Marijuana Business Magazine - January 2017

employees and offers customers a range of services, including security, curing, transportation and storage. Business has been brisk for the new venture. TCD’s 40,000-square-foot marijuana storage facility in Portland, Oregon, is near capacity. As of October, the company was providing trimming and drying services to four large marijuana producers and 12 smaller ones, as well as providing inventory and sales ser- vices to 12 farms in Oregon. Executives anticipate the company will eventually nearly double its staff of 80 trimmers. Third-party logistics hubs are com- mon in many industries – think online retail giant Amazon, food-service distributor Sysco, or trucking or parcel-delivery carriers such as FedEx and UPS that serve multiple custom- ers. But TCD appears to be among the pioneers in the cannabis industry, and its strategy could serve as a template for other businesses. Noah Stokes, OmniTek Holdings’ CEO, said the demand for full-scale distribution services from Canna- Guard’s existing clients helped execu- tives identify the opportunity. But moving from an ancillary business into plant-touching opera- tions – and scaling the operations for a large, centralized hub – has been challenging. It’s meant navigating new licensing processes and filing proper regulatory documents, as well as pivoting from other strategic development opportunities. It’s also meant resource-sharing among the businesses, finding new facilities and hiring and training a workforce. “A lot of what we’re doing is stuff that just hasn’t ever been done in the regulated space,” Stokes said. “When you add that layer of the regulated space – with pesticides, cross- contamination, trimming, packaging, seed-to-sale tracking, sales, third- party logistics and security – all these things together really add a significant layer of complexity.” Software Solutions a Challenge Unlike other industries, products that help companies effectively oper- ate in the regulated cannabis market are harder to come by. LANDING A NEW LICENSE S ecuring a license as a marijuana grower or retailer is tough enough. But what if you’re an ancillary company planning to expand into plant-touching operations? It can be a costly and time- consuming process. Just ask Oregon-based CannaGuard Security, which in 2014 began providing compliance, armed guard and transport services. The fol- lowing year, the company’s executives decided to launch a third-party logistics business – The Cannabis Distribution Company (TCD Co.) – that manages cannabis drying, trimming, storage and distribution for multiple MJ growers. But before it could get off the ground, TCD needed an Oregon Liquor Control Commission wholesale distribution license. That required all the company’s owners to submit to federal background checks. The company also had to secure a Land Use Compatibility State- ment from Portland showing its new facility meshed with the city’s comprehensive plan and regulations. And TCD had to give state can- nabis regulators its security and operating plans plus details about the company’s corporate structure and funding. The application process took hundreds of hours in October and November 2016, according to Noah Stokes, the CEO of TCD’s parent, OmniTek Holdings. It’s inexpensive to fill out the application – a couple hundred dollars, he said – but the associated costs add up. Inspection and licensing fees are compounded by the costs of outfitting a building to pass the inspection. That can cost upwards of several hundred thousand dol- lars, Stokes said. TCD finally secured its marijuana distribution license in November 2016. But the time-consuming process put other strategic development on hold. Stokes said resources were allocated to TCD’s launch that otherwise would have gone into developing CannaGuard’s brand in California and other states. Stokes and his team, for example, had to pivot and apply for TCD’s Oregon license so they could open the company’s new facility in time for the harvest at the end of the 2016 outdoor growing season. — Joseph Peña Noah Stokes, chief executive officer of CannaGuard and OmniTek Holdings. Photo courtesy of TCD Co. January 2018 • Marijuana Business Magazine • 83