Business
How marijuana companies are building brand loyalty by selling seeds to consumers
Several cannabis companies have added marijuana seeds to their line of product offerings – even though the move, at first blush, might seem counterintuitive.
Why, for one, would marijuana companies want consumers to grow their own plants?
Yet, there’s a logic here: Consider how people who grow their own vegetables also shop for fresh veggies at a grocery store or farmers market.
“Everybody who’s got a home garden during the spring and the summer grows tomatoes. But 98% of the tomatoes they buy are at a store,” said Carl Giannone, co-founder of Trade Roots, a cannabis company based in Wareham, Massachusetts, that sells seeds direct to consumers.
“If growing tomatoes makes them want to buy tomatoes, then I want to let them grow.”
An increasing number of companies are offering seeds thanks to a change in federal policy. The move can be profitable for some, while others are doing it to build brand loyalty and share genetics.
In November, Berner, co-founder and CEO of international marijuana brand Cookies, announced at MJBizCon the company would begin selling seeds for home cultivation.
Cookies launched its seed bank the day after Thanksgiving, on Black Friday.
In an email to MJBizDaily, Berner said the launch “broke some internal records.”
“The demand is definitely there and it’s been strong,” he added.
Berner’s approach is to help cannabis fans take their enthusiasm to the next level.
“We want everyone to feel empowered to explore the plant and get into that next level of education when it comes to cultivation,” he wrote.
“It’s more than just buying clones. It’s about the experience from start to finish.”
Marketing is crucial
The cannabis seed business became a more viable option last year when the U.S. Drug Enforcement Administration clarified that it’s legal to sell and distribute cannabis seeds across the U.S., according to Florida-based cannabis cultivation consultant Ryan Douglas.
“A previous regulatory gray area is now crystal clear, and law-abiding cannabis companies are wise to seize this opportunity,” he told MJBizDaily via email.
Douglas sees the opportunity as coming down to marketing.
“If you have amazing cannabis genetics but no one knows you exist, you’re not going to sell any seeds,” he wrote.
“This opportunity can present a compelling business model for companies with recognizable brands that consumers associate with rare varieties or high-quality cannabis.”
According to Douglas, cannabis vendors can fetch anywhere from $5 to $20 a seed, and a well-pollinated plant can yield thousands of viable seeds.
That’s much better than in mainstream horticulture, where a 20-cent seed for vegetables or flowers is considered pricey.
“Given the going rate for desirable genetics and the sheer quantity of seeds produced from a small grow room, seed production can be a lucrative addition to any cannabis cultivation business,” Douglas said of seed providers.
The one drawback, according to Douglas: Cannabis seed production can’t compete at the moment with asexual vegetative plant propagation, where nurseries sell clones to growers, because sowing a hundred seeds of the same variety can result in multiple phenotypes and inconsistent genetic outcomes.
High Tide’s foray
In December, Canadian cannabis retailer High Tide announced it would begin selling marijuana seeds in the United States after the DEA said seeds fall under the legal definition of hemp, or less than 0.3% THC.
High Tide CEO Raj Grover said the company’s core customer for seeds is 19-35 years old.
In the United States, federal law mandates that the seeds can’t be sold for germination, only for novelty purposes.
“Seeds present a new and exciting complementary vertical for us,” Grover said.
“Our intention has always been to extend and strengthen our integrated value chain and provide our customers with a complete cannabis experience.”
High Tide doesn’t manufacture seeds. The company buys its seeds from an authorized seed manufacturer in the U.S.
Grover agreed with Douglas that having a strong brand and trusted genetics is important to making this a successful move.
“Just like our consumers have come to trust us for consumption accessories and CBD products, we want to gain their trust on the seed business as well,” he said.
“So we are cherry-picking absolutely the best and most highly sought-after brands of seeds.”
Grover said High Tide isn’t interested in adding clones or young plants to its product line.
“We are just going after the products that can be easily integrated into our current ecosystem and infrastructure,” he added. “Then also being retail focused, which has always been our strategy.”
Highlighting the breeder
For Giannone and Trade Roots in Massachusetts, the goal is to sell seeds at its store that relate to what the company is doing in its cultivation operation.
If a customer buys a flower strain they like, they might be able to find that seed and try to grow it at home. But not all of the strains are available in seed form.
The company employs breeders who work for it as cultivators. The cultivators produce seeds, which Trade Roots then sells.
Trade Roots’ packaging gives those breeders credit for developing the strain, so the consumer can recognize the breeder.
Their target consumer for seeds is the serious home grower or the professional breeder who can take the seed and crossbreed it to come up with a new hybrid strain.
Giannone said seeds are not a huge profit-maker, but they do it to support cannabis breeders.
“The purpose for us carrying those seeds,” he added, “is really to highlight the breeder and to shine a light on what is really going on here behind the scenes and to educate the consumer to what a strain is and what breeding is.”
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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