laboratories and cannabis concentrates manufactur- industrial hemp seed certification program; calls for indus- ers during the transition period. trial hemp data collection; and authorizes the establish- ment of an industrial hemp website.

Nevada North The state’s fledgling recreational marijuana market Medical marijuana sales would begin next spring under the has led to significant cannabis price hikes that may be state’s tentative timeline for its MMJ industry. The health hurting the local medical MJ industry. Medical marijuana department planned to open the application process for grow- prices “have almost doubled” in parts of Nevada, raising ers and dispensaries in early August and close it at the end of concerns that unaffordable medical cannabis may force September. The agency would review applications in October patients to the illicit market. Lissa LaWatsch, the general and make selections in early November. Regulators estimate manager of Las Vegas’ ReLeaf dispensary, acknowledged cultivators will need about six months to set up facilities and her business has seen a “decrease” in MMJ business. grow the first medical marijuana crop. If the timeline plays out, sales would begin in April, May or June 2018.

New Hampshire Ohio The state has added chronic pain and post-traumatic Regulators received 185 applications for medical marijuana stress disorder to the list of qualifying conditions for the cultivation licenses by the June 30 deadline and now must medical marijuana program, a move that could significantly whittle that number to the 24 growers that ultimately will boost New Hampshire’s struggling MMJ industry. Gov. Chris receive permits. Of the 185 applications, 109 are for Level I Sununu signed House Bill 160 adding the two conditions. licenses, which allow grows up to 25,000 square feet. The other 76 applications are for Level II licenses, which allow sites up to 3,000 square feet. After winning a license, culti- vators can apply for larger grow spaces.

September 2017 • Marijuana Business Magazine • 27 Pennsylvania Washington state The health department awarded 27 medical marijuana Advertising became even more difficult for marijuana dispensary licenses across the state, taking another step businesses under new restrictions that took effect. Can- toward launching the commonwealth’s MMJ market in 2018. nabis businesses statewide must start following adver- Regulators sifted through 280 applications to select the tising rules primarily intended to protect children from winners. Each of the new permit holders is eligible to open marijuana. The law mandates that marijuana signage up to three dispensaries. But not all have opted to open must clearly denote that MJ products are for people 21 the maximum number from the get-go. Initially, the state and older and can’t contain images of cannabis plants or expects to have a total of 52 dispensaries. movie or cartoon characters.

Puerto Rico West Virginia Gov. Ricardo Rossello signed into law an updated medi- Farmers can now apply to cultivate industrial hemp for cal marijuana statute after deciding a previous MMJ commercial purposes. The agriculture commissioner has legalization measure wasn’t thorough enough. Roughly begun accepting applications from would-be hemp farm- 20 medical marijuana dispensaries are already operat- ers. Successful applicants would join members of the ing on the island. The dispensaries began opening for West Virginia Farmers Association who hold 14 licenses to business in January after the island’s health department farm hemp for research purposes. Those original farmers, promulgated industry rules a year earlier. Rossello said who currently are growing 30 acres of the crop over 11 the new law is intended to safeguard patient safety and counties, now will be permitted to cultivate commercially. also “highlights the role of research and development of medicinal cannabis, which in turn will promote eco- – Roger Fillion nomic development (and) creation of jobs.”

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

Vermont Regulators are seeking to add a fifth medical marijuana dispensary, following through on a new law that expanded the state’s MMJ program. The Department of Public Safety began accepting dispensary applications at the end of June. Applications were due by July 28. The state now has four licensed marijuana dispensaries – in Brandon, Brattleboro, Burlington and Montpelier – that dispense the drug to peo- ple suffering from debilitating illnesses.

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force dedicated to fighting crime and enhancing public safety. Accord- ing to documents obtained by The Associated Press, the Task Force on Crime Reduction and Public Safety has offered no new policy recom- mendations to advance the attorney general’s aggressively anti-mari- juana views. Sessions has been rhetorically con- necting violent crime to marijuana since before he began his stint as attorney general. He could easily use bad actors in the cannabis business to justify at least selective actions – if not a more widespread crackdown on the industry. Exactly what form any crackdown may take, and which businesses the DOJ may target, remain open ques- tions. And it’s important to note that a new version of the Cole Memo could still allow the existing marijuana industry to continue doing business as usual, but with a renewed emphasis on Fingers Crossed something such as cracking down on illegal interstate trafficking. The marijuana industry is about to learn A Bigger Danger whether the Trump administration will The other danger for cannabis businesses could be much more undermine marijuana industry protections potent than a new version of the Cole Memo, however. The Rohrabacher- by John Schroyer Farr Amendment (which, when reintroduced at some point this year, will be known as the Rohrabacher- or several years, cannabis Those two developments com- Blumenauer Amendment) is set to companies that abided by state bined could make for a very bad few expire at the end of September. If F law haven’t had to worry about months for anyone in the U.S. can- Congress doesn’t renew it, Sessions raids by Drug Enforcement Adminis- nabis industry. and the DOJ would be free to pros- tration agents or prosecution by U.S. “If you had to choose two months ecute any medical marijuana busi- attorneys. that could be worse than these two nesses they wish. That may be about to change. months coming up, I don’t know Kampia and others fear for the As of this magazine’s August pub- what two months you would choose,” amendment because of an ongoing lication deadline, several cannabis chief Rob political shell game in Washington activists and attorneys were worried Kampia said. DC over the federal budget. In the about the very real possibility that U.S. Attorney General Jeff Ses- past, the amendment has passed the Trump administration may jet- sions was scheduled to receive as a “budget rider,” which in lay- tison the 2013 Cole Memo and kill the policy recommendations on July 27 man’s terms is a legal amendment Rohrabacher-Farr Amendment. from a Department of Justice task to an annual federal spending bill.

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www.Azoth.Solutions Liquid Co2 206.800.3007 Azoth.Solutions It’s a common practice for mem- a conference committee will be bers of Congress to get pet projects charged with reconciling differences EXECUTIVE SUMMARY attached to must-pass bills. And the between the House and Senate Rohrabacher-Farr Amendment was spending bills. In that case, the The Trump administration may be one such pet project when it was first amendment could be stripped out or poised to crack down on cannabis. made law in late 2014. it could survive. Here’s the breakdown as of this magazine’s August publication But it’s precisely because of that deadline: pet-project attitude that Rohra- Uncertainty Reigns • Attorney General Jeff Sessions bacher-Farr is now possibly in danger. In other words, uncertainty is the could throw out the Cole Memo, The speculation in DC for months ruling factor. Kampia is pessimistic which is a nonbinding set of policy guidelines issued by the has been that the House Republican about the amendment’s chances, Obama Department of Justice in leadership wouldn’t allow amend- while Collins is overwhelmingly confi- response to the 2012 legalization of ments to the spending bill in order dent. Other stakeholders fall some- recreational marijuana in Colorado and Washington state. to keep the focus on the budget. where in between. But everyone has • If Sessions tosses the Cole Memo, That way, negotiations wouldn’t get their fingers crossed. he could replace it with something derailed by debates over, say, mari- What may happen if both the Cole stricter, which could open the door juana (or gun rights, or abortion, or Memo and the Rohrabacher Amend- for actions against MJ businesses. any other potentially distracting issue). ment are done away with? That’s • The Rohrabacher-Farr Amendment is set to expire at the end of As of press time, there was no another crystal ball question. But the September if not renewed by clear answer from either the House short answer is it will be up to the Congress. The law prohibits the DOJ speaker’s office or the rules commit- DOJ and individual U.S. attorneys if from using federal funds to interfere with state medical marijuana tee on whether floor amendments they really want to declare all-out war programs, or to prosecute law- would be allowed. on cannabis businesses. They would abiding MMJ companies. The If they are permitted, Kampia and have the power to do so, since mari- amendment may be renewed – but it’s not a done deal. his allies are confident they have the juana remains a Schedule 1 narcotic, votes in the House to get the amend- meaning that the entire industry is • If the amendment isn’t renewed, there’s nothing in federal law to ment attached. Problem solved. breaking federal law. prevent Sessions and the DOJ from The Senate Appropriations Commit- The DEA doesn’t have the raiding marijuana business. tee has already attached the Rohra- resources – financial or otherwise – bacher Amendment to its budget bill, to raid and shutter every marijuana but that may not be enough. business in the country, said attor- “My advice to the industry is, don’t The Rohrabacher Amendment’s ney Charles Feldmann, a former DEA be one of those with your head bur- fate is still uncertain, because agent who worked for the agency ied in the sand. Let’s we’re all from 1996 to 2001. wrong and that it’s all unicorns and But what it could do is restart a rainbows for everyone. But if it’s not, campaign of fear. That means making you need to be prepared,” Feldmann examples of some high-profile com- said. “You need to have some risk- panies, possibly using threat letters, mitigation plans, and that’s through coercion and similar tactics to drive good, strong legal counsel, tax as many companies – and investors – advice, accounting advice, just your out of the business as possible. overall business strategy. And have “Can they shut the marijuana contingencies.” industry down? No, that’s impossi- That’s because the worst scenario ble,” Feldmann said, noting the DEA for a marijuana business is if federal doesn’t have the funding to do so. agents broke in the doors and the “Can they drastically slow it down company was caught off guard, Feld- and cause a lot of big money to exit? mann said, in part because of a naive Yeah, they can do a lot of that.” confidence that the cannabis industry Consequently, companies should is now too big and strong for the DOJ. prepare for the worst and hope for “I see too much of that in the indus- the best, Feldmann said. And yes, try: ‘Oh, it can’t ever go bad,’” Feld- Charles Feldmann that means lawyering up. mann said. “It can. And it may.” ◆

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36 • Marijuana Business Magazine • September 2017 Cannabis is bagged and then stored in containers at Shango Premium Cannabis in Portland, . Photo courtesy of Shango Premium Cannabis STRATEGIES

Proper storage is crucial – otherwise cannabis growers risk seeing their harvest go bad and their profits vanish down the drain

by Bart Schaneman

poorly stored marijuana crop can destroy your profits before your cannabis ever reaches the market. “You can take four months to grow it and ruin it in four hours if you’re not careful,” said Greg A Stefanik, regional production manager for Shango Premium Cannabis, based in Portland, Oregon. Improperly stored cannabis can go bad in a number of ways: It can turn brown, break down or lose its flavor, smell or possibly even potency. So careful crop storage is crucial. Moreover, storage is likely to become even more important as new can- nabis markets come online and the number of cultivators grows. An increase in supply could trigger a glut and a drop in prices, spurring growers to hold on to their crop until the market rebounds. When storing cured cannabis, cultivators must carefully control variables such as temperature and humidity while arranging the plant in a way that protects its structural integrity. In that sense, the storage of cut and dried flower requires as much attention to detail as any other step in the cultivation process.

September 2017 • Marijuana Business Magazine • 37 Storage Techniques Properly stored cannabis that is cured correctly, stowed at the right tempera- ture and hidden away from light can last months, even more than a year. By con- trast, marijuana that is stored wet or is exposed to light and allowed to get hot can turn on you in a matter of weeks. One traditional method is to store your crop in a cellar. Another is to put the crop in pickle barrels and bury it in the ground. Depending on the climate where your grow is located, the earth will keep the product at a constant temperature. Casey O’Neill, a marijuana grower with HappyDay Farms in California’s Mendocino County, places his cannabis in clean, food-grade turkey bags before storing it in a pickle barrel in the ground. Temperature variations – particu- larly heat – moisture and light are your Cannabis hung to cure at Green Growers Technology Alliance. Photo courtesy of Matt Tonkovich, Green Growers Technology Alliance's chief growing consultant enemies. “The main things are cool and dark and dry,” O’Neill said. O’Neill tries to keep his marijuana above 70 degrees, he said, or it will turn network of cultivators in Michigan, typi- stored in the 50-60-degree temperature brown and degrade. cally stores his cannabis in thick plastic range. You definitely don’t want it to get Stefanik with Shango stores his can- bins that keep out light to avoid degrada- nabis in a standard commercial freezer tion of the plants’ trichomes. and seals it with desiccant packs that His employees will regularly open, EXECUTIVE SUMMARY help control the moisture levels. He or burp, the containers to freshen the keeps the freezer at about 25 degrees oxygen for about a month before the Correctly stored cannabis can make below zero. buds have reached a desirable mois- the difference between a great crop “One of the things you have to watch ture content and the containers can and a mediocre one. It can also have an impact on your company’s out for when you’re freezing is frost,” he be set aside and the burping stopped. bottom line. Here’s what to keep in said. Frost will ruin the quality of the DeMarco also stores his cannabis in a mind when storing your harvested bud when it’s thawed. cool, dry room that’s around 70 degrees marijuana: He also cautioned that the plant and 40% humidity. • Cannabis doesn’t like light, heat or moisture; so keep it cool, dark becomes fragile when frozen. “You just It’s common practice in the indus- and dry. give it a little flick with your finger and try to seal cannabis in nitrogen-filled • Follow the 60-60 rule – store it just blows apart,” Stefanik noted. bags, but O’Neill finds that the plant cannabis at 60 degrees with 60% Frozen cannabis flower also can’t be degrades too quickly if it has been humidity. stacked without any space in between. sealed that way. Stefanik said Shango is • Properly curing your crop has a “You don’t want to stack 50 pounds on testing storing cannabis with nitrogen huge impact on how well it stores. top of itself,” Stefanik said. “You’re going to see if it will work for his company. • Deciding when to hold on to your product can enrich your bottom line. to end up ruining a lot of product.” When to Store • There’s no one way to store To avoid this, Shango uses standard marijuana, and techniques baker racks with one layer of flower on At Shango, the team meets to discuss continue to evolve. Find the each rack. method that works for you. what action to take if market demand Leo DeMarco, who grows cannabis for drops and the company needs to hold Green Growers Technology Alliance, a on to product until prices recover.

38 • Marijuana Business Magazine • September 2017

A 'FRESH' APPROACH “I could see that being a problem for companies out there real quick,” aron Newsom, the Stefanik said. A director of cultivation In the event Shango needs to store for Santa Cruz Veterans a surplus, Stefanik said he would rent a Alliance – a medical mari- commercial freezer the size of a ship- juana grow in California ping container. It wouldn’t be the most – doesn’t practice long- cost-effective move – it could cost up to term crop storage. As an several thousand dollars a month – but advocate for fresh cannabis it beats dumping loads of product. flower, he tries to cure his At HappyDay Farms, O’Neill’s stor- buds and get them to the age strategy is less about trying to play patient as quickly as possi- the market and more about trying to ble. The longest he’s stored ensure a steady flow of product to his anything is three months. customers. Newsom tries to limit the harvested plant’s exposure to oxygen and “We have a pretty stable marketplace light. But he avoids long-term storage because “we’ve just seen a lot for our products at this point, so we better effects, test results, terpene results, potency results and just get the same price year-round,” he said. overall quality of the product the fresher it is.” “We’re a small operation and we’ve In his operation, the employees adhere to the standard practices always liked to have product for patients of cultivation, including normal drying and trimming methods. But throughout the year.” Newsom tries as hard as he can to move the product once it’s cured. To cut down on a pricey capital “Freshness, just like in any other agriculture product, is key,” Newsom outlay and large amount of work at said. “There’s definitely variables to be able to store and create a longer shelf life, but I’ve always been an advocate for fresh agricultural harvest, O’Neill spaces out his trimming goods.” schedule. That way he doesn’t have to He counts himself as fortunate to have a large enough patient base hire an army of trimmers all at once and to provide fresh product. can even out his production timeline. “There are a lot of cultivators that aren’t as blessed to be in the situ- “It’s more beneficial to be able to ation that we’re in and do have to store it for long periods of time,” he stretch it out over the course of the year added. “I’m very lucky to be able to have the community that we’re in and not end up in a desperation space to be able to provide fresh cannabis.” where you have to sell it because you need the money,” he said. — Bart Schaneman

Cultivation center operated by Green Growers Technology Alliance. Photo courtesy of Matt Tonkovich, Green Growers Technology Alliance's chief growing consultant

40 • Marijuana Business Magazine • September 2017

Like Stefanik, O’Neill cures at 60 degrees and 60% humidity, taking four to 12 days to cure, depending on the size and density of the flower. O’Neill’s determining factor is how the stem of the plant snaps – he’s look- ing for a bend, then a snap. If the stem merely bends, it’s too wet. If it snaps too easily, the plant is overly dry. DeMarco said he likes to start out at 65% humidity and slowly decrease it over 11 days to 50%-55%. His general rule of thumb for finishing the cure is when the fan leaves become brittle. Then the product is trimmed before it goes to the containers.

Storage racks at Shango Premium Cannabis. If the product is properly cured and Photo courtesy of Shango Premium Cannabis stored, it can last about 10 months and be phenomenal, according to O’Neill. He’s seen cannabis that’s not stored well DeMarco said his Michigan-based Then he hangs the plants for 14-25 turn brown in a matter of months. company so far has not needed to hold days with the temperature in the low “Storage has a huge part to do with on to its product for longer than six 60s and the relative humidity at 60%, it,” he added. months. He said the demand in the with a slight breeze created by fans. DeMarco concurred. market in the upper Midwest is high “Curing is absolutely essential,” “THC doesn’t really break down,” enough that storage has not been a O’Neill agreed. he said. “The plant itself, yes. But if it’s major issue. His preferred method is to store the stored properly, you can have a product there for years that doesn’t really lose product untrimmed, but pared down to ◆ The Importance of Curing eliminate large stems. its potency.” In addition to where your crop is stored, cultivators stressed the impor- tance of properly curing the cannabis before placing it in storage. You’re fighting a losing battle if the plant isn’t correctly cut and dried. “If it’s not cured properly and you store it, it’s going to amplify whatever is wrong with it when you open it up a couple of months later,” Stefanik said. The buds will have degraded much more quickly and lose their potency. When Shango harvests its crop, workers analyze the buds under a microscope to ensure the trichomes developed correctly. Stefanik wants the majority of the trichomes to appear cloudy or amber in color. Storage containers and the desiccant packs that Green Growers Technology Alliance uses “That’s when the plant is telling you to control moisture when storing cannabis. Photo courtesy of Matt Tonkovich, Green Growers it’s ready to go,” Stefanik said. Technology Alliance's chief growing consultant

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ary but mathem culin atic nly al k t o now no -h ng ow si t u by Omar Sacirbey o – e le ns i ccurate and consistent dosing u m of edibles is among the biggest r a e tr A challenges facing the cannabis a x industry. Marijuana businesses can earn cc e a bad rep in the eyes of the public as u e well as state and federal lawmakers from r h a t reports about chocolate bars containing te o all the THC at one end of the bar – or consumers who “green out” after ingest- d g o s ing unevenly dosed products. s r This hasn’t been lost on edibles makers. i e Many are increasingly taking a more scien- n k g tific approach to their craft. Visit the better a edibles companies and o f m you’ll discover more than just a kitchen. Part p s You’ll find a facility that is part kitchen e and part laboratory, equipped not only r l o with baking pans and ovens but also lab- b d i grade scales and food-extruder machines u d that help products maintain their shape. c e A RT, t s e

m o

S

46 • Marijuana Business Magazine • September 2017 ary but mathem culin atic nly al k t o now no -h ing ow us t – o e en il su m These producers rely on a of mathematical and culinary r a skills. They craft their products in small batches to better control e dosing. They adhere to strict formulas and tried-and-true ratios a tr c x of non-THC ingredients to infused ingredients. And they test c e their finished products meticulously. u e r h “Accuracy has a lot to do with testing and pure mathematics,” a t said Emily Bercow, co-founder of Utopia Farms, a Santa Cruz, te o California-based grower that also makes award-winning medi- d g cal marijuana-infused macaroons and other edibles. “It’s about o s getting down a formula, following that formula and testing that s r formula frequently.” i e n k g a o f m Part p s e r l o b d i u d c e SC¬ENCE t s e m o

S

September 2017 • Marijuana Business Magazine • 47 Small Batches of Small Edibles Among the surest ways to control EXECUTIVE SUMMARY and test your products is by produc- ing them in smaller sizes and batches, Accurate and consistent dosing edibles makers said. of edibles is among the biggest challenges facing the cannabis Consider Julianna Carella, CEO of industry. This hasn’t been lost on Auntie Dolores in Oakland, California, edibles makers, who increasingly who makes MMJ-infused pretzels, are relying on a blend of culinary as well as mathematical know- brownie bites, mini-cheese biscuits and how to dose their products. To do other small edibles. They come in canis- this, they: ters containing multiple servings. • Craft their products in small Why mini-sized edibles? It’s easier batches to better control dosing. for patients to regulate their doses when • Adhere to strict formulas and tried-and-true ratios of non-THC the product comes in small serving sizes Emily Bercow, co-founder of Utopia Farms ingredients to infused ingredients. rather than one big piece that must be • Allow the combined ingredients to broken apart. For example, one mini- first sit hours at a time to better contains 28 different ingredients, such cannabis pretzel might be sufficient for distribute the THC and CBD before as spices, herbs, rice vinegar and soy cooking. one consumer, while someone else may sauce. Carella begins with cannabis- • Test potency frequently during the prefer several pretzels. infused coconut oil, which is mixed cooking process, beginning with the infused oil at the beginning with the wet ingredients. The spices and and, of course, the finished edibles. herbs are then added to that. • Record data and use it to dial in their parameters. Following Ratios and Formulas Achieving accuracy and an even spread of cannabis-infused oil or butter in your product also requires finding the of medical and adult-use chocolate bars. right ratio of non-THC ingredients to The Denver company produces about infused ingredients. 2,000 bars per batch. Most bars contain “With a consistent process you can 100 milligrams of THC or CBD, and achieve consistency,” Carella said. each bar is sectioned off into 10 pieces Bercow agreed, but she noted that of 10 milligrams each. while there is nothing complicated “Our whole recipe for our chocolate Julianna Carella, CEO of Auntie Dolores about being consistent, it does require bar goes into one tank with an industrial discipline. mixer and we add (cannabis-infused) oil “It’s not hard. It’s just a matter of Carella also said making smaller as an ingredient to the recipe based on following a standard and following that batches of edibles – versus mass produc- the potency of the oil,” BlueKudu CEO formula you put in place. And if you ing them – makes for a more gourmet, Andrew Schrot said. don’t have a formula, you’re not going artisan-style product. Moreover, this More potent oil means less is required to get the same results every time,” approach makes it easier to control per bar. BlueKudu staff members, Bercow said. dosing accuracy and consistency. Her meanwhile, will determine how much For example, Utopia’s macaroon batches yield enough edibles for about flavor oil and chocolate need to be added, recipe calls for a certain amount of three dozen canisters, or several thou- taking into consideration the bar’s weight coconut oil per batch – specifically, sand mini pretzels. and the infused oil’s potency. 270 grams of coconut oil per gram of “Each pretzel in that batch will have Schrot also believes that methods cannabis-infused oil. It’s possible to the same potency because of how we can make a difference in how evenly the correct a recipe if one deviates from that incorporated the sauce on the pretzels,” infused oil is spread among the other ratio, but it costs time and money. Carella said. ingredients. The more evenly it is spread, Formulas are even more critical for Most of Carella’s products are coated the more likely the THC or CBD will edibles makers that work in big batches, in a sauce infused with THC. For exam- be equally distributed throughout the like BlueKudu, which makes a variety ple, the sauce that coats the pretzels final product.

48 • Marijuana Business Magazine • September 2017

For example, rather than simply “That way I’m able to get a consistent adding infused oil to chocolate and THC dosing throughout all my baked then mixing and cooking the ingredi- goods,” Lewis said. ents right away, Schrot likes to pour Testing’s benefits don’t stop with about half the chocolate he needs into product accuracy. Over time, the results BlueKudu’s industrial-sized mixing – if retained and analyzed – can help an tub. Employees then add the infused edibles business standardize its produc- oil, followed by the rest of the choco- tion methods. That, in turn, improves late. Schrot allows the ingredients to product consistency and reduces costs, sit overnight so they are more evenly Lewis pointed out. distributed before being cooked. Lewis and her staff record their test To do this, the members of his results and other data on spreadsheets. kitchen staff arrive at 6 a.m. and For example, during decarboxylation, complete their preparations by noon. they record the temperature at which Andrew Schrot, CEO of BlueKudu In the last two or three hours of their the trim was baked, how long it was shift, they prepare the chocolate and the baked, and the THC levels afterward. “We track a lot of data and use infused oil in the machine for the next That way, Lewis and her team know lab-quality scales. That makes us better day’s batch. The ingredients gradually that if material comes back testing at, producers. And trim isn’t cheap, so we combine in the machine overnight for say, 11% THC, they can calculate how want to know how to get the most out 12-18 hours. much THC they’ll get off the raw trim of the trim,” Lewis said. “That helps it become homogene- and how much trim should go into the California-based Utopia, which does ously mixed before it’s actually made,” butter batch. multiple tests during the production Schrot said. Lewis also advised producing process, has a “library” of about 3,000 throwaway batches that you overcook or test results across all its product lines, Testing, Testing, Testing undercook under certain conditions so Bercow said. That allows the company While the above methods help edi- you can establish upper and lower limits to “formulate different analyses” and bles makers achieve accuracy and con- for temperature and time. “use our testing to refine our processes.” sistency, there is no certainty without testing. The most accurate and evenly Edibles producers have perfected many distributed edibles are tested numerous techniques in which to turn marijuana into times during the production process. tasty and effective infused goods. For example, Auntie Dolores tests the potency of: • The infused oil it purchases from outside suppliers. • The coating sauces or batters that have been infused with cannabis oil. • The final products themselves. Jaime Lewis, CEO of Colorado- based Mountain Medicine, which makes chocolate-covered marshmallows and other infused sweets, tests the raw trim – the leaves around the flower that have been trimmed away – that she mixes into her butter when it comes in. She next tests the trim again after decarboxylation – a key process that affects potency – and then tests the final product.

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ROLL TOP BENCHES APOLOG¬ES Adam Bierman has transformed MedMen into a marijuana industry powerhouse — despite ruffling feathers along the way

by Omar Sacirbey

56 • Marijuana Business Magazine • September 2017 MedMen CEO Adam Bierman stands proudly in front of the cannabis company's West Hollywood dispensary.

Photo by Tom Kelsey

September 2017 • Marijuana Business Magazine • 57 n a recent June afternoon, MedMen CEO Adam Bierman Ofielded questions from 47 deep- pocketed investors seated at white-cloth tables inside Manhattan’s swank 21 Club. His goal: raise money for a new $250 million cannabis investment fund Med- Men launched on June 15. During the luncheon, Bierman laid out the firm’s vision of acquiring or mak- ing investments in undervalued medical marijuana businesses in markets with many patients – but a limited number of licenses – in order to gain an early mover advantage. Bierman and MedMen expect those deals will generate a minimum annual return of 30%. Among the inves- Under CEO Adam Bierman, MedMen tors – representing wealthy individuals, purchased this West Hollywood dispensary in 2015 and redesigned the facility. family offices and institutional firms – a Photo by Tom Kelsey dozen liked what they heard. They began the process of investing in the fund, a procedure that involves signing nondis- closure agreements, receiving prospec- Music Group, the Los Angeles EXECUTIVE SUMMARY tuses and other steps. Times and Monsanto. The scene shows just how far Bier- • He donates to the Marijuana Policy Over the past few years, Adam man has come in the marijuana industry Project 1% of the money MedMen Bierman and partner Andrew since he and a partner scraped together receives from fund investors, mak- Modlin have built MedMen into $13,000 to launch a medical marijuana ing him a major financial backer a large player in the cannabis industry. How’d they do it? dispensary in a seaside California town of pro-legalization efforts; that has • Reinvention. By being open to in 2010. A couple of years later, Bier- earned Bierman new legitimacy and changing business plans and man and Andrew Modlin officially powerful friends. quickly pivoting from one project to a new opportunity. founded MedMen as a consultancy • He’s overcome a brash, controver- and then built it into a well-capitalized, • Bierman’s first “epiphany” was that sial style that has offended some most states would adopt license talent-stacked marijuana business man- marijuana business veterans who limitations, and that the best agement firm that today owns or has business vehicle for that landscape label him as a greedy, hype-over- would be a management company. stakes in seven MJ companies in three substance opportunist who doesn’t states and Canada. In 2016, MedMen • Before chasing contracts for respect them or the plant. the new management company, launched its first private equity fund, Bierman and Modlin decided which closed to new investors in April The 35-year-old Bierman, a business- they should first build the after raising $60 million. man first and foremost, has no regrets. “infrastructure” of the new “I’m great at making deals,” he told company – hiring top talent and How has Bierman – together with developing company software Modlin – done it? Marijuana Business Magazine. “I’m systems and standard operating never going to pretend that this has been procedures. • He’s been a master of reinvention, my special plant for 30 years. When I got • Sensing investor interest, willing to change plans and business into this industry, I didn’t smoke weed. company leaders created a private equity fund. models at the drop of a hat to seize So I’m not going to pretend. The one an opportunity. • Bierman acknowledged he has thing I’m not is inauthentic.” angered some legacy cannabis • He implemented a savvy hiring business people but has tried to strategy, filling MedMen with talent Think of Cannabis Like Alcohol make amends through significant donations to cannabis advocacy from established mainstream com- Bierman’s first exposure to the can- groups. panies such as BlackRock, Capitol nabis industry was in 2009 when a small

58 • Marijuana Business Magazine • September 2017

California dispensary hired his marketing medical marijuana dispensaries did not They developed a network of growers, firm, ModMen, to perform some work. charge sales tax, The Treehouse did. learned about the industry and, within Bierman’s learned a lesson from that gig: “People were like, ‘No, you don’t charge three years, were running four dispen- The owner did not have a lot of “business patients sales tax.’ We said, ‘No, we’re not saries and two cultivation sites. Then, acumen” but was still raking in money. going to eat the sales tax,’” Bierman said. in 2013, Bierman received phone calls Bierman figured he and Modlin – Comparing marijuana to alcohol and from entrepreneurs interested in starting now MedMen’s chief operating officer gambling didn’t win Bierman many marijuana businesses in Massachusetts, – could make a killing by competing friends in the cannabis industry. where the regulatory model imposed against such businesses. “It’s not lost on me and it definitely a license cap. The entrepreneurs asked “We felt very confident that there doesn’t feel good, but I know that men- Bierman if MedMen would be inter- were not a lot of competent, business- tality has caught some flak with legacy ested in operating the businesses. minded strategic thinking operator- participants,” Bierman said. “But we While Bierman didn’t accept the owners,” Bierman said. didn’t back down. We didn’t apologize.” offers, he believed the phone calls With his first batch of MMJ provided Yet Bierman has sought to mend revealed a greater opportunity that was on consignment and $13,000 that went fences. about to emerge – one that underpins a toward rent, display cases, a cash register “Nobody respects the game more key piece of MedMen’s business model. and some other retail necessities, Bier- than us,” he said, pointing to the hun- “Our thesis was that Massachusetts man and Modlin in 2010 opened The dreds of thousands of dollars MedMen was going to create a merit-based oli- Treehouse, a dispensary in the coastal has contributed to marijuana advocacy gopoly, and that would mean that small California town of Marina del Rey. groups. “But you have to acknowledge marijuana was in jeopardy,” he said. “What we learned really quickly was the full extent of the game, and the Bierman theorized that states that that the clearest path to success in this game is making money.” legalized medical cannabis in the future industry is to pretend that you’re not would follow Massachusetts, implement- dealing with pot,” Bierman said. The Management Model Moment ing license caps. Furthermore, those Instead, think of it more like casinos After launching The Treehouse, license winners would need operators or alcohol. For example, while many Bierman and Modlin quickly expanded. with experience running marijuana

HIRING FOR THE MEDMEN MOLD

y critical component of MedMen’s success has been hiring top talent av Chris Le to build a team that co-founders Adam Bierman and Andrew Modlin Ahoped would one day dominate the cannabis industry. Thanks to a • Jocelyn Pettway, facilities design hiring spree, the firm has gone from about 15 people in early 2015 to more manager. Worked in the theater than 170 today. world before transitioning to Some key hires include: cannabis. • Chris Leavy, co-chairman and head of MedMen Capital. Past employers • Daniel Yi, communications include Oppenheimer Funds and BlackRock, the world’s largest asset director. Former reporter with manager. Leavy retired in his early 40s but decided to jump back into the Los Angeles Times. the business world with MedMen. What do Bierman and Modlin look • Chris Ganan, chief strategy officer. A real estate and hedge fund attor- for in a potential hire, and how do ney who worked at the global restructuring firm Alvarez & Marsal and they attract the people they want? other businesses. The people the two have hired tend to be like them. Namely: • Kate Denton, chief marketing officer. A veteran of Kraft Foods, PepsiCo and Capitol Music Group. • They come from businesses outside the cannabis industry. • Damian Solomon, director of cultivation. Formerly a greenhouse expert with De Ruiter Seeds, a Monsanto subsidiary. • They apply a business approach

60 • Marijuana Business Magazine • September 2017 businesses in other states. The best way to recruited software engineers, facilities Knowing they were a few months take advantage of such a situation would design specialists, cultivators, extraction away from running out of money, Bier- be to create a management company that specialists, lawyers and accountants. man and Modlin sought third-party would target states with license caps. It was putting the cart before the capital. The search would help create the “That was the big bet,” Bierman said. horse, Bierman admitted, but the goal important second leg of their business “We understood what our path would was to have his team built and to have model, a private equity fund. be, and we went all in and did it.” things like the company’s internal soft- “That was something I had never That triggered a big change in tack. ware and SOPs written and tested by the done in my life before,” Bierman said. In 2013, Bierman and Modlin shut- time MedMen pursued its first deals. In 2013, with enough capital to tered and sold all their MMJ businesses “We’ve got to refine this so when survive a couple more months, a family because they were in California’s pre- we get our first contract, we can go office in Florida contacted Bierman. regulatory gray market. The lack of legal execute,” Bierman said. “We were right It was seeking a medical marijuana legitimacy would have made it difficult about the fact that we needed to build license in Illinois and was interested in if not impossible to land clients for the the infrastructure first. The best thing having MedMen manage the business management company that Bierman that we did was be patient.” if the family office landed the license. wanted to build. But after the meeting, the family office The ‘Blessing’ of decided that, rather than apply for the Launching MedMen Nearly Going Broke license, it should invest in MedMen’s Bierman and Modlin first conceived But hiring strategic staff away from management company. of MedMen in 2010 and filed the legal major companies required premiums, Bierman said he’d think about it and paperwork for the business in 2012. and after a couple of years the money promptly called Chief Strategy Officer They spent the next couple of years hir- started running out. Chris Ganan to ask how to get the deal ing personnel who worked on creating “The only thing that we didn’t plan done. The Florida family office invested standard operating procedures, company for was going broke,” Bierman said. $3 million and gave MedMen up to two software and other key infrastructure for That, however, “was an unplanned bless- years of “runway” to finish building the the new MedMen. In particular, the pair ing in disguise.” management company.

y a w n n tt na to e Chris Ga Kate Den Jocelyn P

to the marijuana industry and theory, Pettway said. Near the end of the interview, Modlin explained his view cannabis as a commodity view of design and marijuana. rather than a special plant. “His approach was, ‘This is a store like any other store. It’s a room. No matter what happens, we need a place where people can give us money, They are good at pivoting to where there’s a cash register,” Pettway recalled Modlin saying. capitalize on a new business Her view: “This has always been just a design job. Marijuana’s a huge opportunity. part of it, but at the end of the day, what I do is design.” Consider Pettway, MedMen's Denton, the chief marketing officer, left Capitol Music, where she was facilities design manager. She was a working with new artists, and joined MedMen in June. In her interview, she theater professional specializing in told Bierman that while she didn’t have experience in cannabis, she had set and scene design who answered worked at some of the best-marketed companies in the world, like Kraft a MedMen job advertisement in and PepsiCo. 2015. A few days later she found “I had experience in other sorts of businesses which are analogous to what herself sitting across the table from we’re doing here, and what the broader cannabis community is trying to do, Modlin, himself a professional artist. and I thought I would be a good fit,” she said. Bierman and Modlin agreed. The interview was about design, timelines, budgeting and design — Omar Sacirbey

September 2017 • Marijuana Business Magazine • 61 That first capital infusion and those And as an owner, that’s a hard concept. estate and hedge fund attorney in New that followed rescued MedMen and People who are entrepreneurial don’t York City. He worked at Alvaraz and ultimately allowed it to gain manage- like to work for other people.” Marsal, the global restructuring firm ment contracts and show clients and Still, he doesn’t think about doing that liquidated the assets of Lehman investors projects the firm had run anything differently. Consider that Brothers after the Wall Street firm filed successfully. Florida deal. for bankruptcy in 2008. But the deals had drawbacks: They “It’s easy to look back from a stable Ganan had read about the cannabis required an “onerous” amount of over- situation like now and say, ‘I should have industry’s need for cultivation real estate sight that interfered with running the done this. I should have done that.’ We and the high returns that investors business, in Bierman’s view. did what we had to do,” Bierman said. were getting on marijuana properties. “The first few times I brought in out- Since then, Bierman bought that After shadowing Bierman at MedMen’s side capital, with my back up against the investor’s stake and assembled a group offices for a couple of days, he signed on. wall, I didn’t look at the terms, or ask if of investors more to his liking. One of Ganan’s first major recom- the partner is going to be supportive,” mendations was that MedMen should Bierman explained. “Even as I suc- Are We Having Fund Yet? start a fund. Bierman had never done ceeded, I didn’t feel good about some of Ganan is a big reason the company this type of fundraising, but he liked the those deals because there were just too launched its first private equity fund in idea and told Ganan to proceed. many hooks and too many levers. But at 2016. Ganan is a childhood friend of MedMen launched the fund in late the end of the day, if you’re a CEO, and Bierman’s who played point guard for spring 2016 and closed it last April, you bring in outside investors, in some the Johns Hopkins University basket- having raised $60 million and invested way or shape you work for them now. ball team and went on to become a real in seven companies.

Budtender David Ezenwa, left, interacts with a MedMen customer. Photo by Tom Kelsey

62 • Marijuana Business Magazine • September 2017 The most trusted name in grow lights for 25 years.

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HORTILUX® is a trademark of Iwasaki Electric Co., and is registered in USA and Japan. MedMen shuttered the fund before in Mustang, Nevada, near Reno, that MedMen reopened the store in early it reached its stated goal of $100 mil- includes a 26,000-square-foot green- 2016 and said it has reduced the cost of lion because it had an opportunity to house and a 19,000-square-foot extrac- goods sold from 63% to 50% through invest in MedReleaf – a publicly traded tion and production facility that are measures such as proprietary business licensed medical marijuana producer in expected to be operational by this fall. software that has made the store more Canada – at a pre-IPO price of $2.09 MedMen also acquired three opera- efficient. The dispensary also increased per share. MedMen pumped in some $8 tional dispensaries in Southern Califor- its patient count by 34% and boosted million. When MedReleaf announced nia, a license in New York that gives it per-patient spending from $65 to $83, it was going public and the per-share a vertically integrated business with one something Bierman credits to a store price would be $9.50, MedMen stood grow site and four dispensary locations, redesign that made for a more pleasur- to make a killing. Reasoning it would be as well as a 6% stake in MedReleaf. able shopping experience. unfair to the fund’s early participants to A West Hollywood dispensary Med- “The cost to get into that business accept more investors who would basi- Men acquired in late 2015 underscores today, if we were going to look at a cally dilute the returns, MedMen closed the company’s strategy. It remodeled comp, is probably 2½ times what our the fund to new investors – and hatched the facility, introducing innovations like cost was. And that’s in less than a year,” plans to open a second one. patent-pending “bud cases,” which are Bierman said. He reckons MedMen Those seven businesses in which round, handheld cases that hold a bud bought the dispensary at about a quarter MedMen invested reflect the criteria and have a built-in magnifying glass and of the value it’s worth today. that its executives consider when they aroma holes so patients can better see Another attraction is West Hollywood pick investments. They include: and smell the product. allows only four licenses, so competition • Limited license markets where being a first mover is a significant TAKING THE LONG VIEW advantage and the barriers to entry for other competitors are high. edMen’s purchase earlier this year of the financially trou- • The market offers considerable bled Bloomfield Industries in New York is a prime example potential. Mof Adam Bierman’s acquisition philosophy. • The acquisition target is greatly The MedMen CEO is keen on undervalued marijuana businesses undervalued. that operate in markets with strict license caps. He also likes mar- kets that offer long-term potential. “There are a lot of people in this Bloomfield – one of New York’s five originally licensed medical industry who are first. But there’s a marijuana businesses – had been struggling, even failing to pay smart way to be first, and then there’s employees in the final months before MedMen stepped in. After the just being first,” Bierman said. deal, some industry experts questioned MedMen’s purchase, citing In other words, if you’re first but not New York’s overly restrictive MMJ program and the stiff competition strategic you’ll lose the edge that first- posed by the local black market. mover advantage offers. Bierman, however, saw opportunity. “If you’re thoughtfully first, be first While New York’s program had been infamously difficult, regula- in places where you can create a moat tors there were also working on changes to help the program. They around what you’re doing,” Bierman approved those changes earlier this year. Among the most notable said. “That’s why we’ve shied away from was the addition of chronic pain to the list of qualifying conditions. the free-market states. There is no moat Regulators also approved home deliveries of medical marijuana in Colorado or Washington. and permitted a wider variety of health professionals to recom- That philosophy has served Med- mend MMJ. Men well. Since shifting gears and “We believe very much that New York’s program is going to almost going broke a few years ago, the evolve,” Bierman said. “That’s a market with 20 million-plus people company has swept across the North and … limited licenses. We’re not overly concerned with profitability American cannabis landscape, acquiring tomorrow. We look at New York as a longer-term play. … The long- a cultivation facility in Los Angeles in term upside is so big.” early 2016 that now produces about 120 – Omar Sacirbey pounds of cannabis per month, as well as a cultivation license for a business

64 • Marijuana Business Magazine • September 2017 is limited. It’s surrounded by Los Angeles be come 12, 24 months from the time going to do is lose our momentum,” and borders several heavily populated we did the deal.” Bierman said. communities in the city. The fund is still focused on wealthy Bierman said it also helped that he had New Fund Launches individuals and family offices, but Bier- established a regulatory affairs department MedMen launched its second fund man said MedMen is “having discus- that tracked the city and state’s rulemak- on June 15. The company set an aggres- sions” with institutional investors as ing processes, and had a pulse on when sive target of $250 million that it hopes well. “I believe there’s a high likelihood regulations were going to come forward. to raise in two years, as well as a deploy- this fund will see some institutional “We were able to do that because ment time frame of 10 years. capital,” Bierman said. politically we were so active in Los The firm closed on its initial $17.5 Angeles, we had a really good sense of million injection on June 20. Some of Mending Fences what the future would look like,” Bier- that is already committed to what Bier- While Bierman has been busy trans- man said. “We had a seat at the table man described as a retail project near forming MedMen, he has also sought to and were part of the discussion as those Los Angeles International Airport. strengthen the firm by reining in what rules were being contemplated. Because “We’re not slowing down on the can be viewed as disdain for the legacy we had that foresight we could antici- deals side. The deals are the special- marijuana community. That has meant pate what the value of this thing would ness of all of this. The last thing we’re supporting causes that legacy people

Name: MedMen

Founded: Legally incorporated in 2012 but conceived in 2010. MedMen owns and manages: three dispensaries and one grow site in California; one cultivation site in Nevada; and Headquarters: Culver City, California one license in New York that allows it to run a grow site and four retail locations. MedMen also has a minority stake in one CEO and co-founder: Adam Bierman Canadian licensed medical marijuana producer, MedReleaf.

Chief Operating Office and co-founder: Andrew Modlin Funds: The above businesses were capitalized through Med- Men’s first $60 million fund, which closed to new investors in Co-Chairman and head of MedMen Capital: Chris Leavy April and holds investments currently valued at $92 million. Chief Strategy Officer: Chris Ganan MedMen launched a second fund in June with a target of $250 million. Businesses: The company has two components: MedMen, which is a management company, and MedMen Capital, the Employees: Approximately 170 firm’s investment fund arm.

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66 • Marijuana Business Magazine • September 2017

WALL STREET CRED ne factor that could help OMedMen bring in institu- tional money is Chris Leavy, a financial services heavy hitter whose past employers include Morgan Stanley, Oppenheimer Funds and BlackRock, the world’s largest asset man- ager. In 2004, Barron’s named Leavy among its “Top 100 Fund Managers.” At Black- Rock, he oversaw $115 billion in equities. In April, MedMen hired Leavy as co-chairman and partner. He is the head of MedMen Capital and oversees the company’s new private equity fund, which has a goal of raising $250 million. To land Leavy, MedMen CEO Adam Bierman delegated Chris Ganan, the company’s Jocelyn Pettway is MedMen's director of chief strategy officer, to lead facility design. the efforts. Ganan previously Photo by Tom Kelsey was a hedge fund lawyer, so he knew Leavy’s world. Ganan tracked down Leavy would most likely endorse, such as the where they stand. That part of me will in retirement, though he was Marijuana Policy Project. always be there.” still investing on a personal Rob Kampia, MPP’s executive But he also admits he has moderated level. In fact, he had invested director, called MedMen “our biggest his style, if even just a little. For example, in MedMen’s first fund, so supporter for reform.” he still may make unfiltered statements he was already attracted to While Bierman acknowledges the about the legacy marijuana demographic, cannabis. MPP donation is a charitable act, he but he prefaces some of his comments What made him take the unabashedly points out that it’s at least by acknowledging what legacy marijuana leap out of a cushy retire- as much about smart business as it is people have achieved, for example – ment and into the marijuana charity. statements along the lines of, “Without industry? “It’s going to make investors more the legacy community, the marijuana “The investor DNA in me money because as more laws change, industry wouldn’t be where it is today.” just couldn’t ignore what is more markets open, we have more Bierman also said he has more going on in the legal cannabis opportunities,” Bierman said. respect for the legacy people because of industry,” Leavy said in a news release announcing his Med- He also said he’s become more mature their trailblazing role in the industry but Men post. “Despite the com- than when he first got in the industry feels they are “unfortunate” because they pelling business prospects, seven years ago, when he was 28. lack the business acumen to succeed in the scarcity of traditional “What do we do great when we’re an industry they helped create. capital sources is creating 28 years old, except for maybe athlet- “I’m more sensitive now to those valuations for privately held ics?” Bierman asked. “As I look back people who have paved the way within assets that are some of the at my 28-year-old self, I got into the the industry and so many of them won’t best I’ve ever seen.” industry and I saw the opportunity. I’m be able to see the future,” Bierman said. very unfiltered, and I wouldn’t change “But I hope the respect is mutual, and – Omar Sacirbey that about myself, because when people that they can have respect for what we are dealing with me they always know have built here.” ◆

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Financial sweeteners and a DEALprofessional approach can help win over a wary landlord

70 • Marijuana Business Magazine • September 2017 by John Rebchook

arijuana retailers and growers have some- times been forced to pay two to four times Mthe market rate when leasing a building. At first blush, negotiating a reasonable deal may seem like a hard sell given marijuana’s illegal status under federal law. But that doesn’t mean you shouldn’t try. In fact, it may be possible to eke out a lower rent – or at least convince a reluctant landlord to lease you their property. Any break would be welcome, given that the monthly rent can cost tens of thousands of dollars. That’s on top of other expenses such as electricity. To begin, you need to be flexible and willing to kick in sweeteners to entice a wary landlord. You might, for example, pay six months of rent upfront versus three. Or you might agree to add a stipulation

The Wellness Connection of Maine believes maintaining an air of professionalism goes a long way with a prospective landlord. Photos courtesy of Wellness Connection of Maine

September 2017 • Marijuana Business Magazine • 71 the day and don’t tie up traffic. Typically, there’s a line to the door when Ermont opens at 10 a.m., and the 15 parking spaces (soon to be expanded to 20) are usually full until noon. Busi- ness then slacks off. It picks back up from 3 p.m. to 5 p.m. and again as clos- ing time nears at 7 p.m. In short, Hudson knows he must be ready to pull out the stops to reassure a landlord.

Bring More Money to the Table Remember, too, that money talks. As a show of good faith, if a land- lord is asking for three months of rent Ermont’s medical marijuana cultivation center. Photo courtesy of Ermont upfront, consider offering six months, advised Rosi. That shows you are seri- ous, and the landlord may be willing to to your lease that you’ll expand your – landlords, too, can fall prey to bogus negotiate with you on other points. operations down the road. information. It’s useful to be upfront Hudson used a similar strategy when Moreover, you want to squelch any with a prospective landlord about your he first signed a lease for Ermont but preconceived notions a landlord may operations to ease any jitters. Landlords, have about cannabis. Instead, present for starters, have a reason to be uneasy. yourself as a legitimate business owner. “Leasing to a marijuana business is EXECUTIVE SUMMARY “One of the main like no other business in the country,” things you have to do is said Jack Hudson, founder and CEO of Landlords may be less willing prove you are profes- Ermont, a 36,000-square-foot medi- to lease property to marijuana sional,” said Patricia cal marijuana grow and dispensary in business owners or will Rosi, CEO of Well- Quincy, Massachusetts. charge sky-high rent. But MJ entrepreneurs can take steps to ness Connection of “We are the only industry where a make the process less onerous: Maine, which operates bank can demand that your landlord • Show you’re a professional by four medical marijuana stops leasing to you or it will call the bringing in your business plan, referrals and any compliance Jack Hudson is dispensaries. “When you mortgage. So landlords take a lot of risk records you may have. CEO and founder meet with a building by leasing to a marijuana business.” of Ermont, a • Educate any prospective landlord medical marijuana owner, plan to bring in Hudson is taking steps to ease such about your business by showing business in Quincy, your business plan, busi- worries as he tries to expand into recrea- that person any existing MJ Massachusetts. ness referrals, provide tional marijuana under Massachusetts’ business operation you may have, Photo by Jane such as a dispensary or grow. Hayward compliance records. new adult-use program. • If a landlord is asking for three Convince your landlord While he scouts parts of the state to months of rent upfront, consider you are here to stay.” find a suitable location, he plans to allay offering six months as a show of Here are tips that could make leasing concerns that a retail shop will result good faith. a marijuana space less onerous. in an annoying flood of customers by • If you expect to need more space down the road and the building urging potential landlords to visit his has room to grow, put that into Educate Your Landlord Quincy Dispensary. your lease. Just as consumers and politicians Hudson wants them to know that • Scout out economically distressed have misconceptions about marijuana – while 250-350 patients visit his dispen- areas where better deals may be available. legalization generates crime, for example sary daily, they are spread throughout

72 • Marijuana Business Magazine • September 2017 Grow Smarter with Growlink Wireless. E ortless. Magnicent.

growlink TM then couldn’t move into the building as Agree to Expand short-term lease, because quickly as planned. If you expect to need more space the building owner will Hudson initially signed the lease in down the road and the building has not have to worry about November 2013 and made a $35,000 room to grow, put that into your lease. turning off other tenants deposit. He ended up raising the ante by “One thing I tell my marijuana who don’t want to be $130,000 – to $165,000 in deposits – to clients to do is visualize where they near a dispensary. help keep the deal alive when he didn’t think they will be in five or 10 years,” She added that more get the necessary government approvals said Blake Cisneros, a broker with City space could become Blake Cisneros, a as quickly as he had expected. available in a building Seattle real estate Closers in Seattle. broker, says you “These additional deposits were to “Let’s say you need 3,000 square and a marijuana operator need to know when mitigate the landlord’s risk in the event feet for your today, but should be on top of such to walk away from a bad deal. Ermont was not a successful applicant,” you think you will need 10,000 square changes. “Talk to your Photo courtesy of Hudson said. feet down the line. If you are in a place landlord often to stay in Blake Cisneros “Once Ermont’s final approval where you can negotiate to lease 10,000 the know of potential was obtained from the Massachusetts and grow into it, I guarantee you that 10 changes,” she advised. Department of Public Health in years from now you will be happy with Hudson agreed. “You might be able May 2016, the majority of the addi- the price you locked into today.” to help your landlord out by committing tional deposits to mitigate such risks Rosi noted that landlords may look to space in the building,” he said. were returned,” he added. “The upfront kindly on a marijuana operation grow- money definitely helped keep the ing into space currently occupied by Make Your Landlord a Partner lease alive.” tenants on a month-to-month basis or a Many traditional retailers will provide Lobby of Ermont’s dispensary. Photo courtesy of Ermont

in his MMJ dispensary because it’s a not-for-profit operation. But he would consider giving a landlord an equity stake in any future for-profit rec business. Another option is to offer to buy the building from the landlord, according to Brooke Gehring, CEO of Live Green Consulting in Denver and the owner of four MJ retail outlets and two cultiva- tion centers. “We have bought some of our build- their landlords a percentage of their sales, Hudson and others. ings, so I am both a landlord and a in addition to their base lease rate. But It could prove valuable, given that a tenant,” Gehring said. many states bar marijuana businesses lease can be pricey. In Hudson’s case, from entering into such agreements. his lease expenses are close to what he Locate in a Distressed Area On the other hand, you may be able spends on electricity – around $40,000 Just like renting or buying a house, to get a lower lease rate by giving your per month. In this case, however, Hudson you’ll no doubt find better deals in areas landlord equity in your business, advised cannot offer a landlord an equity stake that are economically distressed.

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“Anyplace near Boston is hot and RENTER BEWARE you will pay top dollar,” Hudson said. “There is just no getting around it.” efore signing a lease, get a lawyer to comb through the For future stores, he plans to scout details and be alert to certain warning signs. areas that are not as hip as Boston, B Denver cannabis business owner Brooke Gehring learned where the municipalities might wel- this the hard way. Gehring thought she’d found the perfect building come the economic impact of a profit- for launching her medical marijuana cultivation center in 2010. able business. “It had almost 30,000 square feet of space in northeast Denver, On the other side of the country, had sufficient power and enough room for expansion,” recalled Cisneros said a traditional retail space Gehring, the founder and CEO of Live Green Consulting. in Washington state can be 20%-45% “I thought it was eventually going to be the flagship for all of our cheaper outside the heart of Seattle. production and retail business operations.” What she didn’t know – and it wasn’t disclosed when she signed Offer to Improve the Property the lease – was that her landlord was mired in bankruptcy and foreclosure proceedings. Another tactic is to offer to pay for After three months of negotiating and two months in the build- tenant improvements. That way, you ing, the bank kicked Gehrig out once it foreclosed on the property. may be able to get a break on the lease The expulsion cost her “several hundreds of thousands of dollars” In Hudson’s case, he paid for several in lost plants. tenant improvements, such as vaults, “It was very tough, and I can’t help but think I was taken advan- lighting and upgraded heating, cooling, tage of,” said Gehring, who has since bounced back and is the ventilation and electrical systems. He owner of four MJ retail outlets and two cultivation centers in addi- even paid to have a stucco-like insula- tion to her consultancy. tion material placed on the outside of The debacle, in fact, proved to be a valuable learning experience. the concrete building. The landlord did, In subsequent ventures, she’s had lawyers go over every detail however, split the cost of putting on a in the lease agreement to protect her business from such a nasty new roof. surprise. For example, the lawyer can ascertain any debt on the building Know When to Walk Away and whether the landlord has partners. It’s also worth remembering that no The experience also has made her aware of red flags when sign- deal can be better than a bad deal. ing a lease. Cisneros recently advised a can- “There are a lot of landlords you hear about that when there is a nabis client to walk away from a deal marijuana dispensary or a cultivation facility involved, they just see in Tacoma, Washington, when the dollar signs in their eyes,” Gehring said. developer asked for so much money Personally, she doesn’t want to do business with a landlord like that, although she understands others might still sign on the dot- that it was “highway robbery,” even for ted line if they feel they have no viable options. someone in the marijuana business. “I want to have a long-standing relationship where both sides “It’s like that old Kenny Rogers are transparent and the expectations are clear,” Gehring said. song: ‘Know when to hold ’em. Know when to fold ’em,’” Cisneros said. ◆ — John Rebchook

76 • Marijuana Business Magazine • September 2017 BELLPARKHORTICULTURE

End humidity problems • Effective & Efficient • Increase Airflow • Increase Yield • Decrease costs bellparkhorticulture.com Barred from social media advertising, A hemp-based CBD companies use education, SEO and physicians to reach consumers L T A by Margaret Jackson ith the market for hemp-based CBD products booming, dozens of compa- W nies have surfaced across the country E D to pump capsules, oils and other goods into a market valued at $130 million. Given the competition, it’s critical for these companies to make their products appealing to R V the average consumer, many of whom know very little about hemp or CBD. But marketing hemp CBD products has its challenges, in part because of the plant’s close relationship to marijuana. N E “There’s a significant education process to the average consumer,” said Chad Reiling, marketing director for hemp at Denver-based Dixie Brands, which sells hemp CBD products for humans A R under the Aceso brand and for dogs under the Therabis brand. “In the marketplace, the big misconception is that hemp is a euphemism for marijuana.” T T The marketing hurdles are significant: • Hemp CBD businesses can’t run paid ads on Facebook and other social media sites, which have restrictive policies when it comes to I I these types of products. • Many online marketplaces are unwilling to carry hemp CBD products. V S • While hemp CBD suppliers are sometimes approached by cannabis-related publications such as Dope Magazine and to run ads, the readership of these publications does not attract the broader demographic the companies want to reach. I Consequently, suppliers of hemp CBD products must get creative. Here’s a look at some of E the strategies companies are using to reach consumers. Engage Through Social Media N A spokesman for the nonprofit advocacy group Vote Hemp estimated there are likely 50-100 hemp brands offering products such as capsules, tinctures and oils. Even though these companies can’t advertise on social media, the most popular method of educating people appears to be networks like Facebook, Twitter and Instagram. G Mike Harinen, chief brand officer for Colorado-based Bluebird Botanicals, said social media helps get conversations going among people who are interested in the benefits of hemp CBD.

78 • Marijuana Business Magazine • September 2017 Denver-based Dixie Brands sells hemp CBD products for humans as well as dogs. The latter are sold under the Therabis brand. Photo courtesy of Therabis

EXECUTIVE SUMMARY

Companies that make hemp- based CBD products must use a variety of strategies to reach consumers because of government curbs and other factors that restrict their ability to advertise. Some marketing and advertising strategies include: • Turning to education to teach “Since the beginning, social media On another Facebook post last Janu- consumers about the health has been key for us,” Harinen said. ary, the company shared a photo of an benefits of hemp and how the “Building a strong presence on Face- old $10 bill with the caption: “1914 Fed- plant differs from marijuana. book has been a big boon for our com- eral Reserve $10 bill, depicting a Hemp • Using social media platforms that don’t allow hemp CBD ads pany. We can’t engage in the conversa- harvest in PA and printed on Hemp!” – such as Facebook, Instagram tion if it becomes close to medical, but The post attracted more than 200 and Twitter – to engage with customers can engage with each other.” “likes,” “loves” and “wows” from fans and consumers and post educational material about hemp and CBDs. One of the company’s Facebook posts was shared nearly 300 times. “Pioneers • Relying on search engine over the summer, for example, shared a grew it!” one fan gushed. optimization to get found through newspaper article about a plan by Lehigh Another business that relies on social Google searches. University researchers to study the impact media is Lazarus Naturals, a Seattle • Engaging with physicians who are of medical marijuana on children with company that posts photographs and willing to educate their patients about the merits of hemp CBD autism. The post generated 61 “likes,” and educational articles about hemp and products. 27 fans shared it on their Facebook pages. CBD to generate interest in its products.

September 2017 • Marijuana Business Magazine • 79 #1 IN SOUTHERN CALIFORNIA

A dropper top full of hemp CBD oil from Bluebird Botanicals. Photo courtesy of Bluebird Botanicals WE HELP YOU

focus on search engine optimization, a marketing discipline aimed at increasing visibility in nonpaid search engine results. “Not only is a sound SEO program a best practice for any online property, it’s especially important for brands that may EXPAND “We just try to post pictures and generates conversation among their fol- information that people can relate to,” lowers,” Shirley said. “These social media not be able to leverage the paid plat- said Meg Gwirtz, the company’s office influencers also align with our vision forms that dominate the top of all search YOUR BUSINESS manager. “We post things that are of sustainability and organics, so they engine results pages (SERPs),” Dixie’s visually appealing – people using the appreciate a high-quality product that Reiling said. “In this instance, without TO SOUTHERN CALIFORNIA product in everyday life.” their following is able to benefit from.” good search results placement, you’re On its Instagram account, for example, even more invisible.” Lazarus Naturals posted a photo of a Search Engine Optimization Reiling said Dixie is leveraging stand- large clear tub of its 25-milligram CBD Because most sales occur online, it’s ard SEO practices to get its sites for its capsules, accompanied by the caption: critical for CBD companies to make CBD brands to surface at the top of the “#cbdcapsules awaiting packaging:)” sure they show up at the top of Google results for key words and phrases, as well Because Instagram users search for searches. For that reason, many companies as maximizing its presence on the SERP. content they might like by using hashtags, Lazarus accompanied its photo with the W O R G following: #cbd #madewithlove #seattle #nature #science #hemp #hempheals. The post attracted more than 100 “likes.”

Social Media Influencers Denver-based NuLeaf Naturals has employees whose job is to build rela- tionships with people who have large followings. “We’re working with people who believe in our products – health profes- sionals and people with significant fol- lowings that believe in helping people live Sales happier, healthier lives,” said Bo Shirley, Leasing chief operating officer at NuLeaf. Shirley said that during his eight years Financing in the cannabis industry, he’s cultivated Acquisitions relationships with industry influencers. “The social media influencers we work with receive a product to sample, Paula Turner Bruce Hutchison [email protected] but more importantly, they are able to Hemp CBD oils are the most popular product offered by Colorado’s Bluebird Botanicals. [email protected] Photo courtesy of Bluebird Botanicals BRE License #00702492 BRE License #00957590 talk about a product that is exciting and Mobile 760-578-6564 Mobile 310-753-7059 Desert Pacific Properties 77-933 Las Montanas Rd. #101 Palm Desert, CA 92211 80 • Marijuana Business Magazine • September 2017 #1 IN SOUTHERN CALIFORNIA WE HELP YOU EXPAND YOUR BUSINESS TO SOUTHERN CALIFORNIA W O R G

Sales Leasing Financing Acquisitions

Paula Turner Bruce Hutchison [email protected] [email protected] BRE License #00702492 BRE License #00957590 Mobile 760-578-6564 Mobile 310-753-7059 Desert Pacific Properties 77-933 Las Montanas Rd. #101 Palm Desert, CA 92211 The company: Spreading the Message • Uses data-driven, keyword-rich Then there’s the old-fashioned, tried- and-true form of communication: Word content on its website. of mouth. • Optimizes site functionality, perfor- All the companies Marijuana Business mance and speed. Magazine interviewed for this story said • Employs proper content formatting they rely heavily on word of mouth to spread the message about their products. and structured data to encourage In Colorado, NuLeaf, for example, rich snippets. hosts booths at popular events like the • Builds backlinks involving useful Boulder Creek Festival and the Boulder content from influential sites that Farmers Market, where the company can have strong SEO and are seen by engage directly with consumers. That, in Google as a trusted source, such as turn, creates a buzz. PetMD.com. “Since we can’t really go down a lot of the traditional marketing streams, word “Interestingly, the search engines’ ill- of mouth has been huge for us,” Shirley informed policies don’t extend to their said. “Having a quality product gets Seattle-based Lazarus Naturals sells a organic results algorithm and display, people out there talking.” variety of hemp CBD products, including tinctures. Photo courtesy of Lazarus Naturals but just impact their paid networks,” Reiling said. “So we’re able to leverage Doctors Network the same tactics at any online property’s Some companies also rely on a disposal to build our own SEO.” network of doctors who are willing to educate their patients about the merits of hemp CBD products. THE IMPORTANCE OF EDUCATION In July, Bluebird Botanicals started contacting doctors who have ordered he hemp CBD market has reached an estimated retail value from the company. The doctors can of $130 million in the United States alone, according to a affiliate with the company and pur- T 2016 market estimate by Vote Hemp and the Hemp Busi- chase Bluebird’s products wholesale to ness Journal. sell in their offices. It’s also building But educating consumers about hemp CBD products is not a relationships with the doctors so it can simple task, in part because social networks such as Facebook can refer customers to them when they quash what they believe are ad campaigns. There’s also hemp’s have medical questions that the com- relationship to marijuana, which can make some consumers wary pany is not permitted to answer. of the plant. Harinen said the arrangement ben- The U.S. Food and Drug Administration bars companies from efits all parties involved by increasing marketing CBD oils and related products as treatments for specific conditions, such as autism or cancer. But it does allow companies the doctor’s patient base. It also allows to make what are known as small-structure function claims such Bluebird to give solid recommenda- as “helps to maintain cell strength” — provided there is research tions to customers who want specific evidence to back up those claims. advice and empowers customers with As a result, education remains a potent tool to reach the aver- professional support. age consumer. “Building a network of doctors has “We try to provide people with as much unbiased information as been really helpful,” Harinen said. “If we can,” said Mike Harinen, chief brand officer for Colorado-based we hear from a patient that they’ve Bluebird Botanicals. “But no sales pitches is a company policy. We been referred to us by their doctor, educate people on the difference between hemp and marijuana.” we’ll reach out to that doctor and provide answers to any questions they – Margaret Jackson have. They’re just as curious as their patients.” ◆

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Minerva’s sales have grown from $780,000 in sales in 2011 to a projected $5.5 million-$6 million this year. Photo courtesy of Minerva Canna Group

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New Mexico marijuana entrepre- neur Erik Briones has expanded From the Get-Go his vertically integrated medical marijuana company from $780,000 in sales in 2011 to a projected $5.5 New Mexico cannabis entrepreneur Erik million-$6 million this year. The veteran cultivator offered these tips to launch a grow and improve Briones shares tips for getting your grow it over time: • Form strategic partnerships with off the ground and perfecting it over time experts or other producers to maximize your yield and stock a deep retail shelf with product. by Joseph Peña • Avoid large-scale, hasty changes, All your products particularly with regard to critical component to early Briones knows a thing or two nutrient lines; instead, implement incremental change to gauge the at your customers fingertips. success is your grow: the about outshining the competi- impact on your crop. team of green thumbs you tion. Minerva has grown from a The in-store touch screen that recommends your products based on all the A • To distinguish your crop from that assemble, the yield and quality of your single storefront to three, and of rivals, use pesticide-free, organic important medical and recreational criteria. product, and the way you market it. from $780,000 in sales in 2011 to a grow practices and demonstrate an authentic, transparent “You have to come out of the gate projected $5.5 million-$6 million this commitment to running clean strong or others are going to outper- year. He’s also started development operations. Strain Symptoms Terpenes form and outshine you,” said Erik Bri- on a sustainable living farm that will • Vet and hire flexible talent for ones, a horticulturist and founder of house not only greenhouses but a your grow; a good place to start is Effects Potency Price New Mexico’s Minerva Canna Group, vegetable farm that uses recycled local universities with horticulture programs. a medical cannabis business with cul- soil and water as well as organic tivation and retail facilities. waste from the greenhouses.

Educate. Enlighten. Sell. | www.horizondisplay.com/seed 86 • Marijuana Business Magazine • September 2017 Confusion. Clarity.

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Educate. Enlighten. Sell. | www.horizondisplay.com/seed Briones, who founded Minerva in market, Minerva had more product on Implement Incremental, 2010, shared tips for how to prime a its shelves than rival retailers. Deliberate Changes cultivation facility for success – and The key to working with other pro- Some growers are tempted to improve it along the way. His strategies ducers is trust and a shared commit- overhaul their techniques frequently. include using organic cultivation prac- ment to quality, Briones said. Resist the urge, Briones said. Instead, tices, hiring flexible talent and making “You need to make sure that the make small, incremental changes to small, incremental changes to your product you are buying meets your better measure what works and what grow versus a large-scale overhaul. standards, or those shortcomings will be doesn’t. A large-scale, hasty change passed on to customers and patients, risks the consistency and supply of Form Strategic Partnerships and that’s a reflection of you,” he said. the product. With Experts If you own a small grow, it also may “If you want to change something, Develop partnerships with experts be worth the investment to hire a change it in small steps,” Briones and other growers to gain an early, consultant to help take your business said. “If you’re growing a 25-plant necessary advantage in your market. to the next level. rotation, take a fifth of them and try a Briones leveraged his horticulture Briones’ expertise, for example, new fertilizer line or a new technique. experience to partner with small, boosted Minerva’s harvest yields Then, you can measure what’s work- out-of-town producers – something from the get-go. While other growers ing and what’s not. But don’t reinvent he recommends growers do in states harvested 6-8 ounces of flower per the wheel all the time.” with restrictive plant counts. plant, Minerva consistently harvested “One of the biggest mistakes I’ve New Mexico, for example, previ- a pound to a pound-and-a-half and seen other producers make is chang- ously imposed a plant cap of 150 for gradually increased its yield to more ing their nutrient lines,” Briones added. each licensed grower; it was later than 2 pounds of flower per plant. “Someone sells them on a new line raised to 450 in 2015. To deal with “We never ran out of product,” Bri- promising bigger yields or higher the lower plant count, Briones helped ones said. “We didn’t always have 15 potency and they make the switch not small, licensed producers in the state strains, but we always had six or eight knowing how to use the new nutrient grow better product. He then bought strains, and we never closed and we line all through the growing stages.” the flower wholesale. That meant, in never ran out. That had so much of an Mistakes can be made at every the early days of New Mexico’s MMJ effect on our success in the early days.” stage of growth, and growers need to

GO ORGANIC AND BE A STICKLER ABOUT CLEANLINESS

eteran marijuana grower Erik Briones con- clean practices, Briones said. Set clear hygiene tends pesticide-free, organic grow prac- policies for your employees by requiring gloves Vtices make good business sense. Such and hairnets in harvest rooms. practices, he said, result in higher yields with Before and after the harvest, sterilize surfaces, better quality flower and safer, better-tasting floors, benches, buckets, tools, trimmers and products for patients. He also stressed the need anything else the plant touches. Briones goes as to keep grow facilities spotless. far as to repaint the floors and replace and repair “You should be promoting what you’re doing equipment after every harvest, or about four well and differently,” said Briones, a horticultur- times a year. ist and founder of New Mexico’s Minerva Canna “Clorox is a clean grower’s best friend,” Briones Group, a medical marijuana business with culti- said. “We use commercial Clorox on floors, walls vation and retail facilities. and drying racks, and Clorox wipes and spray You can market pesticide-free, organic can- on table tops, benches and buckets. We also nabis to consumers and reap the rewards, but be use ethanol alcohol for our trimmers where we sure to demonstrate an authentic, transparent recapture the trichomes and use the solution in commitment to running clean operations. our oil extractions for our baked goods.” A challenge to operating a successful pesti- cide-free, organic grow is that you must maintain – Joseph Peña

88 • Marijuana Business Magazine • September 2017 closely monitor and all his grow lights from Bell Lighting “They might have grown great prod- document the effects to Gavita’s 1,000-watt, high-pressure uct in their closets or their backyards, of a new nutrient line, sodium and plasma lighting. First, but an indoor commercial grow is a including any adjust- he evaluated Gavita’s lights in one whole new ballgame.” ments they make, Bri- room with a fraction of his plants and Vet growers and give them a ones said. Rather than observed a 20% increase in his yield. six-month probationary period to roll out a new nutrient He also noted a marked improvement demonstrate their skills. You can line across your grow, in the quality of his harvest. That jus- provide them with a small number of Erik Briones try it on a few plants tified the large expense of changing plants to harvest and evaluate their founded New Mexico’s Minerva and then fine-tune the hundreds of lights in Minerva’s yields and practices. Canna Group in the process. grows, but the carefully planned Industry trade magazines or news- 2010. Photo courtesy of Erik Briones “We’ve learned change guaranteed a quick return on letters with classified ads can be use- that many nutrient Briones’ $90,000 investment. ful sources for job candidates. Also, manufacturers tend local universities with horticulture to overfeed plants, Vet and Hire Flexible Growers programs are good places to source and that results in burn or nutrient You need a talented, capable team fresh talent. lockup,” Briones said. “That’s why to manage your grow. “Young people bring fresh ideas, growers need to find the optimum Be wary of growers who claim to be are eager to learn, are dying to get dose for their grows.” the best in the industry, Briones said. into this industry and can be trained Changes to lighting, in particular, “The market is full of growers who to do processes your way, rather than should also be done carefully. Bri- think they’re the best growers in the bringing old, maybe not-so-efficient ones, for example, gradually changed world, and they’re not,” Briones said. practices with them,” Briones said. ◆

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Building a Best-Seller Colorado company used a cannabis leaf shape, sour flavors and distilled oil to create a popular gummy line by Jaimy Lee

mericanna scored a coup in 2 by volume and revenue, according to this, I noticed, through our own per- 2016: Its Sour Leaf Gummies the data company BDS Analytics. sonal R&D of consuming the product, Awere among the top-selling Americanna took a number of that the efficacy of the experience recreational edibles in Colorado. steps to differentiate its product line of eating this got so much better,” Moreover, Boulder-based Ameri- from rivals. Americanna CEO and founder Dan canna accomplished that feat in just It developed a recognizable shape Anglin said. “Your body is process- eight months. The company unveiled for its edibles, focused on sour-style ing the pure THC instead of all of the its cannabis leaf-shaped gummy in flavors that are popular among candy compounds of the cannabis plant.” the spring of 2016. By the second half consumers and opted for distilled oil Americanna also priced the gum- of the year it had climbed to the No. 1 to infuse its edibles with pure THC. mies to be cheaper than those of its spot and finished the entire year at No. “As we began to play around with rivals: They retail for about $17 for 100

Americanna used candy industry data to choose which flavors to use in its recreational gummies, with sour apple being the most popular last year. Photo courtesy of Sarah Bouma, D/CO

92 • Marijuana Business Magazine • September 2017 milligrams of THC (10 servings) versus the roughly $25 charged by most competitors, according to Anglin. The company’s over- all strategy worked. In Colorado last year, Dan Anglin, founder Americanna sold and CEO of Boulder, Colorado-based 208,000 units (10 gum- Americanna. mies each) of Sour Leaf Photo courtesy of Sarah Bouma, D/CO Gummies, generating $3.6 million in sales, according to BDS.

Opting for Distilled Oil Americanna sold more than 2 million Sour Pot Leaf gummies in 2016, making it the To create the new gummy, Anglin top-selling cannabis edible in Colorado last year. Photo courtesy of Sarah Bouma, D/CO opted for distilled oil rather the decar- boxylated commonly used to Anglin, who used to work for a with the extra time of distilling. Still, infuse edibles. large edibles company, discovered Anglin said he recognized a need that decarboxylated and winterized to market more consistent prod- cannabis oil can darken the color of ucts in the recreational marijuana EXECUTIVE SUMMARY candy. The distilled oil, by contrast, marketplace. allows Americanna to maintain the “We like to focus on consistency,” Americanna’s Sour Leaf Gummies color of its pastel-colored Canna- he said, “because that’s what is really were a top-selling, adult-use edible Puffs, a separate product from the important as more and more people in Colorado in 2016. The Boulder- based company took a number of Sour Leaf Gummies. start to consume cannabis.” steps to distinguish its gummies In addition, the pure THC is intended Anglin is also quick to point out from those of rivals: to help ensure each edible delivers the that Americanna was among the first • Americanna employed distilled oil same effect for consumers. cannabis gummy makers in Colorado rather than the decarboxylated hash oil commonly used to infuse To source its oil, Americanna built a to go down the distilled oil route, edibles; the pure THC is intended fractional distillation lab and focused which he said is now the gold stand- to help ensure each edible delivers on refining its product formulas. The ard for quality edibles. the same effect for consumers. process of perfecting the oil took In addition to distilled oil, Ameri- • CEO Dan Anglin created a widely about three to four months and cost canna uses pharmaceutical-grade recognizable shape: a cannabis leaf formed using a $15,000 $50,000 to test in a licensed cannabis metered dosing lab equipment to dial custom-made mold. lab. But the time and expense allowed in its dosing. This helps ensure accu- • The company priced the gummies the company to craft the oil that best racy and precision for each serving of to be cheaper than those of rivals, suits its needs – and that fits into THC, Anglin said. charging $17 for 100 milligrams of THC versus the $25 often charged Americanna’s overarching strategy to The company said it can dose its by competitors. improve the quality of its edibles. edibles down to the millionth of a • Americanna used candy industry “We tried other companies’ oils,” milligram, or a microliter. Every time data to determine which flavors Anglin said. “They didn't taste good a consumer buys an Americanna were most popular among candy makers and used that intel to enough for our candy.” gummy and cuts it in half, for example, decide on the varieties it would use. The decision to move forward with he or she will have the same experi- • For its leaf-shaped edibles, the distilled oil came with a higher price ence – whether it’s the time required company offered sour-style flavors tag, however. It drove up the costs to feel the effects of the gummy, or the that are popular among candy of the oil by 10% because of higher duration of the high, said Anglin, noting consumers – although it also sells a sweet line. costs for supplies, equipment main- there are exactly 5 milligrams of THC in tenance and the labor associated every half a gummy.

September 2017 • Marijuana Business Magazine • 93 Going for the Leaf product,” Anglin said, “and we could issues for cannabis makers in Colorado. To distinguish its gummies from capitalize on the novelty of a pot leaf- “These things were not things you could rivals, Americanna dreamed up a shaped candy.” buy outside of a dispensary.” widely recognizable shape: a can- When he bought Boulder Pharma, nabis leaf formed using a $15,000 the extraction firm that he ultimately Sour Versus Sweet custom-made starch mold. turned into Americanna, Anglin knew Anglin’s previous experience in the Starch molds are traditionally used by from the get-go he did not want to edibles business told him that cannabis confectioners, Anglin said. Unlike silicone infuse commercially available candy, consumers respond to flavors that are or injection molds, which can create a like gummy bears and Sour Patch Kids, also popular among candy consumers. cleaner cut, starch molds create softer as some edibles manufacturers have So Americanna focused on “spe- edges for the gummies, which make for done. Those products face concerns cific flavors that we know are per- a better experience for consumers. about accidental consumption and formers in the confectionary market: Anglin also had regulatory con- could trigger a response from regula- watermelon, strawberry, grape and siderations in mind: The leafy shape, tors, he said. Separately, the design sour apple.” The latter was the most Anglin’s brainchild and design, identi- created an opportunity for cannabis popular flavor of Americanna’s gum- fies the edibles as cannabis products, consumers to legally purchase canna- mies in 2016, he said. not something to be consumed by a bis products shaped like a pot leaf. The company also discovered that child. In addition, the gummies carry “What we should do to stop this people like sour cannabis gummies the state-mandated THC logo. conversation is have proprietary more than sweet gummies, based “It would make it really clear to shapes,” said Anglin, a former marijuana on sales figures for Americanna’s everyone that this is a cannabis lobbyist who has worked on regulatory sour gummies in 2016. In fact, the At the end of the day, even though it’s been adulterated with cannabis, it still has to be candy that people want to eat.

company’s sour products generated according to Anglin. “It wasn’t so development process for three new 38% of the company’s overall sales overpowering,” he noted. “It’s not flavors that launched July 4: Sour last year. Warheads sour.” Sativa Gummy Freedom Mix, which is Still, consumers don’t like products strawberry, white lemonade and blue to be overly sour. That’s why Ameri- Relying on Data raspberry; a sweet mix of peach and canna uses a sour sanding, rather More broadly, Americanna’s banana; and a sweet-and-sour mix than a sour gelatin flavor. The sour flavor strategy relies heavily on that utilizes all five of the new flavors. sanding method allows Americanna data. It gathered research from the “At the end of the day, even to control the amount of sour flavor National Confectioners Association though it’s been adulterated with because it’s only on the surface of to inform its decision-making and cannabis, it still has to be candy that the gummy and not in the gelatin, then used those insights to guide the people want to eat,” Anglin said. ◆

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How to hire – and train – the right extraction technician by Bart Schaneman

ultivation facilities, infused product companies and labs Cplace a high value on extrac- tion technicians. The jobs are sought after and demanding, and finding the right person to extract oil and concen- trates in the lab can be a challenge. Extraction is a hands-on job that requires attention to detail. The tech- nician also should be mechanically inclined and alert to the dangers of the job. Butane can easily catch fire or explode, for example. “The person who gets to process and handle our oil, we view as one of the most important jobs in the entire

building,” said Ryan Abernathy, presi- Ryan Abernathy of X-Tracted Laboratories 502 recommends hiring employees "who are dent and CEO of X-Tracted Laborato- good with a wrench." Photo courtesy of X-Tracted Laboratories ries 502 in Seattle.

WHAT TO LOOK FOR A Lucid Labs technician works Jim Makoso, co-owner and vice on extraction equipment. Photo courtesy of Lucid Labs president of Lucid Labs – an extraction branding and licensing company with locations in Nevada and Washington state and a pend- ing lab in Oregon – prefers some- one without cannabis experience. “Generally, when someone has cannabis experience they tend to bring their bad habits along with them,” he said. That can lead to friction with the owners and other lab workers. “The first guy we brought in had experience in a cannabis extraction lab, and it didn’t end well,” Makoso said. “We find that to be the case in lots of

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Final Registration Deadline ENDS 10/19 Register Today & SAVE $200! extraction labs. Just because they have Abernathy likes to hire from extracted marijuana before doesn’t within the company. mean they know how to do it well.” “We like to know the personalities EXECUTIVE SUMMARY Some lab experience with a degree we’re hiring,” he said. in either biology or chemistry can be Abernathy typically starts his Hiring an extraction technician useful. Makoso also might consider employees in a packaging role, then requires a keen sense of the duties and dangers involved. Extraction someone with cannabis retail or culti- promotes from there. He’s looking for technicians carry out highly vation experience. someone with a strong work ethic who specialized tasks and need to have “It’s a lot easier to train someone is mechanically inclined. The extrac- a well-developed attention to detail. When staffing your lab: with science knowledge the way we tion equipment is complicated, requires • Look for someone who is want things done,” he said, adding daily maintenance and can be expen- mechanically inclined. Extraction that it takes too much time to retrain sive. The machines in Abernathy’s lab equipment can require frequent someone with experience. wholesale for around $125,000. repairs. “In our industry – unfortunately He wants someone who is highly • Consider hiring from within so you because it’s been in the gray area for attentive. know firsthand how your employee will perform. so long – people assume that just “It is a process that does have the • Take candidates with science because they received education in potential to be dangerous,” he said. backgrounds. Biology, chemistry the school of hard knocks, that’s the “At the same time, it is a process that and chemical engineering are way things are supposed to be done,” has many nuances that could change considered desirable backgrounds. Makoso said. “Unfortunately that’s the outcome of the product. • Teach your technicians all aspects of production, so if something goes not the case, especially in extraction.” Because extraction has that dan- wrong he or she knows what to do. He focuses more on younger work- ger factor, he seeks people with good • Be patient with new hires. Let ers who tend to be hungry to learn. judgment, a level head and a back- them get their feet wet through Older workers typically have more obli- ground in science. hands-on experience before they gations and less hunger, Makoso said. “It does help to have something of work on their own.

a scientific background so you can understand the processes that are going on,” he said.

Ron Gershoni, CEO of Jetty Extracts in Oakland, California, said “it’s such a tough position to hire for because there are very few people who have a lot of experience with extraction.” He checks references from previ- ous employers for character and work ethic. He wants to know he can trust someone working with his company’s expensive equipment. He also wants someone who is friendly toward cannabis. “We find that people who are into the plant and spend a lot of time researching techniques, terpene profiles and strains outside of work are able to bring in more fresh ideas Extraction equipment at Jetty Extracts. Photo courtesy of Scott Badovick because they are passionate about cannabis,” he said.

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13485:2003 0086 Registered HIRING WARNING FLAGS Like Abernathy, he looks for some- one mechanically inclined. hen hiring an extraction technician, watch out for candidates “Extraction equipment is usually with a string of short stints on their employment history. You expensive and very prone to fail- also want to keep an eye on body language and interviewees ure and breakdowns, so the abil- W who are looking for a job in the industry simply because they love to ity to troubleshoot and learn how use cannabis. things work (are important),” he said. Jim Makoso, co-owner and vice president of Lucid Labs, an extraction “People who like taking things apart branding and licensing company with locations in Nevada and Washing- and putting them back together are ton state and a pending lab in Oregon, avoids job hoppers – candidates usually more able to diagnose the who can’t keep a job longer than a year and a half or two years. problems you come across.” “Anybody who’s young, under 30, who has 10 different jobs on their Extraction equipment has many resume, that tells me that’s someone who doesn’t know how to stay in components, and when those fail you a position and earn their keep,” he said. need someone who can repair them. Ryan Abernathy, president and CEO of X-Tracted Laboratories 502 in “What we’ve found is that you Seattle, watches out for people who have more enthusiasm for canna- constantly have equipment that you bis than they do for working. have downtime on because of various “We have a lot of people who would love to work here because they issues, and people who are good with love the product,” he said. But they “don’t necessarily have a great a wrench and good with fixing stuff are background or great work ethic.” extremely helpful to have around,” he During the interview, lack of eye contact is a deal breaker. Also, ask- added. “When something stops work- ing your prospective boss to consume with you is obviously taboo. ing, they can fix it themselves.” “I’ve been asked if I want to go do dabs after interviews,” Abernathy In Gershoni’s eyes, chemical engi- added. “That’s absolutely a red flag, buddy.” neering is the best formal education Job hopping and gaps in employment history are also question marks with the most relatable skills. for Ron Gershoni, CEO of Jetty Extracts in Oakland, California. “But it’s really about tinkerers,” he But cannabis is a different type of industry, so it’s not a major no-no said. “They seem to have the most for him if someone has an unusual job record. passion.” “But that stuff needs to be explained,” he said. On a resume, grammatical and spelling errors and a general lack of WHERE TO LOOK attention to detail are red flags. Makoso posts job ads on Craigslist Another obvious warning sign would be no mention of an interest in and LinkedIn and looks for referrals. cannabis. But some of his hires have come “We want people who are really into being in this industry, not just from lateral movement. In Lucid Lab’s looking for a job,” Gershoni said. “We want people who are like, ‘I want Washington state location, workers to make the best hash.’” from other parts of the operation have been moved into the extraction lab. — Bart Schaneman Makoso, for example, has promoted packaging workers and even a dish- washer with a chemistry background. experience in the medical cannabis Historically, Gershoni would look “He was just looking for an oppor- industry. But not everyone with a only within his network and rely tunity to get involved while working cannabis background fits the bill. on word-of-mouth to find his on his master’s degree in organic “To some degree that’s a struggle,” he technicians. chemistry,” Makoso said. added. “People in the cannabis industry “It was safer to hire someone with will tell you – the stoner effect is real. If some sort of contact with someone Abernathy recruits from retailers their only attachment to being at work we knew,” he said. “Just for security and partner processors so he is the product, it can be a problem.” reasons.” can see how people perform in On the other hand, he’s hired But he’s moved past that as Califor- other jobs. people who don’t consume cannabis nia’s marijuana industry has pro- When hiring for base-level extrac- or have an interest in the plant, and gressed. Jetty Extracts now uses online tion positions, Abernathy has had they lacked passion in their work – job boards similar to those Makoso good luck with people who have which can also be a problem. mentioned, Craigslist and Indeed.

100 • Marijuana Business Magazine • September 2017 But he doesn’t favor any one method. “It’s a really difficult process to find those right people,” Gershoni said. “Hiring is definitely one of the more challenging aspects of trying to scale an extraction process.”

HOW TO TRAIN AND MANAGE Starting out, Makoso expects his extractors to learn every position in the laboratory. The new hire will eventually be trained in extraction and distillation, but the employee will also learn how to perform “low-end” tasks such as filling cartridges. “That’s what we expect from - rybody we bring on,” Makoso said. Extraction equipment at X-Tracted Laboratories. Photo courtesy of X-Tracted Laboratories “They go through the ringer.” He sets aside a month for training. The first two weeks are hands-on you can help us improve. Master under our wing,” Abernathy said. learning. In the second two weeks, what it is we do well now. Then, once With new hires he emphasizes the the employee is observed and given you’ve mastered it, that’s when we’ll importance of standard operating tips on how to improve. expect you to help us improve.” procedures. “In our organization we’re not “We make sure people are aware of really micromanagers,” Makoso As one of X-Tracted Laboratories’ everything going on around their role, added. “We set a production sched- founders, Abernathy started the not just in their role,” he added. “So ule. We clearly outline our expecta- company performing extraction people understand where they fit in.” tions of what needs to be done.” himself. Makoso clearly communicates that While the equipment and tech- For Gershoni, one of the chal- the new hire shouldn’t bring in any niques have progressed and matured, lenges in training and managing preconceived notions. he’s remained “very much involved in extraction technicians is how “You know nothing about what that process.” quickly the process and equip- we want to do,” he tells the new “I think just having direct involvement ment changes. employee. “So don’t come in here in the business and familiarity with the “I don’t think a month has gone by in thinking that there’s anything that processes allows us to take someone the last four years that we haven’t had a new piece of equipment come through our facility,” he said. “Even our longest, An extraction technician tenured employees are always learning works on equipment at X-Tracted Laboratories. new equipment and processes.” Photo courtesy of X-Tracted He likes to let a new hire shadow Laboratories another technician for at least a month before working alone. “It takes about a month of working on a certain process to really grasp it,” he said. “And we have a lot of processes and equipment.” Gershoni believes in letting the employee get hands-on experience before turning that person loose. “The best way to learn anything is by doing it,” he added. ◆

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The Firefly 2 – from San Francisco- based Firefly Vapor – works with both cannabis oil and flower. Photo courtesy of Firefly Vapor ¬ndustry Snapshot: Vaporizer Companies Data, trends and challenges by John Schroyer

t seems as if vaporizers – in as the cannabis industry has grown much more on quality, whereas pens particular, vaporizer pens – are and vaporizers have become popular, often cater to consumers looking for ¬ everywhere. are smaller companies in China that the cheapest possible vape option. That’s thanks mainly to the biggest can produce e- and are To the contrary, the vaporizer market manufacturing economy in the world willing to take a risk and enter (the seems to be continually growing, likely – China. cannabis) industry,” Hackett added. due to a number of factors, including: “In 2014, I could have named all The result has been a glut of inex- • A continuing rise in medical can- (vaporizer companies) on both hands, pensive vape pens in the U.S. mari- nabis use (because vaping has very easily. Now, in 2017, what you juana market, as retailers, growers much more support from physi- have in China is an economy that’s and extractors have begun purchas- cians than smoking). based on copying things as quickly ing cheap, wholesale vape pens from as (possible),” said Peter Hackett, vice Chinese manufacturers, emblazon- • The portability and discretion of president of Transpring, a Chinese ing those pens with their own brand personal vaporizers. vaporizer manufacturer that has a name and selling them. • Some U.S. state laws that prohibit distribution wing in the United States. But that hasn’t done away with the sale of flower but encourage “What’s arisen in the last few years, higher-end vaporizers that focus vaping.

104 • Marijuana Business Magazine • September 2017

Market Dynamics business),” said Steve Kelnhofer, who The vaporizer business is crowded, founded 7th Floor in 2005. “After a EXECUTIVE SUMMARY with insiders estimating there are while, as pot became more legal, and hundreds of vaporizer pen brands these vape pens started coming out, The vaporizer industry is booming across the globe thanks to Chinese the whole ballgame started changing.” in large part because U.S. cannabis retailers, extraction companies and factories. There are at least a few Many higher-end vaporizers tend to growers are buying inexpensive dozen independent vaporizer manu- cost considerably more for custom- Chinese vape pens and rebranding facturers globally that typically carry ers, but the payoff is typically a better them for sale. Here are some takeaways about the sector: only one flagship vaporizer product vaping experience and a longer-last- • Vaporizer prices, as well as quality, that is perhaps updated periodically ing product that consumers can use vary widely. While many vaporizer with new functions or features. for years. Moreover, vaping is simply pens retail for well under $100, “Many are brands that are ‘re-skin- healthier than smoking. most of the industry-leading products sell for more than that, ning’ e-cigarettes and then putting “It’s an investment in your lungs, at up to $600 for the German-made it in a package that’s trying to lean the end of the day,” said Lisa Harun, Volcano desktop vaporizer. towards consumers. But there’s no the co-founder of Canada-based • Plenty of vaporizers also sell for real manufacturing on their part,” said Vapium. around $150, such as Vapium’s Steve Berg, CEO of San Francisco- The price range for a quality vapor- Summit Plus, as well as less expensive models designed to based Firefly Vapor. izer can run from around $100 up appeal to a broader customer “By that measure, there are proba- to $600 for top-of-the-line desktop demographic. bly thousands of companies out there, vaporizers such as the German-made • While many vaporizers work with just in the U.S., that are doing it. In Volcano, which many consumers still both flower and concentrates, many will work only with one or terms of companies that are designing consider to be the industry standard. the other, often forcing consumers and building their own devices, that’s Vape pens, by contrast, typically retail to choose. But concentrates are a much smaller subset, probably for much less: Colorado’s OpenVAPE on the rise across the industry, with many executives believing measured in the dozens.” pens start at about $20, for instance. cannabis oil – not flower – will Some, like Transpring, specialize in But there remain niches to be be the mainstay of future vaping vaporizer pens, cartridges and batter- explored. Vapium, which produces customers. ies, while many, such as Colorado- a splashproof, handheld vaporizer • Competition is driving technological innovation, with based 7th Floor Vaporizers, focus dubbed the Summit Plus, retails for many higher-end vaporizers on tabletop vaporizers or specialty $149, and can even be used in the working with both flower and devices that often work with both shower, Harun said. concentrates. The more pricey models also offer features such as flower and concentrates. “When we were going after the splashproof devices and mobile “When we started, there were prob- waterproofing part, I was like, let’s be apps that can adjust temperature ably five to 10 of us (in the vaporizer real. People vape in the bathroom. settings.

They’re hiding from their kids, they’re hiding from their wives, and you hear about people dropping their phones in the toilet,” Harun said. “What if you could just vape in the shower? That was sort of how that was born.” Firefly, which released its first vaporizer in 2013 and is now on its second iteration, even has an app that accompanies its portable vapor- izer and allows the user to change the temperature settings depending on whether flower or concentrates are being vaped.

Transpring’s vaporizer manufacturing facility in China. Photo courtesy of Transpring “The app, via Bluetooth, connects with the device. It will give you metrics

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108 • Marijuana Business Magazine • September 2017 Import Problems and Chinese Manufacturing Issues Even if vaporizer companies in North America and Europe don’t have all their devices manufactured in China, they often purchase parts from Chinese companies. Either way, U.S. customs can be a substantial hurdle, as can the reliability of Chinese manufacturing partners. Puffco’s business stalled in 2016 because of a product defect, cour- tesy of a Chinese manufacturer that messed up the vaporizer design (which was chronicled in the May- June issue of Marijuana Business Magazine). Puffco’s Volodarsky said his China issues were an important learning experience but that his company is better off for it. “Before, we would just design it and hand it off and hope for the best, and that didn’t work out,” he said. “Now, we design it, we source it, we oversee assembly, we fully own the process. It’s a very expensive way to build, but ... it’s the only way to build it and make sure you get what you want.” 7th Floor lost hundreds of thou- The Summit Plus vaporizer by Vapium, which is designed for rugged outdoor use. Photo courtesy of Vapium sands of dollars a few years ago when U.S. customs agents seized five shipping containers of Chinese parts they’re placing their branding in the innovative you are, because so many bound for the company’s Colorado same fashion on the same products,” companies are out there marketing, it manufacturing plant, because the Transpring’s Hackett said. could be hard for a new user entering government classified the parts to be “Smart, forward-thinking companies the space to see what is obviously “drug paraphernalia.” will say, ‘We like the base platform, best,” Volodarsky said. “Making an “That was a tough pill to swallow,” but we need to be able to design amazing product was step one for us. 7th Floor’s Kelhnhofer said. “There the outer design of it, or make some Now we have to tell the world why it’s were parts and pieces to make a portion of it uniquely ours, so we can so amazing.” good 2,000-3,000 vaporizers. It was identify ourselves against the greater everything I had at the time.” market,’” he said. “When that comes to TRENDS TO WATCH vape pens, usually that will take shape Rise of Portable Vaporizers Growing Competition and in the mouthpiece. That’s one of the Vaporizer companies generally agree Brand Identification easiest ways to brand a vape pen and that portable vaporizer devices will Another major hurdle for independent make it uniquely your own.” likely continue to grow in popularity vaporizer producers has been how to Other ways vaporizer companies across the global marijuana market. distinguish themselves from the pack. distinguish themselves is through “Ease, convenience and friendly “A lot of vaporizer companies, innovative features, custom art offer- form factors,” Firefly’s Berg said when if you look across the market, are ings and quality marketing. asked about trends in the vaporizer starting to look the same, because “Our next biggest challenge is business. “That’s something we’re they’re using the same hardware, likely to be marketing. No matter how very, very conscious of.”

September 2017 • Marijuana Business Magazine • 109 Transpring’s Hackett broke down “There will always be a healthy the type of inexpensive replaceable the popularity of vape pens to its market for flower, but concentrates are cartridge produced by Transpring and most fundamental level. going to continue to grow, and I think lots of other Chinese factories. “What it provided was the brown bag that (the industry is) going to become “If you’re a retailer in Colorado, effect,” Hackett said about the appeal more savvy in terms of the healthier and you’re doing good business just of vape pens specifically. “If you take ways of extracting,” Harun said. retailing those, but you’re left won- an open bottle of alcohol out onto Berg, who spent three years as the dering, ‘Could we do something simi- the streets, you’re legally and socially chief financial officer of OpenVAPE lar and capture more margin?’ The obnoxious. But if you slip a brown bag before signing on with Firefly, said easiest thing to do is just start either around that alcohol container, all of a that non-vaporizer companies such producing your own oil, or buying it sudden, cops can go right by you with- as cannabis retailers and growers on the wholesale market, and getting out having to stop. They know exactly will also likely continue getting into cheap knockoff pens,” Berg said. “On what you’re doing, but they have an the vape pen market. That’s in part the surface, it looks quite easy. ... excuse now to just pass you by.” because Chinese manufacturers are Consequently, the market is increas- still making it relatively easy, and ingly flooded with ‘me-too’ products.” Concentrates Over Flower also because OpenVAPE broke new Vapium’s Harun said one reason ground by making quality vape pens Technological Innovation concentrates will continue to boom cheap and accessible for consumers, Another notable trend in the vapor- is the steady increase in medical both Berg and Hackett said. izer business is going to be new tech cannabis use, for which she argued Already, most of the quickly avail- features that companies will develop concentrates are much more appeal- able vape pens utilize cannabis oil as yet another way to appeal to ing than raw marijuana flower. instead of flower, and they work with consumers.

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CalCann Holdings, LLC. | 1526 Brookhollow Drive, Suite 85 | Santa Ana, CA 92705 its third version of its vaporizer. Market Segmentation “Innovation will be king and contin- Another trend Berg said is already ues to be something that is not just occurring is vaporizer companies having desirable but is becoming part of peo- to choose which customer demograph- ples’ expectations,” Harun said. “We ics they want to target, based on differ- can use that to help drive the next ent product benefits, pricing and so on. iteration and the new devices.” “In the early days, it was just Part of that, added Hackett, will enough to be selling cannabis. ... It be technology that provides an even came in a pretty nondescript con- The circuit boards for Vapium’s original Summit vaporizer. Photo courtesy of Vapium more precise dose of cannabis oil or tainer. It was like faceless cannabis. flower than what’s currently avail- Just the fact that you had it was able on the market, especially as the enough to justify a sale. That was Volodarsky compared the situa- medical marijuana industry continues then, and this is now, and we’re in a tion to Apple and Samsung’s ongoing to expand globally. different world now,” Berg said. rivalry with the iPhone and Android “One of the driving trends is going “You have market segmentation smartphones, and he predicted the to be trying to create technology that that is increasingly pronounced, and same sort of competition will play out can provide accurate single dosing,” I think it’s one of the things that will in the cannabis vaporizer space. Hackett predicted. “Right now, there govern successful brand develop- Harun said that’s one of the reasons are a couple pens on the market that ment in the years ahead,” he added. Vapium developed its Summit Plus to claim to do that. ... But those pens, “Are you catering to baby boomers, be as durable as possible, and it’s also if you look at the inner workings of millennials or Gen Xers? Are you more one of the reasons the company is on them, it’s still a little dicey.” medically oriented?” ◆

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. COMPANY NEWS Wheelin' Dealin' Recent deals, acquisitions and other announcements & from North American cannabis companies by Omar Sacirbey

High Times Going Public Oregon Holding Company High Times Holding Corp., the company behind High Buys Grow and Retail Business Times magazine and the , plans to go Golden Leaf Holdings, a holding company in Portland, public in October, a move that would make it the first U.S. Oregon, signed an agreement to buy Portland-based marijuana-related company to list on the Nasdaq Stock Chalice Farms, a vertically integrated operator of four Market. Private equity firm Oreva Capital bought a control- medical and recreational retail outlets. Golden Leaf will ling stake in High Times in June and will sell the magazine pay $19.3 million in cash and 83.4 million shares of its to Origo Acquisition Corp. – a so-called special purpose common stock to acquire Chalice Farms. Under the deal, acquisition company – for $250 million, Reuters reported. Chalice Farms also will receive an amount equal to 1.25 times the 2017 revenue of the businesses being acquired, New Biggest Operator in according to Golden Leaf. The amount is payable in cash Harvest, a multistate medical marijuana or shares of Golden Leaf’s stock company based in Tempe, Arizona, has merged with Modern Flower of Guadalupe Etain Heads to Manhattan to create what Harvest said is the larg- Etain Health, the women-owned medical marijuana est MMJ operator in the state. Terms of the company in New York, plans to close its MMJ dispensary deal weren’t disclosed. The merger with in Albany and reopen it in Manhattan. The New York State Modern Flower gives Harvest six more Department of Health approved Etain’s move. Harvest CEO Steve White. medical cannabis licenses in Arizona and an 18,000-square-foot cultivation facility in Cot- Wellness Institute of Maryland Wins tonwood. Harvest already operates Arizona First Maryland License dispensaries in Tempe and Scottsdale, a 12,000-square- Wellness Institute of Maryland became the first busi- foot indoor cultivation facility in Bellemont, along with ness in the state to be awarded a dispensary license and a 35,000-square-foot grow facility and 3.3 acres of has also been allowed to open its doors – even though no outdoor cultivation space in Camp Verde. medical marijuana products will be available for months.

112 • Marijuana Business Magazine • September 2017

Denver’s First Two Delivery Companies Social Media Exec Green Parcel Service and Colorado Logistics, based Rolls Out Vegas Weekend Box in the Denver metro area, are the first companies to Krista Whitley, CEO of Social secure permits to deliver cannabis under a new state Media Unicorn, a cannabis-focused law. The law, which took effect July 1, created a new marketing firm in Las Vegas, is roll- class of licenses that allow independent companies ing out The Weekend Box for Silver to provide logistics, distribution and storage services State tourists interested in trying to licensed retail and medical marijuana businesses in a variety of marijuana products. Krista Whitley Colorado. Green Parcel Service received both recrea- The black box contains products rolls out the tional and medical marijuana transporter licenses and like flower, pre-rolls, vaporizer Weekend Box. Colorado Logistics a rec cannabis transporter permit. cartridges, cannabis-infused gum- mies and chocolate bars and other products from companies including Calipharms hopes Dixie Brands, Moxie Extracts and for bigger harvests. Tahoe Hydro Co. The contents of the box will change monthly. It retails CaliPharms Subsidiary Receives for $199. Humboldt County Grow License Riverside, California-based CaliPharms announced Canadian Investment Firm Partners that its Pacific Cannabis Grower subsidiary received with African Produce Grower a license for a 10,000-square-foot cultivation facility LGC Capital, a Canadian investment firm, has part- from California’s Humboldt County. The company will nered with AfriAg – an African produce grower – to use the facility’s income to acquire commercial green- cultivate and distribute medical and recreational houses and cultivation equipment. marijuana across southern Africa.

Lab Gets Accredited Canadian Grower Teams , a cannabis-testing laboratory, has become with Ohio Fashion Firm in MMJ DB Labs Grow License the first and only ISO 17025-accredited marijuana-anal- ysis lab in Las Vegas. A standard used by testing and Canadian licensed producer Aphria, headquartered in Leamington, Ontario, calibration labs, ISO 17025 is required by most countries. is partnering with the Schottenstein family of Ohio, which owns fashion Fifth Canadian MJ Company Joins TSX Canadian licensed producer Aurora Cannabis became retailers American Eagle and DSW, Aphria CEO the fifth marijuana company to list on the Toronto Stock Vic Neufeld. in a bid to acquire one of 24 medical Exchange in July. Vancouver, British Columbia-based marijuana licenses that will be awarded Aurora joins Aphria, Canopy Growth, CanniMed Therapeu- in the state. Schottenstein Aphria – one tic and MedReleaf. of 185 applicants hoping to enter Ohio’s fledgling medical cannabis market – is Zoned Properties Lands Tenant Contract seeking a license for a 25,000-square- Zoned Properties, a marijuana-focused real estate foot cultivation facility. development firm, has signed a five-year commercial lease agreement with Hana Meds, the primary tenant at Major Private Placement for Canopy Growth its Medical Marijuana Business Park in Tempe, Arizona. Canopy Growth, a Canadian licensed producer Hana Meds plans to establish a comprehensive, vertically in Smiths Falls, Ontario, completed a previously integrated operation at the site. announced private placement financing with one investor totaling 25 million Canadian dollars ($20.1 mil- lion). Canopy intends to use the proceeds for “capacity growth initiatives.”

114 • Marijuana Business Magazine • September 2017 Canadian Grower Buys Greenhouse IHMML Secures Cultivation and Land for CA$7.3 million License from Health Canada Up Cannabis, a wholly owned subsidiary of New- International Herbs Medical strike Resources, has agreed to pay 7.3 million Cana- Marijuana Ltd. – in the Canadian dian dollars ($5.9 million) to Westbrook Greenhouses province of British Columbia – has Zenabis West gets license. for a greenhouse, related equipment and 16.6 acres of received a cultivation license from land in Ontario’s Niagara region. The acquisition will Health Canada to produce medi- allow the company to increase its production capacity cal marijuana for its Zenabis West facility. The facility, to about 30,000 pounds annually. totaling more than 25,000 square feet outside Vancou- ver, British Columbia, in Delta, is the first two IHMML Australian MMJ Company brands to secure a license. Zenabis East is located in the Acquiring Canadian Grower village of Atholville, New Brunswick. Creso Pharma, an Australian medical marijuana com- pany, has purchased Nova Scotia-based Mernova Medici- Dallas Extract Company nal for 10.1 million Canadian dollars ($8.1 million). After the Buys 25 Greenhouses cash-and-equity deal is completed, Creso Pharma will be Puration, a cannabis extraction the only Australian-based cannabis firm with direct expo- company in Dallas, has acquired sure to the world’s largest legal MMJ market. a 25-greenhouse grow operation Puration buys 25 greenhouses. that the company said will allow it Bottles Breaks Into Alaska to refine its own marijuana strains. Cannabis-focused packaging and labeling company Kush Bottles of The First Marijuana Santa Ana, California, has secured an Law School Book exclusive distribution agreement with The Wolters Kluwer Legal and JKD Brands, a distribution company Regulatory U.S. Legal Education in Alaska, that will give it access to business unit has published “Mari- that state’s market. juana Law, Policy and Authority,” Kush CEO said to be the first law school case- Nick Kocacevic. Quebec Grower Launches book focused on cannabis practice Canada’s First Sublingual Mist Law book author Robert Mikos. area. The book – by Robert Mikos, a The Hydropothecary Corp., a Cana- professor at Vanderbilt Law School – dian licensed producer in Gatineau, focuses on law, policy and authority Quebec, has launched Canada's first issues surrounding three categories medical marijuana sublingual mist, of regulated parties: marijuana users, Elixir No. 1. The product is packaged in their suppliers, and the third parties a child-resistant, 15-milliliter spray bot- who interact with them. ◆ tle and contains close to the maximum allowable THC level under current Have a company announcement you Health Canada regulations. It retails for want us to consider? Send a news 89 Canadian dollars ($64) a bottle. release or general information to [email protected]. (Note: We’re Hydropothecary’s MassRoots Nets $1.2 looking for news about expansions, new sublingual Private Placement spray. financing, deals, partnerships and simi- MassRoots, the popular mari- lar developments, not product-related juana-focused social media plat- announcements.) form based in Denver, has closed a $1.217 million private placement. The transaction follows the company’s late-May report in a financial filing that it was running low on capital and would need to raise $5 million in the next year to stay in business.

September 2017 • Marijuana Business Magazine • 115 NEW HlRES & PROMOTlONS Movers Shakers& A look at some recent hiring moves in the marijuana industry

by Omar Sacirbey

Colorado Credit Union Hires President In his new role, Cochran initially will focus on hiring a to Lead New Business Unit team and launching a multistate beta test in Septem- Partner Colorado Credit Union has hired ber with up to five banks and credit unions. As of early accounting veteran Matthew Cochran to August, at least 30 financial institutions had applied to lead its newly created Safe Harbor Ser- become test clients, Cochran said. Among other things, vices. The business unit plans to sell and the beta program will involve getting audits from multiple distribute its cannabis banking program auditing firms, verifying the reliability of third-party ser- – developed by Partner Colorado CEO vice providers and ironing out the compliance software Sundie Seefried – to financial institutions the financial institutions use. Matthew Cochran nationwide interested in serving marijuana “We’re working to make sure that the process is businesses. streamlined and that everything works at least as well “We want to expand the cannabis banking program as we need it to and hopefully better,” Cochran said. “It’s nationally and help other financial institutions solve the a major commitment for financial institutions to get into safety issue of the unbanked cannabis industry,” Seefried this industry, and we want to be able to help them show said. “Appointing a separate president to run operations financial examiners that they take compliance seriously.” and expansion will relieve the credit union staff from such a time-intensive and monumental task.” DPA Names New Executive Director Seefried will continue to head the 32,000-member The board of direc- credit union and Safe Harbor’s internal Colorado division. tors appointed Maria McFarland Sanchez- In 2007, Cochran moved to Colorado, where he has Moreno as the organization’s new execu- worked for accounting firms – including Mayer Hoffman tive director. McFarland Sanchez-Moreno and McCann – and served as an independent consultant comes from Human Rights Watch, where Maria McFarland specializing in company launches and turnarounds. she most recently served as co-director of Sanchez-Moreno

116 • Marijuana Business Magazine • September 2017 the organization’s U.S. program. During her 13-year ten- Parker comes to MedMen from Leonid Capital, a private ure at Human Rights Watch, McFarland Sanchez-Moreno equity firm, and also worked at Alvarez & Marsal, where he pressed the organization to more directly address the was a financial services consultant. He is also a lecturer on war on drugs as a human rights issue; in 2013, Human quantitative finance at California State University, Northridge. Rights Watch became the first major international human rights organization to call for decriminalization CEO Turnover at Golden Leaf of the personal use and possession of drugs and global Golden Leaf Holdings, a holding company in Portland, drug reform. She succeeds Drug Policy Alliance founder Oregon, has a new CEO. William Simpson, formerly the and former executive director Ethan Nadelmann, who company’s president, has been appointed CEO. He will stepped down May 1, after 17 years. replace Don Robinson, who resigned as CEO and as a board member, the company said. Robinson will pursue MedMen Adds Two Executives other interests, Golden Leaf said. Los Angeles-based cannabis management and invest- ment firm MedMen added two top executives: Former Mettrum CEO Goes to • Kate Denton, as chief marketing officer. New Canadian Marijuana Company • James Parker, as chief operating Liberty Health Sciences, a newly formed Canadian officer of MedMen’s capital arm. acquisition company that targets American marijuana Denton brings more than a decade businesses, hired George Scorsis as CEO and director. of experience overseeing marketing Scorsis was most recently president of Mettrum Health, a and brands for companies like Pep- Canadian licensed marijuana producer that was recently siCo, Kraft Foods and most recently acquired by Canopy Growth. Before cannabis, Scorsis Capitol Music Group, where she was worked in the alcohol and energy drinks sector, including senior vice president. Kate Denton serving as president of Red Bull Canada.

September 2017 • Marijuana Business Magazine • 117 Kush Push in the Silver State MJ-Focused Venture Capital Firm Kush Bottles, a leading packaging and Gets Chief Development Officer labeling company in Santa Ana, Califor- StarGreen Capital, a cannabis-focused nia, hired a new sales and support team in venture capital firm in Beverly Hills, California, Nevada that will be led by Carmen Lam. tapped Justin Braune as chief business devel- opment officer of its newly formed $100 million Carmen Lam New CEO for Vaporizer Company legal cannabis investment platform. Braune is Justin Braune San Francisco-based Firefly, a vaporizer a former president of MIJC, a cannabis distribu- designer and producer, appointed Steve tion and compliance company. Before MJIC, Berg, a former investment banker, as CEO. Braune was CEO for two cannabis sector companies cur- Former CEO and co-founder Mark Williams rently traded on the over-the-counter market: Vape Holdings moves to chief technology officer. and Agritek Holdings.

Marijuana Data Company Gets New COO Drug Development Company Steve Berg New Frontier Data, an independent can- Hires New Strategy Officer nabis-focused data analytics firm, appointed INTIVA BioPharma, a Denver-based drug development Gary Allen as chief operating officer. Before company working with cannabinoids, hired marijuana cannabis, Allen worked in marketing technol- entrepreneur and investor Alain Bankier as chief strategy ogy and, most recently, served as principal officer. Bankier is also a director of INYIVA BioPharma of Spire Strategy Consulting, now known as and a co-founder and managing partner of marijuana- Modern Minds, where he concentrated on focused consultancy VSTechVentures. bringing startups’ ideas to market.

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118 • Marijuana Business Magazine • September 2017 NCIA Board Taps Grow Vet MMI Subsidiaries Growing The National Cannabis Industry Associa- Medical Marijuana Inc. subsidiary Dixie tion has a new board member, Christie Botanicals appointed Brent Albin as direc- Lunsford, chief operating officer of Pro tor of sales and marketing. Albin served MAX Grow and a founding member of the as director of business development for NCIA. Lunsford advises clients throughout General Hemp, a hemp-focused investment Christie Lunsford the United States on sustainable cultiva- group where he helped create Medical Mari- Brent Albin tion practices and mentors new cannabusi- juana Inc. subsidiary Kannaway. Kannaway, nesses through her consulting company, meanwhile, appointed Jim Gibson, a supply Endocannabinoidology. chain management veteran, as vice presi- dent of operations. ◆ Colorado Gets New Revenue Czar Colorado Gov. John Hickenlooper hired Hired or promoted someone for a senior-level Michael Hartman, a senior vice president position? Send a news release or general informa- at Mutual of Omaha Bank in Denver, as tion to [email protected] Jim Gibson the new executive director of the Colorado Department of Revenue. The department

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Connecticut Despite tight regulations and a low cap on the number of avail- able licenses, Connecticut has shown a level of hospitality toward marijuana businesses not usually seen in other states. For example, Connecticut has gone so far as to educate the public about the avail- ability of medical marijuana. Patient counts doubled in 2016, driven in part by an expansion in the list of qualifying MMJ conditions. That prompted the state to license three additional dispensaries that opened in the latter half of the year, bringing the total to nine. The new dispensaries have increased patient access to MMJ across the state, setting the table for even more sales growth in 2017.

Main measure House Bill 5389

Year passed 2012

Cannabis Heavy. Producers and dispensaries are separately licensed and may not be integrated. The number of available licenses is capped at a low number and tightly controlled. Licensing business regulations fees and bond/escrow requirements for producers are some of the highest in the country. Regulations on operations are detailed and extensive, covering everything from location and security to transportation and advertising. Only a licensed pharmacist can apply for a dispensary license, and only a pharmacist or individuals who have held a pharmacy techni- cian registration within the previous five years may sell medical marijuana.

Patient registry Mandatory - patients must have a written recommendation from a physician

Sampling of state Application License medical marijuana Dispensary - $1,000 Dispensary - $5,000 (new and renewal - license is valid for two years) Producer - $25,000 Producer - $75,000 (new and renewal, license is valid for five years) licensing fees

What to watch Patient counts surged in 2016. With three more ailments recently added to the list of qualifying MMJ conditions, 2017 could be another record sales year for Connecticut MMJ businesses.

Connecticut law allows officials to expand the MMJ program if demand warrants – which they’ve already done. If patient counts continue rising rapidly, it’s possible state officials will again award more licenses.

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What They’re SAYING

“It’s like big money “In the marijuana “High Times is in is saying, ‘I don’t industry, your job is an industry that’s care what the to be creative and growing, and economics are telling come up with ways to they’re the most me. I’d love to have either connect with well-known brand a dispensary in a hot influencers or do more in that industry. … town.’ So they pay guerrilla activations, (And) legalization irrational prices.” because the legalities can legitimize what – Ron Seigneur, a partner of (other marketing they’re doing.” at Colorado accounting firm options) are so limiting. Seigneur Gustafson who has – Matt Karnes, founder and written more than 20 valuations … You can’t just do managing partner of New York- for cannabis businesses in based GreenWave Advisors, on five states, on the difficulty of traditional sponsorships High Times’ bid to list on Nasdaq valuating a company in the or PR outreach or after Origo Acquisition Corp. marijuana industry. purchased a controlling stake in advertisements.” the magazine’s publisher, High Source: Marijuana Business Daily Times Holding Corp. – Lily Colley, vice president of public relations for cannabis real Source: Marijuana Business Daily estate firm Kalyx Development and marketing director for edibles maker Medically Correct, on the importance of developing innovative marketing techniques in a sector that the U.S. government still views as illicit.

Source: Marijuana Business Daily

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