Business
MJBizCon attendees prepare to tackle marijuana industry challenges in 2023
LAS VEGAS – As the regulated marijuana industry wraps up the 2022 business year, companies are fine-turning their strategies for whatever new challenges 2023 might bring.
Cannabis business leaders attending MJBizCon described a variety of expected headwinds in the year to come – and a range of plans to adapt and succeed.
“The market has a lot of marijuana in it right now,” said Beth Kotarba, chief operating officer of vertically integrated Colorado company Native Roots Cannabis Co.
Kotarba sees challenges in “getting the right balance of supply and demand,” especially given the long lifecycle of cannabis plants.
“We’ve been addressing it by implementing a lot of planning, sales and operational planning, where we work really (closely) with retail on forecasting the demand, so that then it gives us time to adjust our supply chain to that demand.”
George Allen, board chair of California-based marijuana grower and retailer Lowell Farms, cited heavy taxation, “market fragmentation and a rampant illicit market” as key difficulties going into 2023.
“Most operators are relying on a strategy built on economies of scale and vertical integration with captive retail,” Allen told MJBizDaily.
“We see our path elsewhere, in true product innovation and branding … We are planning for a world where cannabis sales will occur across platforms on a federally deregulated basis.
“In that environment, differentiation within branding is critical.”
Finances are a key concern
Capital challenges and banking reform are also top of mind for U.S. marijuana operators in the year to come.
Ali Jamalian, CEO of California manufacturing and extraction business Sunset Connect, said that one bank recently shut down his business accounts and another “would not open an account for me nor admit that they actually have cannabis banking.”
“Access to capital is only reserved for (multistate operators), it seems.”
“The passing of the SAFE Banking Act would be an instrumental win that significantly impacts cannabis businesses of all sizes,” said Mike Weinberger, chief franchise officer of Arizona-based marijuana cultivator and retail franchisor Item 9 Labs Corp.
“To help push it forward in the new year, we are increasing our advocacy and lobbying efforts by expanding our executive team to include our local shop owners across the country.”
Others are concerned about so-called THC inflation and how a heavy focus on THC content affects the marijuana market.
“We’ve seen how lab shopping has frequently led the worst-actor cannabis brands and labs to perform better, while high-efficacy brands and science-first labs suffer,” said Jeff Journey, CEO of California marijuana testing company SC Labs.
“In the year ahead, we’re focused on combating this issue head-on and ensuring that, as an industry, labs be held accountable for the results that they deliver.”
Going into 2023, marijuana-product safety is top of mind for Tyler Williams, chief technical officer with industry standards certifier Cannabis Safety & Quality.
“No one is making smaller operators get certified for safety, and most head cultivators come from the legacy market and are stuck in old ways, thinking, ‘I’ve been doing things a certain way for a while now and haven’t harmed anyone, why pursue certification now?’” Williams explained.
“(Multistate operators), on the other hand, are smart enough to see the benefits and know that this is the direction the industry is headed. The challenge is getting the small operators in the same headspace, looking to the future with federal legalization around the corner.”
Emerging markets = new opportunities
On a positive note, developing adult-use marijuana markets should also bring new opportunities for small cannabis businesses to find their niche in 2023.
Kevon Carter, co-founder and CEO of Plant Base in New Jersey, is working to open both a store and a consumption lounge upon licensing.
Carter said he’s building a team of people with experience in more mature adult-use markets such as Colorado and California “because they can actually tell us what roadblocks are going to approach – because I feel like it repeats in every market that opens, coming from west to east.”
New state markets also offer new opportunities for ancillary cannabis businesses, such as Missouri-based information technology consulting firm IT-This Consulting.
“I’ll be scaling up, trying to automate some aspects of the business so that we can get new customers and new dispensaries up and running within a week,” IT-This founder Nathan Kaminsky said.
“We’ll also compete on price – a lot of the other IT companies in our area hear ‘cannabis’ and think they can charge anything.”
Companies are branching out
Some ancillary cannabis industry firms such as point-of-sale software company Cova Software in Colorado are taking their businesses in new directions in 2023.
“The biggest challenge we see in supporting the retail piece of the supply chain is the challenges retailers have in mature markets where there’s a saturation of dispensaries,” Cova CEO Gary Cohen said.
“The way that we’re going to deal with that is, we’re going beyond supplying the point of sale, and all the technology around it, to putting more training and coaching into successful business strategies to our customer base.”
Consulting with retailers to improve their businesses strategy is “a win-win,” Cohen added.
“If they go broke, it hurts us, and we don’t want them to go out of business.”
Cannabis software company Dutchie is also moving in new directions, co-founder and CEO Ross Lipson said.
Global economic conditions have changed, average order sizes have shrunk and some cannabis retailers have gone out of business, Lipson said.
Oregon-based Dutchie has launched a point-of-sale system, an insurance business and a payment system to address what it sees as the needs of marijuana retailers.
“We need to focus on what matters most – and for us, that’s the customer, which is the retailer,” he said.
“So 2023 is all about focusing on solving the merchants’ needs.”
Source: https://mjbizdaily.com/mjbizcon-attendees-prepare-to-tackle-marijuana-industry-challenges-in-2023/
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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