Industry experts sound off on finance, product testing, social media and more
There was little sin and plenty of cannabis industry expertise as MJBizCon took over the Las Vegas Convention Center in November.
More than 27,500 cannabis professionals from at least 60 countries gathered Nov. 12-15 for the marijuana industry’s largest event. The staff of Marijuana Business Daily handpicked nearly 160 experts in the sector to speak on topics from seed procurement to retail sales and everything in between.
In addition to the Marijuana Business Crash Course, which offered a roster of topics and speakers selected to give newcomers a solid foundation in this emerging industry, the 2018 MJBizCon schedule included preconference sessions covering MJ investment, technology and hemp.
What follows are valuable tips and advice gathered by MJBizDaily journalists from more than 100 sessions curated for cannabis industry professionals.
– Marijuana Business Magazine editorial staff
Exercise Caution When Adding New Strains to Your Cultivation Facility.
What’s the new Blue Dream? Or the next Gorilla Glue?
It can be tempting to chase every hot new trend when adding strains to your cultivation facility. But adding untested, foreign genetics to your grow room is a surefire way to cause yourself problems if you’re not cautious.
“Be super careful acquiring new strains,” said John Andrle, owner and co-founder of vertically integrated Denver cannabis company L’Eagle Services. “That’s the devil hitchhiking his way into your grow.”
New genetics can introduce pests and disease to your grow room. Don’t mix in unfamiliar strains with your current crop. If you want to try out new genetics, it’s better to keep them confined to your research and development area.
“You can’t effectively cultivate plants if you’re chasing problems that new plants are bringing in,” Andrle added.
When diversifying your offerings, first vet the compatibility, health and resilience of those new plants in your R&D room.
Andrle also recommends bringing on board pest and disease specialists to help manage problems that arise. Develop relationships with specialists from local universities, for example.
Andrle’s overarching strategy as a business owner is to be responsive to what his customers want.
“What we grow is what the consumer is asking for,” he added.
– Bart Schaneman
Don’t Cut Corners When Curing Cannabis.
There are a lot of ways to tighten up your harvest turnaround time, but one area you don’t want to skimp on is the curing process.
“The cure is not where you want to cut corners,” said Laura Day, director of operations for Portland, Oregon-based Yerba Buena.
That finishing period is essential because it develops the proper flavors and moisture levels. The finished product, when it goes out to consumers, should then taste and smoke as intended.
Day said a seven-day drying period is the absolute minimum when curing, but she typically shoots for about 10 days.
She’s seen some automated curing systems that work by taking the guesswork out of the process and leaving it to a software program. However, Day said the best way to cure is in glass jars.
Producers who want to shorten harvest turnaround time can do so during the trimming period by choosing strains that are less leafy and require less manual labor, according to Day.
For example, a strain such as Sour Diesel will yield only five harvests per year, while Blueberry Kush can be harvested six times per year.
With Sour Diesel, you’ll have to charge significantly more—at least $173 per pound more—to make up for fewer harvests.
Automated trimmers also can expedite the process, but you might sacrifice a little in quality compared to manual trimming.
– Bart Schaneman
The Days of Plant Cloning Might Be Nearing an End.
Cannabis cultivators have long relied on cloning to propagate their plant inventories and preserve genetics. But cloning’s days may be numbered—at least among smart and successful growers, said Hope Jones, founder and CEO of Emergent Cannabis Sciences, a cultivation consulting firm in Arizona.
Jones also specializes in plant tissue culture, an agricultural breeding method she claims will replace cloning as the go-to method for growers who need to propagate plants and preserve their genetics. It yields far more plants than cloning and better replicates plant genetics.
Plant tissue culture, Jones said, “is a collection of techniques used to maintain or grow plant cells, tissues or organs under sterile conditions on a nutrient culture medium of known composition.”
Tissue culturing typically takes 10-14 weeks, according to Jones, beginning with clipping very small leaf, stem and root samples and then letting them establish themselves in a nutrient mix where they eventually multiply, take root and grow.
Jones noted that 100 clone cuttings per month—a relatively high number—can yield about 5,500 clones per month, or 66,000 clones per year. By contrast, 200 nutrient vessels with five plant clippings each will yield 2.4 million clones per year.
While the labor required to perform tissue cultures can be expensive, the process before labor is cheaper than cloning, Jones said.
– Omar Sacirbey
The Hemp Industry is Going Leafy.
Hemp producers have historically been focused on the plant’s fibers, seeds or flowers. But a company from the cannabis plant’s homeland says it’s time to start looking at hemp leaves.
Avnish Pandya of the Bombay Hemp Co., a hemp clothing manufacturer and medical marijuana researcher in Mumbai, India, said leaves from the plant are an untapped business opportunity.
“The one part of the plant that no one really seems to talk about is the leaves,” Pandya said.
“The funny part is, that’s the very part of the plant that’s being used in Ayurvedic medicine, the traditional Indian medicine,” Pandya said. “We’re looking at it, not just processing the flowers but also the leaves.
“We’re also looking at hemp as a food supplement. How many things that we eat as food are also a supplement? That’s a discussion we’re going to be having more often in hemp.”
– Kristen Nichols
Test Multiple Samples from the Same Plant as a Single Batch—Rather Than Individually.
Laboratory testing of medical and recreational marijuana often is considered one of the industry’s weak points. Results of potency analyses can vary widely, fueling rumors about growers who seek labs that inflate potency numbers and providing fodder for skeptics who still see cannabis as snake oil.
But getting accurate and consistent test results is not as hard as it may seem, according to Chris Hudalla, co-founder and chief science officer of ProVerde Laboratories in Massachusetts.
First, some background: It’s nearly impossible to get two flower samples from a single plant that will have the same exact potency results.
Why? It’s well known among industry veterans that flower at the top of a cannabis plant will have more THC than flower from the bottom. Similarly, flower from one part of a plant will have different chemical characteristics than flower from another part. So, if two labs get two different samples, the potency results will be different because the samples are different.
To get around this, labs should collect multiple samples from different parts of a plant and then, rather than test them separately, combine the samples into one batch to be tested. The combined batches should yield averages of the different samples. Those samples may vary by a couple of percentage points. But in a world where every flower is a little different, that’s a reliable result, Hudalla said.
“Labs should homogenize their samples because two samples can be very different,” Hudalla said.
On the other hand, if the results of two batches from the same plant still vary greatly at two labs, then something else is probably at play.
– Omar Sacirbey
Focus on Quality Control and Testing from the Start—or Risk Having Your Brand Suffer.
Quality control and early testing are key in the production process from the get-go, according to Jason Hamilton, director of quality assurance and quality control at Texas-based Compassionate Cultivation, and Garrett Nicodemus, chief operating officer for Denver-based Xabis.
They said many plant-touching companies overlook these steps early on when setting up new facilities, especially makers of edibles and concentrates.
“You want to make sure you assign a dedicated space in your facility. This needs to be included early, and don’t leave it out,” Hamilton said.
Both MJBizCon speakers also warned against relying on labs that produce results desired by plant-touching companies, as opposed to reality-based testing data. That’s because many plant-touching businesses are eager to get their products to market—instead of ensuring their products are safe and labeled accurately.
Doctored results can hurt a company’s brand in the long run, Hamilton and Nicodemus agreed. To avoid that, they said, steer clear of labs that brag about their client lists and the results they provide. Instead, look for labs that have some type of independent accreditation or at least validation of their processes. Also, seek out labs that are willing to share detailed information regarding their testing procedures and outcomes.
“Transparency is binary,” Nicodemus said. “You should be looking at it as full disclosure or no disclosure.”
Both men also emphasized that quality control is a company’s “best defense” against legal liabilities, audits, consumer complaints and other problems.
– John Schroyer
Infused Product Manufacturers Need to Get Ready for the FDA.
Experts predict that U.S. federal reform of marijuana laws is coming—and with it, infused product manufacturers should prepare for oversight from the U.S. Food and Drug Administration.
Manufacturing processes and quality-control plans will have to meet the FDA’s standards, said Rick Scarpello, the founder of Denver-based Incredibles, an infused product maker. That means edibles makers:
- Should be prepared to register their facilities with the FDA and submit to third-party audits of quality-control processes.
- Will have to prove to the FDA their manufacturing facilities are safe and that they have a quality-control plan that includes standard operating procedures and good manufacturing practices.
- Will also need a hazard analysis and critical control points (HACCP) plan. It shows a manufacturer has identified times in the manufacturing process where products can be vulnerable—milk that could spoil in transport, for example.
- Will need to have food safety and food defense plans to show they’ve limited safety hazards when producing, manufacturing or handling food, and that they’ve prevented intentional tampering of products.
- Will need to have testing, quality-control, quality-assurance and recall-system plans in place, too.
– Joey Peña
Infused Beverages Could Be a Lucrative Niche in Canada.
Price, dose and discretion are the top purchase drivers for cannabis-infused products—factors that edibles makers need to keep in mind when dreaming up new offerings. Infused beverages could be a sizable product category in Canada, where edibles are expected to become legal in 2019.
According to retail and consumer research on U.S. and Canadian markets conducted by Seattle-based Headset and Toronto-based Lift & Co.:
- 88% of revenue from infused products is derived from items priced below $25 (all prices in U.S. dollars), and affordable costs are the No. 1 purchase driver for edibles.
- 26% of Canadian consumers want a convenient
size or dose, and 33% say they want high-THC,
- 30% of Canadian consumers say they choose edibles because they are discreet; discretion is particularly important to females and consumers 55 and older.
- 48% of Canadian consumers are particularly interested in sampling cannabis-infused beverages when edibles are made legal there next year.
What does that mean for new-product development in the United States and Canada?
Based on the research, infused product makers should focus on potent, $15-$25 products that deliver long-lasting, consistent effects in 100-milligram packages or 10-milligram doses, experts said.
There’s also a market for discreet products—mints or atomizers, for example—that are marketed to female consumers and baby boomers.
– Joey Peña
Use ‘Micro-Influencers’ to Boost Your Brand’s Social Media Reach.
You don’t need to spend big bucks and hire a celebrity to get your marijuana business noticed on Instagram, Facebook or other social media platforms.
Instead, you can spend a few hundred dollars and engage a micro-influencer. These people reach a smaller social media audience—typically more than 1,000 followers but fewer than 100,000.
In addition to costing much less, micro-influencers can deliver higher campaign-engagement rates than a big-name celebrity—60% higher, according to the latest marketing studies.
“Micro-influencers are the answer to your advertising challenges,” said Natalie Cupps DiBlasi, a social media guru and co-founder of Laced Agency, a California advertising and digital marketing firm. “The key to identifying the right micro-influencers is looking for those higher engagement rates and a consistency in driving conversations among their audiences.”
According to one analysis, Instagram users with 1,000-10,000 followers elicited likes from 4% of their fans, according to DiBlasi. By contrast, users with 1 million-10 million followers earned likes only 1.7% of the time relative to their overall followership.
DiBlasi noted that micro-influencers generate higher degrees of credibility and confidence among their followers because they are more engaged with their audiences on a consistent basis.
How to find a micro-influencer? On Instagram, Facebook or Twitter, type in your company preceded by a hashtag. Then check out the people who have used that hashtag to find possible candidates. You can also use software to identify micro-influencers.
DiBlasi’s advice: Seek out more than one micro-influencer. “Have a long list ready, because these people are really busy and may not always answer you on your timeline,” she noted.
– Roger Fillion
Data Can Expose Problems Your Business is Overlooking.
Don’t rely on your instincts to steer a cannabis retailing operation to profitability.
Instead, rely on some sales numbers you’re already collecting to reveal paths to increased retail performance, said Bryan Hill, director of Botanica Premium Cannabis in Tucson, Arizona.
Say your marijuana dispensary sells a lot more infused cookies and brownies than infused beverages. A savvy retailer would increase shelf space for cookies and reduce beverage inventory, right?
First, Hill explained, a retailer should look at how much he or she is spending on those baked goods versus how much it costs to acquire and display beverages. That analysis—called gross margin return on investment, or GMROI—might show that the beverages are more profitable than cannabis cookies and that the retailer should instead add shelf space for beverages and reduce inventory of baked goods. It’s a simple calculation that can be done on a handheld calculator, and the results can make a big difference in a store’s profitability, Hill said.
Data can be a retailer’s best friend, exposing potential problems and revealing profit possibilities, he added. Hill encouraged retailers to take a simple online class in Excel spreadsheet calculations and copy some easy-to-replicate sales calculations common in other industries.
“No matter what you do in cannabis, data will help you,” Hill said. “Cannabis isn’t super special. It’s exciting, but it’s still a business.”
– Kristen Nichols
Female Cannabis Owners Can Take Steps to Overcome an Unequal Playing Field.
Female marijuana business owners and executives still face an uneven playing field when it comes to raising capital. That was one of the messages delivered during a women’s equity panel at MJBizCon.
To help overcome such inequities, three female executives offered the following suggestions to their peers:
Look for investors you know have invested in woman-owned companies, said Rosie Mattio, founder of Rosie Mattio Public Relations in New York.
Remind investors that women-owned companies “historically and statistically have a better return on investment” than businesses run by men, said Kyra Reed, the CEO of Los Angeles-based social media strategy firm Markyr Digital.
Keep in mind that investors “will judge you very quickly on how passionate, engaged, educated and informed you are about your own product,” said Amy Margolis, a Portland, Oregon-based cannabis attorney and founder of The Initiative, a female-focused business accelerator. (Read more about Margolis on page 51.) “It’s mixing those … in an effective way so (investors) want to provide you that funding.”
– John Schroyer
Five Tips for Selling Your Cannabis Business.
If you want to sell your dispensary, grow, edibles company or testing lab, here are five tips:
1. Map out your exit strategy years in advance—and make it as foolproof as possible.
According to the Harvard Business Review, “70%-90% of acquisitions are abysmal failures.”
“It’s never too soon to start planning your exit … even if it’s five years,” said Dena Jalbert, founder and CEO of Align Business Advisory Services, a mergers and acquisitions advisory firm in Florida.
2. Sell your business when it’s doing well financially.
“Your business can’t be on the decline when you’re marketing it,” Jalbert said.
She noted that profit trends over the past couple of years will be crucial. Intangibles such as brand and quality are important, too—but not as vital as your company’s financial performance.
3. Hire expert help such as an attorney, an M&A adviser and a certified public account.
“Don’t go it alone,” Jalbert said, noting the average deal requires six months, or 1,000 hours. “Could any of you walk away from your company for 1,000 hours and still be successful?”
4. Get your books and records together ASAP.
“The buyers are going to come in and kick the tires,” Jalbert said.
Any buyer, for example, will want to verify the profits and assets being purchased. “It’s a painful process, but necessary,” Jalbert noted.
To alleviate the pain, hire a part-time chief financial officer.
5. A suitor will want to know more about your company than just its bottom line.
According to Jalbert, a buyer will:
- Want to see your personnel records and employee handbook, among other things.
- Talk with your employees and customers.
- Ask “a million questions.”
– Roger Fillion