KCA Laboratories Awarded Hemp Testing Contracts for Massachusetts, North Dakota

In a press release sent out last week, KCA Laboratories announced they have been awarded hemp testing contracts for Massachusetts and North Dakota. They received the notices through the North Dakota Department of Agriculture and through the Massachusetts Department of Agricultural Resources’ Hemp Program that they were awarded the contract.

KCA Laboratories is an independent, third-party testing laboratory based in Nicholasville, Kentucky that specializes in hemp testing.

According to Ryan Bellone, Commercial Director for KCA Labs, they started the company to focus strictly on hemp testing. “The team here at KCA Labs is grateful for the opportunity to analyze North Dakota’s and Massachusetts’ hemp samples for Total THC content,” says Bellone. “We started KCA Labs to elevate the quality of testing in the hemp industry. It has been our goal from inception to service regulators, farmers, processors, and retailers with trusted results. KCA is excited to work with North Dakota and Massachusetts as well as the farmers and processors they serve.”

Bellone says they have started seeing a backlog of samples in a number of states for hemp regulatory compliance testing. “For years, a lack of laboratory testing was a bottleneck for the industry and now that the market has more options, testing turnaround time should not be a barrier.”

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The Changing Landscape of CBD in the UK

Reports estimate that up to 8 million people in the UK use CBD for its variety of wellness benefits. The market is currently worth £300 million, a figure which is expected to more than triple in the next five years.

Sales of CBD already outstrip those of Vitamin C at £301 million vs £119 million and given that almost 90 percent of users in the UK purchase CBD online, new investments into omnichannel and e-commerce capabilities are likely to lead to even more growth.

Yet, for all this excitement, the truth is the UK’s CBD industry is facing a bit of a roadblock.

The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.

Until this year, CBD has been in a period of regulatory uncertainty and the industry faced understandable criticism when high profile cannabis probes found that over half of the most popular CBD oils did not contain the amount of CBD promised on the label. On February 13, 2020, the Food Standards Agency (FSA) unveiled new plans to better regulate the industry and announced a deadline of March 31, 2021 for the submission of a valid application for novel food licence for businesses selling food and food supplements containing CBD in the UK. Contained in the announcement was a warning to all CBD companies that failure to comply may result in products being taken off the shelves.

Consumers are also advised by the FSA to “think carefully” about taking CBD, and not to consume more than 70mg a day, making the UK the first country in the world to set recommended limits for CBD consumption, despite no scientific basis for the 70mg recommended limit.

Whilst it is undeniable that the CBD market requires some form of regulation and standards need to be raised for CBD products, to ensure consumers are receiving safe, legal and quality products, this will be a complex and costly process. CBD companies, particularly smaller CBD brands, will need to ensure they have the necessary infrastructure, expertise and resources to meet this deadline.

The deadline is fast approaching, and no extension has been granted despite of the difficulties caused by COVID-19. This will put all businesses under pressure, as the process for applying for Novel Food status requires supplying a large amount of data from rigorous testing. For larger players, this will likely be nothing more than a costly inconvenience, but for smaller, nascent businesses, these costs may put their longevity at risk. There are hundreds of CBD start-ups which have done great work to future-proof their businesses and create safe, high-quality products. Now, instead of preserving costs to try and stay afloat during the pandemic, these businesses must put a significant amount of precious resource and funds into finalising their applications in time.

Improving end user confidence in CBD products and understanding the process from seed to shelf is crucially important in this developing industry, however, I firmly believe these regulations are suffocating the market. I fear that on April 1, 2021, many smaller firms who haven’t managed to achieve Novel Food status yet have a superior product, will suddenly find themselves unable to legally trade.

On the other hand, there is the argument that the FSA ruling may increase the importation of CBD products from firms based outside of Europe. So far, the large cannabis firms in North America, which have the budget and expertise to meet FSA standards, have held back on importing CBD products to the UK. This may well have to do with the slightly dubious legal status CBD has so far had in the UK, so it will be interesting to see whether this changes in April next year and which players will enter the market. The CBD market will continue to grow and diversify but it will be essential that this leads to increasing consumer choice rather than confusion.

In my opinion, the only way the UK will be able to fully harness the potential of CBD is to create an independent, self-sufficient industry that not only helps consumers but contributes to the wider economy through jobs, skills and investment. The pandemic has done well to put a spotlight on the huge access issues cannabis patients face in the UK, bolstering the case to ‘onshore’ the industry.

Whilst this would require a streamlining and simplification of the licensing laws around growing cannabis, the development of a UK-based industry would have endless benefits. Not only would medical cannabis patients see improved access to their medication, CBD firms would no longer have to ship oil in from the dominating wholesale nations such as Poland, Czechia and Italy, this in turn having huge economic benefits. The development of a UK industry should involve the creation of a new regulatory system specifically designed for cannabis products and preferably for a new regulatory body, similar to the Office of Medicinal Cannabis in the Netherlands, to oversee all cannabis regulation, licensing, importation and approvals. This would mean a move away from the current solution of forcing CBD products into the Novel Food category and subjecting them to inappropriate regulations which will soon begin to smother the market with unnecessary red tape.

People are increasingly turning to more natural health and wellness solutions, so as Britons become better informed about CBD products and as the market matures, demand will certainly increase. Yet with both Brexit and standardisation of cannabinoid regulations occurring in parallel, the future and scale of the CBD market is still to be determined. A huge UK market could potentially help push it in a positive direction, facilitating processes for CBD producers.

The cannabis industry is resilient and until this point, has managed to grow at an exponential rate despite regulatory uncertainty. As acceptance and demand continues to increase, so the case for an independent UK industry will strengthen and regulatory roadblocks finally overcome.

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Could CBD Standards Become Global?

Here is the good news: There are beginning to be regional- and country-specific guidelines on at least one widely grown cannabis crop internationally. This includes a range of regs on the medical side (GMPs) but they are also expanding for the “other” cannabis crop too. Namely, hemp.

Now, here is the bad news: The regulation that is developing in different regions is frustratingly not uniform, and can still differ greatly in critical areas. Most notably, for some reason, while the U.S. Farm Bill of 2018 created a new national standard for the amount of THC that could be contained in American hemp crops (0.3%), the same conversation in Europe during the same period of time led to a decision to set the level of allowable THC in hemp plants and products at a slightly lower one: 0.2%. As a further confusing muddle, Switzerland has set its THC limits at 0.1% (Switzerland is not in the European Union), and other countries across the region have also attempted to limit the THC in industrial hemp production to no more than this level, no matter what regulators rule at the EU level.

Just some of the many CBD products on the market today.

Beyond a lack of scientific reasoning obvious in the same, by definition, this creates a natural trade barrier between hemispheres. If U.S. farmers are looking for export opportunities to Europe (for example) not to mention other states, they have to worry about both local as well as destination standards – which on the surface at least, are currently incompatible.

It is also creating some frustrating issues for anyone who is in the market for hemp as either a buyer or seller.

Other Issues In The Mix
Markets are driven by many factors – including regulations but also cost and of course consumer demand for a product within a certain price range. Certainly, the CBD industry if not the recreational THC one right behind it (even in Europe now) desperately wants to attract those who are known euphemistically as “daily consumers.”

This means that both the price point and consumer opportunities must hit a mainstream distribution norm. While the recreational market will continue to be distorted by delayed, but inevitable discussions about reform across Europe, the medical market is beginning to set some groundwork that is also bleeding into the entire discussion. Namely, that extracts will play a large role here.

What does this wrinkle mean in a world where the agricultural cultivation standards are different?

Biomass And Extracts Are Gaining In Importance
For those in the strictly “flower” game, the market at least in the U.S., will remain a place where pretty flower crops will gain premium prices as long as they meet local spec.

european union statesHowever, this is a limited proposition, even now – especially in the CBD business. The edibles market, for one, has created a huge potential for vast quantities of industrially produced, outdoor grown hemp, bound for extraction and downstream, a vast variety of end products across a wide spectrum of niches – from wellness to purely cosmetic. So is the burgeoning medical market in Europe.

This means two things. The first is that consumer-facing products with any amount of cannabinoid (take your pick) can be produced to order, no matter the cannabinoid concentrations of the original plant. The second, by definition, means that biomass bound for extraction, particularly export, will gain an increasingly larger share of the wholesale market.

Does it really matter, in other words, to a European extractor, that the source product is of higher THC concentrate than is allowed for B2C sale in Europe? No. Indeed, all it means is that they have to buy lower amounts of biomass. The rest is merely a mechanical problem.

Playing The Regulatory Game
For an increasingly competitive hemp market in the United States, in other words, foreign exports are absolutely an intriguing option for revenue right now, and will continue to be as long as price competitiveness and overall quality issues remain high. Furthermore, there will be almost no pressure to regulate the market globally to the same standards, particularly if CBD itself is descheduled in December by the WHO.

In other words, the regulatory disconnect between the U.S. and Europe right now, and certainly for certain kinds of unfinished bulk product, could therefore open a new niche in the market that is unlikely to be “fixed” anytime soon.

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The Year in Cannabis (So Far)

At the outset of 2020, the cannabis industry appeared poised for a series of incremental changes: a number of states were considering decriminalization and legalization measures, and support was growing for federal legislation allowing cannabis businesses access to banks and financial services. Then the COVID-19 pandemic hit, which disrupted state legislative sessions (and legislative priorities), obstructed signature gathering for ballot initiatives, and reshuffled federal priorities. However, despite all of these changes, the cannabis industry has seen significant developments across the country. Beyond of course the many challenges and losses brought by the pandemic and its aftermath, in some ways, it may prove a boon for the industry.

Legalization and Decriminalization

Currently around a dozen states have legalized cannabis for recreational use, while just under two dozen states allow use of medicinal cannabis. With support for legalization measures steadily growing in most states, a number of major states seemed poised to pass legislation legalizing recreational cannabis, including large potential markets in the Northeast such as New York, New Jersey, Connecticut and Pennsylvania. And in many other states, advocacy groups were well underway gathering signatures to qualify legalization measures for the November 2020 ballot. When the pandemic hit, however, state legislatures largely suspended their normal operations, and signature gatherers were stymied by stay-at-home orders and social distancing requirements.

Despite these major obstacles, legalization and decriminalization legislation has continued to move forward in a number of states, and still others will have legalization referenda on the ballot for November’s election. Perhaps more important than these initiatives themselves are the diverse states that are moving toward loosening of restrictions around cannabis: rather than being limited to a handful of especially liberal states, cannabis advocates are seeing tangible progress is every geographic area, among states whose political leanings span the spectrum.

Whether through the legislature or directly by the ballot, it seems likely some states will legalize adult use this year

While the Northeast corridor had planned to undertake legalization efforts in a coordinated fashion this year, those results were put on hold given the seriousness of initial COVID-19 outbreaks in the greater New York area. However, New Jersey nevertheless passed decriminalization legislation, and the appetite for full-scale legalization remains strong there, with a ballot initiative going directly to voters in advance of the New Jersey Legislature considering the issue. The Commonwealth of Virginia enacted decriminalization legislation also, and a legislative caucus in Virginia has pledged to introduce recreational legalization legislation this summer when Virginia convenes a special legislative session. Voters in Mississippi and South Dakota will be able to vote on ballot initiatives to legalize recreational cannabis, and similar ballot initiatives are underway or likely in Arizona and Nebraska. Advocates in Arkansas and Oklahoma had also hoped to bring initiatives to the ballot, but have encountered practical and legal obstacles to gathering the required signatures in time for this year’s election.

These myriad initiatives reflect a strong shift toward legalization of recreational cannabis across the country, and the ability to continue gathering signatures and momentum despite stay-at-home orders and social distancing underscores the growing popularity of the movement. Whether through the legislature or directly by the ballot, it seems all but certain that the number of states permitting recreational cannabis will grow significantly this year.

COVID-19 Business Closures

As the COVID-19 pandemic took hold in the early months of 2020, most states instituted various forms of stay-at-home orders that required the closure of nonessential businesses. While these policies had—and continue to have—serious impacts on businesses of every type, cannabis companies have largely seen strong economic growth notwithstanding.

One of the most important developments in this space came in the context of state and local governments designating certain businesses as “essential” for purposes of business closure orders. In nearly every state to consider the issue—Massachusetts being the main outlier—state and local governments recognized cannabis companies as essential, which allowed them to operate during the shutdown.

The “essential” designation largely carried between both recreational and medicinal cannabis jurisdictions. And this matters because of what it means for the industry. State and local governments clearly realize the important medicinal role that cannabis plays for patients dependent on it for treatment, and the overlapping customer bases of mixed dispensaries further contributed to keeping cannabis companies open during the pandemic. Even in states where certain dispensaries operate solely in a recreational capacity, those jurisdictions recognized the importance of allowing access to a safe recreational substance, like alcohol, during prolonged stay-at-home orders.

Similarly, likely as a result of those same stay-at-home orders, cannabis companies largely saw significant increases in sales revenue. More customers visited retail establishments, and those customers often purchased more product per visit. This resulted in better-than-expected sales revenue for cannabis companies, and also produced increased tax revenues for state and local governments.

The cannabis industry saw more than just increased sales, however. In the process of issuing emergency rules for the cannabis industry during quarantine, a number of state and local jurisdictions either began to allow cannabis deliveries or expanded its availability, a shift in policy that may stick around well after the pandemic subsides.

One final impact of the pandemic may also help push legalization initiatives forward in the coming years: decreased tax revenue and major budget gaps. Due both to a decrease in economic activity like shopping and dining, as well as the unexpected health care costs associated with responding to the COVID-19 crisis, state and local budgets are expected to see significant shortcomings for years to come. In response, state and local governments are starting to see cannabis as a significant and viable source of tax revenue. For example, various cities in California that had previously been reluctant to permit recreational cannabis are beginning to welcome cannabis companies in hopes of making up for lost tax revenue. Similarly, in New Mexico, where legalization has remained a heated topic of discussion, Gov. Lujan Grisham has explicitly expressed her regret that the state failed to legalize cannabis, recognizing that tax revenues from the industry could have reached upwards of $100 million. Other state and local governments are coming to similar realizations, which should help propel expanded access to legal cannabis in coming years.

Federal Changes

Major changes in the cannabis industry in 2020 have not been limited to the states. In the midst of changes and crises across the country, the federal government has been making meaningful progress in two major respects, COVID-19 notwithstanding.

SAFE Banking Act language included in COVID-19 relief package legislation

First, cannabis companies are edging closer to having full access to banks, bank accounts and related financial services. The SAFE Banking Act, championed by Rep. Perlmutter, has made it through the House of Representatives and is currently in the Senate Committee on Banking, Housing, and Urban Affairs. However, as Congress continues to toil away at future COVID-19 relief legislation, political signals from Washington, D.C., suggest there is a reasonable likelihood that the protections of the SAFE Banking Act will be included, in some form, in the next round of major COVID-19 legislation out of Congress. The enactment of these banking provisions will provide substantial relief to cannabis companies who have largely been excluded from opening bank accounts and utilizing the services major banks provide. Additionally, allowing access to banks and their services should further facilitate the rapid growth in the cannabis economy we are witnessing elsewhere, and this movement could further legitimize the industry as part of a broader push for federal legalization.

Second, after a four-year delay, the DEA has finally proposed draft rules to expand the DEA’s limited cannabis research program. For decades, all cannabis research to date has relied on limited supplies of cannabis grown at the University of Mississippi. Now the DEA is finally following through on its promise to further develop, refine and expand its research program by allowing additional suppliers and market participants to play a role in cannabis research. While the rules proposed are not without detractors and critiques—and the rules themselves have not been finalized—this marks an important step forward to a better understanding of the effects of THC on consumers, not only because more research is needed to understand a substance consumed by millions annually, but also because the limited supply of cannabis on which researchers currently rely has been shown to differ substantially in appearance, consistency and chemical composition from cannabis that is commercially available in states across the country. With an expanded research regime comes the hope that scientists will be able to develop new and innovative cannabis-derived medications, while also furthering our understanding of how THC affects health and the body.

At every level of government, the year in cannabis so far has proven to be far more eventful than many predicted. And the COVID-19 crisis has not slowed progress. There appears to be continued momentum to further mature how cannabis is treated at every level of government, which signals that significant changes are on the horizon. Industry observers will be closely focused on how the rest of the year proceeds, especially with a presidential election on the horizon.

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Advertising a Cannabis Business Through the Pandemic

For a long time, cannabis marketing didn’t exist. Then suddenly, it did. Fast forward a few years, and this nascent vertical within the modern marketing sphere remains a unique tangle of federal restrictions, state regulations, platform-specific policies and gray-area confusion, complicated by the sudden classification of businesses within it as “essential.”

So, how do today’s cannabis business owners create a marketing strategy that works in 2020? Below, we take a look at how cannabis marketing has evolved over the last few months before diving into one example of a Seattle-area cannabis retailer that’s risen to the challenge, evolving their marketing strategy quickly and successfully to capture an influx of new customers during COVID-19.

Welcome to the Cannabis Industry’s New Normal

The fact that COVID-19 has fully dominated marketing news, along with every other form of coverage, since its inception goes to show just how much it’s changed things. Multinational corporations have paused their entire ad spends; contracts have been backed out of; multi-year marketing plans have been torn up and rewritten, sometimes more than once. Those who were hoping to get back to their previous initiatives within a month or two have seen the error of their ways—and we’re still (though it doesn’t feel like it) less than half a year in.

The biggest change brought on by COVID has been a shift en masse to all things digital. Whereas before most companies met in person, they now meet over Zoom. Thousand-person conferences have become webinars and virtual networking events, while brand activations are now free trial promo codes. Along the way, traditional marketing methods have increasingly been replaced by their digital counterparts. Today, marketers need to meet consumers where they are, and where they are is at home and online.

In most industries, this shift to digital has been happening for many years already. Digital marketing and advertising methods are highly measurable, instantly adjustable and capable of reaching target audiences more directly and efficiently than traditional media. Even before the pandemic hit, cannabis was already playing marketing catchup: For example, while most industries have been using billboards since closer to their inception in the 1830s, the first cannabis billboards post-legalization only cropped up in 2014.

The shift to digital advertising in the cannabis industry has long been stalled by Facebook and Google, both of which reject all cannabis ads and even most CBD ads regardless of the location and legality of the products. Therefore, cannabis brands have evolved their own unique non-digital marketing playbooks. In addition to the prevalence of print ads, physical billboards, sponsored events and in-person pop-ups, many cannabis brands have come to rely heavily on a tactic unique to the industry: budtender education. In the meantime, most cannabis marketers haven’t been leveraging their digital options in full (or, frequently, at all).

Due in large part to COVID-19, the need for this to change has come into sharp relief. In addition to decreased reach for print publications and out-of-home ad space with fewer people spending time in public, events are no longer feasible, and customers are no longer having leisurely chats with their budtenders as they weigh the benefits and drawbacks of different products for sale. Most cannabis stores are minimizing their in-store visitors as well as offering online ordering, curbside pickup services or cannabis delivery. In April Margaret Jackson, a journalist at Marijuana Business Daily, reported on this trend:

“Many marijuana brands have relied on in-store pop-ups and educating budtenders about their products to reach consumers. But as cannabis customers increasingly order products online for delivery or pickup—and with the expectation that these habits will persist after the coronavirus pandemic is under control—marijuana brands should consider more direct ways to reach their audience to ensure sales stay strong, according to industry officials.”

Marketing Isn’t the Budtender’s Job

We don’t know how long COVID-19 may continue unchecked, but as Jackson notes, these shifts in behavior are likely to outlive the circumstances that first necessitated them. Since online shopping, pickup and delivery have quickly become standard in 2020 cannabis sales, a huge marketing gap has been left between consumers—including an influx of new ones—and the brands they’d probably be buying if those brands had been marketing to them before the pandemic.

“I’ve been saying for a long time that the brands we work with need to start marketing themselves directly to consumers,” says Anna Shreeve, managing partner at The Bakeréé. “It’s not the budtender’s job to do that legwork.”

The Bakeréé operates two retail locations in Seattle, one on the north end of the city and the other on the south. Since opening their first store, the team has focused on sourcing products of the highest possible quality at every price point, as well as emphasizing a wide variety of high-CBD options. Shreeve says the store has worked hard over the years to build a knowledgeable clientele that comes in specifically to find new and interesting products. Still, she notes that many customers go directly to the budtenders for suggestions.

Steve Schechterle, director of marketing at Washington’s Fairwinds, which sells both cannabis and CBD products, recently noted the company’s focus on budtender outreach and training in a webinar hosted by the Cannabis Marketing Association. “It’s where we’ve seen the biggest payoff by far,” said Schechterle. “Since we first noticed this, we’ve created an entire program around training Fairwinds-certified budtenders.”

Fairwinds isn’t alone: Many companies come in to meet dispensary employees, offer swag, answer questionsand show off their newest products. That way, when a customer comes in looking for a recommendation, those products are top of mind. For now, that option is largely gone, and Fairwinds (along with a few other early adopters of digital advertising in the industry) has begun advertising online to drive increased consumer demand and avoid having to rely primarily on budtenders in the long term.

Pivoting a Dispensary to Digital Ads

In the past, The Bakeréé—like many retailers in adult-use states—leaned heavily on event-based marketing, including New Years parties, in-store artist showcases, festival sponsorships and more. While they have used digital advertising for their own business, ad campaigns have primarily supported in-person events, such as through ticket sales for the New Years parties. This year, Shreeve had planned to go big on marketing for 4/20, putting together her own concert lineup that included up-and-coming hip-hop names from across the US. She was about to start promoting that concert with digital ads when the pandemic hit.

This ad for The Bakeréé appeared in The New York Times.

By early April, it had become clear that the 4/20 concert was not happening. Shreeve had already lost $20,000 in deposits on artists and the venue, which reduced the budget available for alternate marketing ideas. She decided to run a digital advertising campaign with a single display ad: The goal was to promote online ordering for curbside pickup.

While display ads are not generally known for their conversion rates, they’re a common place to start advertising cannabis due to their price point (impressions generally cost fractions of a cent) and ease of creation. Display ads can be run using programmatic ad tech, the current standard in digital advertising, which accounts for 70% of ads bought and sold in 2020. In most other industries, search and social ads through Google and Facebook are the go-to methods for digital advertising, but since both are closed to cannabis brands, programmatic is the best way for cannabis businesses to advertise digitally.

Starting with one display ad concept, and then adding a second, The Bakeréé ran their ads on a wide variety of mainstream websites, using demographic and geographic targeting to reach potential customers within a specific radius of each store. They also advertised to customers living near the closest competing dispensaries. The ads themselves focused primarily on promoting the ease of curbside pickup as well as offering a 10% discount on all online orders. Sales began to rise almost immediately.

Though April’s increase may have been due in part to 4/20’s impact on sales and a widespread stock-up mindset in the first month of the pandemic, The Bakeréé saw back-to-back-to-back months of YOY revenue growth at both their locations in April, May and June. From display ads on desktop they added mobile to the campaign, and in June added two 30-second video ads to build on the momentum generated by display.

Overall, The Bakeréé has seen a 13-fold return on ad spend, driving $153,000 in revenue from digital ads in the campaign’s first 90 days. The display ads have generated widespread use of the online ordering system, increased basket size to an average of $95.47, and grown online ordering revenue by 389%.

In the second half of the year, Shreeve says she hopes to expand the campaign to include connected TV and digital audio ads, particularly to support the launch of a new website with updated online ordering capabilities in Q3. And she still hopes to see more of the cannabis brands sold by The Bakeréé start advertising on their own, too: To that end, Shreeve is considering working with vendors to run co-branded advertisements that may help them adopt their own digital marketing initiatives sooner and drive more sales for everyone involved.


Suggested Readings

Case Study: The Bakeréé (PrograMetrix)

Programmatic Advertising: A Close Look at Cannabis (IAB)

White Paper: Digital Ads for Cannabis & CBD (PrograMetrix) 

The post Advertising a Cannabis Business Through the Pandemic appeared first on Cannabis Industry Journal.

A Joint Problem: How Cannabis Testing Policies Affect Applicants’ Attraction Toward an Organization

Employees with substance abuse issues could cause problems for their employers. Recent legalization of cannabis has prompted organization to re-evaluate their drug testing policies in anticipation of increased usage among employees and potential hires (Rotermann, 2020). Cannabis use has increased from 14.9% to 16.8% post-legalization in Canada. Policies that enable routine cannabis-testing of employees, though beneficial in some cases, might negatively affect the perceptions of individuals toward the organizations that hold these policies. Specifically, job applicants may perceive the administration of such policies as unfair. I investigated the influence of cannabis testing policy and its perceived fairness on job applicants’ perception of organizational attractiveness and their intention to apply to a job vacancy.

A recruitment notice was presented to potential participants, which included a link to the survey. After reading and signing the consent form, participants were randomly assigned one of the three drug testing conditions (severe, moderate, none). Severe drug testing policies include testing pre-employment, randomly during the employment period, and in response to suspicious behavior. Moderate drug testing policies include administering drug testing pre-employment and in cases of suspicion. None is the control (i.e., no testing policy in place). The corresponding vignette was presented, followed by the survey questionnaire (measures on organizational attractiveness, intention to apply, perceived fairness, and perceived stigma), demographic questions, and questions on cannabis usage.

Cannabis user’s perceived fairness of cannabis testing was higher within organizations with no compared to severe testing situations (Figure 1). However, for individuals who do not ingest cannabis, the perceived fairness was higher for organizations with severe compared to no cannabis testing policy. This suggests that cannabis users deem cannabis testing as unfair regardless of the type of policy. This supports previous research findings on recreational use of cannabis and job seekers’ perception of drug testing (Paronto et al., 2002). Based on Gilliland’s (1993) model of organizational justice and perceived fairness, there are 10 procedural rules categorized into three categories: formal characteristics of selection system, explanations offered during the selection process, and interpersonal treatments that help form the applicants’ perceived fairness. In the current study, the no-cannabis testing job advertisement was seen as valid (one of Gilliland’s procedural rules is selection information) and honest (one of Gilliland’s procedural rules is honesty) by the cannabis users; however, moderate and severe testing was not seen in the same light, which might explain why we see decreased perceived fairness for cannabis testing. Those two procedural rules violate reasonableness leading to decreased perception of organizational fairness among cannabis users for cannabis testing.

The current study also supported past research by confirming that the individuals who ingest cannabis demonstrated increased levels of organizational attractiveness and intention to apply to organizations that had none compared to severe cannabis testing policies. If the organization is testing for cannabis use pre-employment or randomly, in addition to post-accident/suspicious behavior (i.e., severe policy), cannabis users’ level of organization attractiveness and intention to apply is much lower. This could be due to the fact that cannabis has been legalized in Canada and 11 states in the US  (Leafly, 2020). Individuals might feel that severe testing is an invasion of their privacy given that they are not doing anything illegal. Furthermore, job applicants perceived drug-testing as harassment toward individuals and claimed it represents a repressive work environment. Given that, this feeling could prevent an applicant from applying or considering the available job.

Implications: This study has important implications for employers and organizations in general. Even though it is important to have cannabis testing policies in place, it is equally important to consider the impact of cannabis testing on the potential talent pool. Such perceptions of drug testing may lead talented applicants to self-select out of the job pool. This would lead to a decreased number of applicants for a job available to the employer. Therefore, knowing the attitudes and intentions of individuals who ingest cannabis toward moderate and severe testing policies will provide employers with solid research-based evidence from which to design programs and policies surrounding cannabis testing.

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What Cannabis Businesses Need to Do to Adapt to COVID-19

How COVID-19 Impacted Cannabis Businesses

Before jumping into what cannabis businesses can do amid this pandemic, it is crucial to explore the specifics behind how the virus impacted the industry as a whole. From a surface level, it seems obvious what happened: dispensaries had to implement social distancing protocols, require both customers and employees to wear masks and limited the number of customers that can be present on the point-of-sale floor room. But COVID-19 did not merely make shopping experiences a tab bit inconvenient.

Cannabis producers, and especially those involved in manufacturing cannabis goods, experienced an apparent disruption in their production schedules. If the metals and plastics were sourced from Wuhan, Shenzhen or any other dense industrial area in China, supplies suddenly stopped coming, and producers were left with limited production options. Businesses did not consider the value of having various vendors and instead put all their stock in one source. A disruption in production inherently impacts dispensaries.

COVID-19 impacted more than just supply chains, however. For instance, investors are now less likely than before the pandemic to invest in early-stage cannabis companies. Competition for capital now far outweighs the supply for cannabis companies, and we have seen (and will continue to see) a drop in company valuations. Indeed, COVID-19 is affecting more than just currently existing operators but those yet struggling to create cannabis businesses of their own.

Vendors & Supplies

A broad survey conducted by the Institute for Supply Management (ISM) between February 22, 2020 and March 5, 2020 found that 75% of U.S. companies had experienced supply chain disruption as a result of the COVID-19 outbreak. An estimated 90-95% of all components utilized in cannabis vaporizer pens were sourced from manufacturers in Shenzhen, China. In contrast, very few companies used domestic manufacturers. While this is just one example, it is equally important to note that cannabis-specific equipment and supply shortages were not the only factors that disrupted cannabis businesses. Shortages of personal protective equipment (PPE) presented challenges for cannabis dispensaries, producers and manufacturers that continued to operate during the “shelter in place” orders.

Operators must establish a resilient supply chain. Do not simply limit your options to one specific region, as this can be a costly mistake. Operators must cultivate an in-depth understanding of their supply chain beyond critical suppliers and their stress points; they need to develop and follow a systematic supply process that takes potential disruptions and stress points into account. When vetting potential vendors, always ask detailed questions that elicit evidence-backed responses. Ask vendors where they source their materials from, whether they have any history of experiencing disruptions in their supply chain and what kind of setbacks they have suffered as a result of COVID-19.

Investing in Your Core Business

In light of COVID-19, operators must invest in solutions that increase efficiency and improve the customer’s experience. This entails ensuring your customer safely enters and leaves your dispensary with a product they are satisfied with—the essence of any retail operation. Your operation should focus on enhancing customer flow as opposed to encouraging aimless roaming. Having an open-space, Apple store style dispensaries might have been a popular option before, but times have changed, and dispensaries must adapt.

Guided purchases offer not just more efficient transactions, but also serve to ensure that your waiting room isn’t backed up with an endless stream of unmanageable customers. Depending on your locally-mandated COVID-19 protocols, your dispensary will likely not be permitted to hold a high number of customers in the store, nor should it during this pandemic. Each customer service representative must be active as opposed to passive, directly asking customers what they are interested in, offering product or strain choices when customers seem unsure and answering questions as thoroughly as possible to avoid confusion and inherently delays. Be sure to emphasize the value of guided purchases to your employees and how they can promote the safety of both themselves and their customers.

Maintaining Urgency

The uncertainty of COVID-19 and its impact on the general economy has left many individuals “clocked out.” Simply put, many people feel that they should wait until things go back to normal before making any critical decisions. As essential businesses, cannabis operators cannot afford to make this same mistake. Now is not the time to sit back, reflect and wait for the vaccine. Instead, operators must work to precisely assess how COVID-19 impacted their business and execute a clear plan of action to address foreseeable problems.

Execution is far more important than perfection; you’ll need to make changes on a dime and avoid spending excessive hours obsessing over debating specific actions rather than taking them. It is far more essential to get tasks done versus ensuring they are perfect. If something is not working in your business, it must be readdressed or removed entirely from the protocol. It is far better to make necessary changes now amid the pandemic as opposed to reactively waiting and seeing what may come next following it.

Stay nimble by cutting out any factors that may be slowing down your company’s efficiency. Is your point-of-sale system causing issues? Can you use a better payment processing tool? Are any employees underperforming? Are there any internal policies that may be hindering your employees’ ability to work as optimally as possible? These are some of the many factors that must be considered to ensure your business stays agile and adaptable. Determine what is working against you and execute a plan of action to address. Do not wait and do not take shortcuts around regulations.

Understanding the Shift in Purchasing Behavior

Regardless of whether or not a vaccine for COVID-19 is completed anytime soon, operators must know that there is no “returning to normal.” People’s habits and behaviors have changed due to this virus, whereas slow browsing of items might have been preferable for some individuals before COVID-19; this is likely not the case today. Furthermore, research groups like Accenture have found that most customers expect their shopping habits to change permanently.

Source: Accenture COVID-19 Consumer Research, conducted April 2–6. Proportion of consumers that agree or significantly agree.

In the study mentioned above, shopping more consciously is one of the two top priorities for customers during this pandemic. According to Accenture, “[c]onsumers are more mindful of what they’re buying. They are striving to limit food waste, shop more cost consciously and buy more sustainable options. Brands will need to make this a key part of their offer (e.g., by exploring new business models).” Furthermore, customers are now more likely to shop locally; this is why community engagement would be especially important to ensure you develop transparency and trust between your brand and your customers. Understanding this shift in purchasing behavior will remain one of the more crucial tasks of any cannabis operator.

Expanding Sales Avenues

More and more customers are now relying on online and curbside purchases than ever before. Dispensaries must look to their current sales avenues and determine where key focuses should be made. Use your sales data to determine where customers are making their purchases the most, be it through third-party delivery services such as Eaze, standard home delivery, online ordering or curbside pickup. Focus on identifying friction and streamlining the user experience on all customer-facing platforms and services. Equally, consider which platform your customers are using the most to make purchases; are they making more online purchases, or do most still prefer direct shopping at the store? Remember that having more products doesn’t necessarily mean more revenue. You must also identify which products are performing well and which have low margins.

These considerations can help strengthen your highest performing platform while working to fix any more inferior performing platforms. As stated before, stay nimble; if something is not working out, cut it out from your business model, and move forward. Do not be afraid to cut poor-performing platforms to hone your focus on the successful ones. Since post-COVID-19 shopping behavior is likely to stay permanent, these changes may still be applicable following a slowdown or cessation of the virus.

Delighting Your Customers

Virus or not, customer satisfaction remains one of the most crucially defining points for the future of your business. Your customers must be safe and must be happy with their purchase. To ensure this outcome, you need to maintain adequate safety policies while equally promoting streamlined purchases. Although a limited number of individuals may be annoyed with over-the-top safety precautions, most customers will enjoy the heightened security that comes alongside these types of measures.

Equally, be sure there is hand sanitizer available near the entrance of your dispensary. This adds a further sense of security for your shoppers. Delivery should be consistent; delays and setbacks must be minimal to win the confidence of your customers. Take the extra steps to ensure your dispensary is clean and products hygienic. All these factors work to increase customer satisfaction while maintaining their safety, and more importantly, impact the level of trust your customers have in association with your brand.

Scaling Operations Taking Advantage of Limited Competition in Emerging Markets

As stated before, several individuals—including existing and emerging cannabis businesses—are clocked out following COVID-19. This mindset is not only detrimental for operations but can also impact how you scale your business. New markets are coming online and will continue to do so as regulators are increasingly incentivized to replenish government coffers. Riverside County in California, for instance, is now allowing for capless licenses for all cannabis business types. However, what remains the key focus for regulators is expanding the number of delivery and distribution operators. In Massachusetts, delivery endorsements for dispensaries are available without a set deadline to social equity applicants and do not have a defined cap. In Illinois, the cap for transporters was equally removed, and each applicant who scores above 75% will receive a license.

These types of licenses are now more valuable than ever before for two reasons. The first reason is that regulators are keener to award delivery and transporter licenses than other types. Secondly, customers now prefer home delivery over shopping in stores due to COVID-19. With more people clocked out during these times, you have far more opportunities and far fewer competitors during application processes. Use this time to truly develop a strategy for expansion, as the chance might not come so quickly again.

Conclusion

As a final point, be sure to expand your online presence during this time. Although you may not have the capacity to reflect your company’s personality and value through quick in-store transactions, you can use social media to encourage product reviews, social interactions, and recommendations. Invest in marketing through social media platforms. Platforms such as TikTok have helped form communities of like-minded individuals. Use platforms such as that to highlight your company’s personality and values, avoid being “salesy” and focus more on being funny, entertaining and just alive. Character adds value to your business.

People want to laugh, to feel safe and they want to live. Create social interactions and immersion and always prioritize being honest and transparent with your customers. This final point stands as equally as important as the rest of the considerations highlighted throughout this article. Stay nimble, stay active and stay alert! Do not view the chaos behind this pandemic as a pit, and instead see it as a ladder. Track down opportunities, do not be afraid of change, and, more importantly, do not wait for an answer to COVID-19, be the answer.

The post What Cannabis Businesses Need to Do to Adapt to COVID-19 appeared first on Cannabis Industry Journal.

Shakeups In The German Cannabis Market

As Germany begins to enter a summer where life seems ever more normal, there are fairly major shakeups underway in the German cannabis market. These are structural but will have a profound impact on the entire market going forward.

A Mass Of Distribution Licenses
It is an interesting metric to understand that before 2015, there were no specialty cannabis importer/distributors in Germany. As of July 2020, there are rumors that this number has now shot to close to 80 (either licensed or in the process to become licensed). That is a huge number. So was the last amazing number (40) as of the beginning of this year. Just the previous estimate would mean, literally, 1 specialty cannabis distributor for every 2 million Germans. That obviously is not sustainable. What it does indicate is the huge surge of interest in medical cannabis not to mention acceptance, as well as the amount of money actually now beginning to slosh around in the domestic market.

And that spells good news for both patients and insurers. The rest of the industry, however, will be under further pressure to reduce cultivation and operation costs to meet the challenge.How many of these distributors will survive is another question, particularly in an environment where the government is looking for just one to fulfil the needs of all of Germany’s pharmacies from what is grown domestically. This does not of course mean the end of specialty distribution. Indeed, far from it. There is not enough cannabis entering the market, presumably this fall, that is grown here to even come close to meeting demand.

No surprises here. This has been one of the enduring criticisms of the entire process, if not the bid itself since 2017.

However, one thing this does mean is that distribution fees, like pharmacy fees for processing the plant before them, are finally hitting a price adjustment phase.

This is also going to be good not only for patients, but also health insurers.

For all the standardization of the industry, including fees and mark-ups, one of the strangest things about the German cannabis market is how widely cannabis prices can differ even between pharmacies. This is as true of flower as it is of dronabinol.

The Wholesale Price Of Medical Cannabis Is Dropping
Again, no surprise here, the government will end up buying more cannabis than contracted for under the original bid. This was actually anticipated in the language of the contract that currently exists between the government and the three bid winners. Namely, an automatic 50% reduction in price is mandated for any cannabis sold beyond the 120% agreed upon qualities.

german flag
Photo: Ian McWilliams, Flickr

The growers domestically, in other words, who won the bid will be under a severe price restriction. This may have been the ultimate strategy of the government to begin with (namely to attract foreign capital and expertise but then begin to reign in the sky-high prices of medical cannabis so far.)

This means that the price of €2.30 a gram will undoubtedly fall. Where it will float is anyone’s guess, but right now it appears on course to hit about €1.87. Or about the same price that other governments across Europe (notably Italy) had previously negotiated with the big Canadian cannabis companies (notably on this one, Aurora’s military contract in Italy).

Implications For The Import Market
With domestic producers under the gun, this also means that all imports will begin to feel the price squeeze too. And that will also have a significant impact on point of sale cannabis prices.

And that spells good news for both patients and insurers. The rest of the industry, however, will be under further pressure to reduce cultivation and operation costs to meet the challenge.

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Gen Z Marketing Dos and Don’ts in the Cannabis Industry

Gen Z is currently at about 40% of consumers, and this segment will be rapidly growing in the coming years. Most researchers and media define this generation as those who were born between the mid to late 1990s and early 2010s. In the United States alone, Gen Z consumers have an estimated $143 billion in buying power. Businesses that aren’t putting enough marketing strategies toward Gen Z need to reevaluate and switch gears, stat! Start laying the groundwork for your company’s success in the coming years. Kickstart your targeted Gen Z marketing strategies now. Every industry is different, but there are a few key do’s and don’ts to follow when communicating with Gen Z buyers. In the cannabis field, it is especially important to only market to those who can legally indulge.

Do Make Genuine Connections Online

Gen Z is our first truly digital generation. They’ve grown up using social media and the internet. As digital natives, they’re quick to recognize inauthentic communication methods. Whether it’s unnatural comments or trying to cover up negative testimonials, the younger crowd can always spot brands trying to be something they are not. Instead, practice total transparency with followers and friends to ensure that there is never a lack of brand accountability and authenticity. Within the cannabis industry, businesses can use their social media platforms to educate, build relationships and easily refute longstanding cannabis stereotypes that are so common in older generations.

Don’t Try Too Hard to Be Relatable

One way to make genuine connections is to engage with, create and share memes and other trends on social media. Although this is an excellent method for increased interactions, there is also plenty of room for error, so caution is the guiding principle. If not executed correctly, a post about a meme could easily make brands look unprofessional, or behind the times as they’ve missed the actual joke. These techniques can make business accounts seem like they are trying too hard to fit in, and will ultimately cause Gen Z to hit the “unfollow” button. Instead, focus on topics that closely align with the brand’s image and find creative ways to make content relate to exciting and funny trending ideas about cannabis.

Do Care About Social Issues and Responsibility

Focus on creating high quality, exciting videos and vibrant pictures that highlight cannabisResearch has shown that Gen Z sincerely cares about social issues and responsibilities. These beliefs don’t only apply just to their personal lives, but also to their buying habits and which businesses they want to support. These beliefs provide an excellent opportunity for brands to stake out common ground with Gen Z and support a variety of causes at the same time. Many of these consumers seem to care about topics like the environment, equality, hunger and homelessness. Do note that it’s essential to review and analyze these issues before making statements or posting about them on social media. For the cannabis industry, many businesses tend to raise awareness about medical matters, social equity and community-oriented programs.

Don’t Post the Same Content Repeatedly

After getting into the social media game, it can be tough to figure out how often to post. As much as those aspects do play an essential role in overall engagements, it’s also crucial to pay attention to the type of content that makes it into followers’ feeds. All photos and videos should be related, yet unique. Posting the same marketing content over and over is going to bore Gen Z, and make business accounts look less aesthetically pleasing. Instead, focus on creating high quality, exciting videos and vibrant pictures that highlight cannabis, and then vary your post types.

Navigating Gen Z communication and marketing tactics are going to be pivotal in just a few years, making it critical for businesses to rework their marketing strategies as soon as possible. If cannabis brands can capture the essence of authenticity and social responsibility in their communication methods, while avoiding posting repetitive content, they should be able to reach legal Gen Z-ers seamlessly.

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Moneybowl: How Data Analytics Can Improve Extraction Processes

When data analytics was first introduced in the sports industry, it was met with a lot of criticism. But then it began to show results; a popular example being the story of Oakland Athletics Manager Billy Beane, depicted in the movie Moneyball starring Brad Pitt. In the cannabis industry today, we face familiar hurdles. Everyone is focused on extracting as much CBD oil as they can, but not many are optimizing the process. We even hear that data analytics is too difficult, that it does not help and no one has time for it. In contrast, the sports industry nowadays widely uses statistics and analytics, because it has proved to be effective. They use data analytics to choose their players for a team so that they have the best chance to win the championship. NBA teams have entire departments focused on data analytics, so why doesn’t the cannabis industry? Focusing on basketball, what if the approach taken to pick players for an all-star team was employed in the cannabis industry? Imagine your instruments as players and their parameters as their skills. Now, all you need is data analytics to help you decide how best to optimize your team. Paying attention to the numbers, could help you win in the cannabis industry.

extraction equipmentWhen thinking about players in basketball, one factor of interest is the “Players Offensive Rating”, which is the amount of points produced by a player per 100 possessions. In this scenario, you want the player to have a higher offensive rating as it means that they have a better chance of scoring points when they have the ball. Similarly, in cannabis production, you would want your instrument to yield as much product (points) per hour (possession) as possible as well. So, the cannabis extraction analogy for offensive rating is “Yield Per Hour”. By increasing the yield per hour, the instrument can extract more product in the same time frame, increasing overall output and reducing product cost per gram. In this scenario, the biggest extractor is not necessarily the fastest, and any supercritical CO2extractor will be slower than, for example, ethanol extractors.

Another important factor that’s considered in basketball is “Shooting Efficiency,” which looks at the number of successful baskets made by a player in comparison to the number of shots taken and where the shot was taken from. Having a player with a high shooting efficiency would result in a good chance for that team scoring points over their competitors. This principle is similar in cannabis, while a high yield (number of shots) is great, you also want a high purity (baskets made) of your target compounds or “Percent Purity”. This means you will get a higher percentage of the compounds you want, such as cannabinoids, for every gram of oil extracted. Here, the supercritical CO2 extractor shows its superiority over ethanol, as density modulation of the supercritical CO2 allows for the separation of terpenes or cannabinoids from the rest.You can see that a team that has a better synergy has a higher winning rate. For the same reason, the cannabis extraction process can be optimized by adjusting the parameters of the instrument. 

For one last example, let’s look at “Number of Steals” as well. This is the number of times a defensive player successfully tackles the ball from an opposing player before they manage to shoot a basket. If this is high, opponents have fewer opportunities to shoot and score points. Similarly, “Percent Recovery” in the cannabis industry is important to ensure that the target compounds in your flower are being extracted. The solvent should have the chance to extract the compounds (steal from the opposition), before the run ends (the opposition shoots). A high recovery gives a higher overall output for the materials that were input, generating more product overall. In theory, if you wait long enough every solvent can reach full recovery, but for supercritical CO2 in particular there is a practical ceiling around 80% recovery.

While thinking about these variables in isolation is the first step, it is just as important to see how the variables interplay with each other. A concept is introduced here called “synergy”. A team member must establish a good cooperation with the entire team according to their own characteristics. For example, taller and stronger players whose “Offensive Rating” is higher are more suitable for guards, while those with a high “Shooting Efficiency” are more suitable for forwards. You can see that a team that has a better synergy has a higher winning rate. For the same reason, the cannabis extraction process can be optimized by adjusting the parameters of the instrument. For example, if you increase the extraction speed, which is “Yield per Hour”, you may need to compromise on “Percent Purity” as the increased speed may not allow for the optimal extraction of target compounds. Similarly, you may also need to compromise on “Percent Recovery” as a slower extraction rate will do a better job at having a higher recovery. Thus,in order to improve the overall process of extracting oil, there needs to be a focus on analyzing the synergies between different factors to guarantee optimal parameters for your benefit.

These examples highlight some of the basic data analytics that can be conducted on your instruments. However, there’s still one challenge to consider, most professional NBA teams have entire departments just for data analytics. How can you possibly accomplish conducting these analytics for your entire cannabis LP in addition to your regular job roles? That’s where we come in. Other than the “Yield per Hour”, “Percent Purity” and “Percent Recovery” listed above, CBDV can perform customized data analysis based on your company’s data. Let our team help you integrate the “boring” and “half-baked” data, and present you with a visual and clear data analysis report. Let us help you lead your team to win that championship in cannabis!

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