Markus Roggen, president and chief scientific officer at Vancouver, British Columbia-based Delic Labs, will be speaking at MJBizCon’s Science Symposium on Nov. 15. His session is titled “R&D as a Business Tool: Maximizing Revenue by Focusing on the Scientific Method.”
There is great excitement within the marijuana industry about President Joe Biden pardoning thousands of people convicted on federal marijuana possession charges.
Even the Canadian stock market got excited about it, although share prices later retreated.
Which makes little sense, but it’s a nice break from the constant news of bankruptcies among Canadian cannabis companies.
Wherever I look, there is doom and gloom.
Large mainstream publications have even covered the cannabis industry woes across North America. This bombardment of bad news is in oversupply, like cannabis itself.
Naturally, the industry is raising the alarm, and the cause is easily found.
The laws legalizing cannabis across the continent were half-baked, contradictory and the government was too greedy with taxation.
That means it’s not our fault, right?
Not exactly. I learned a valuable lesson playing sports as a kid. Most of the time, it is your fault.
It is important not only to identify constraints but also think of ways that we can overcome them.
Here are five areas where the cannabis industry can improve:
1. This is not a legal version of the illegal market.
Cannabis professionals love to complain about long wait times for licensing, restrictive business rules and even overly picky inspectors.
But a legal cannabis market is very different from the illicit drug trade this industry is set up to replace.
For one, it does not have the crime or danger as say that of a Mexican drug cartel.
A legal market opens opportunities for new processes and products that require time, collaboration and investments.
2. Take a global view of specific problems, including taxation and testing.
It seems like complaint No. 1 by every cannabis business executive is high taxes.
Especially in the United States, where paying taxes is difficult and unfair, thanks to Section 280E of the federal tax code.
But taxes are just another cost.
An additional cost that many ignore is the price of production. We don’t have much power to influence the former, but the latter is squarely within our control.
One option is to cut wages or staff, which is a favored business tool. But there are better ways.
In our work, we have observed that every cannabis producer has inefficiencies.
Bad production methods waste hundreds of thousands of dollars every month.
One example might be running extraction equipment at 50% capacity.
The next most frequent complaint is the burden of compliance testing.
Yes, testing can be costly, but it also saves. And if we want to save, we should be testing more, not less.
Failed batches are also a cost of testing, and they are the main driver of overall testing costs.
By doing more quality-control testing before the cannabis product reaches compliance testing, failures will be caught early, and waste reduced. Better testing protocols would also help.
For example, we developed a pooled testing protocol for heavy-metal analysis, which could cut testing costs by more than 50%.
A byproduct of all the compliance testing is that cannabis effectively is an organically grown produce, while every year people die from contaminated lettuce.
Cannabis is safer than salad: That is a slogan we can proudly proclaim but have yet to use.
More testing is one thing, more tests are another.
By expanding the types of tests offered, cannabis products can be marketed in new ways.
We already know that THC is not the end all for product quality.
Terpenes are already getting more appreciation among consumers, and testing allows us to print terpene content on labels.
3. Don’t ask if you could, but if you should.
I see it as misguided to focus on the next/new/revolutionary thing in cannabis marketing, without doing the existing high-volume products right.
There are some outrageous products on the market that make you wonder “what were they thinking?”
CBD mascara and CBD pillows might sound ridiculous, but products with delta 8-THC have real potential to be dangerous.
Those products solve the problems of producers – namely what to do with all the CBD oversupply and tanked commodity prices.
They ignore the needs of the customer.
Economic theory teaches us that successful products solve a problem. So, which problems do consumers have?
Or, at least, which products are they actually buying and would benefit from improvement?
Sales of pre-rolls total $1.2 billion with a year-over-year growth rate of 39%. And infused pre-rolls, which make up 19% of all pre-rolls sold, have been gaining steadily.
The customer clearly wants more pre-rolls, and the industry has responded by offering them along with infused versions.
We should focus our efforts there and develop even better pre-roll products.
4. Ask an expert. It will pay off.
The cannabis industry is home to a range of professionals and characters.
A simplified timeline of people I’ve met at conferences is that in the mid-2010s there were a lot of legacy growers and civil rights activists.
Then, slowly, the legacy growers either turned to licensed production or retreated from the conferences.
Frontiersmen with a taste for exploration and the gold rush moved in.
These were closely followed by men in suits – lawyers and real estate professionals.
By 2020, the archetypical cannabis executive is a white male with a finance or law degree.
If these people and qualifications are the right fit for the industry, why is it doing so poorly right now?
It’s time to turn to a new crop of experts.
We need scientists and engineers to update production, processes and products to fit the 21st century market.
5. Pick the right story and stick with it.
Cannabis is praised as cure-all for illnesses and economic problems.
And the proposed benefits are as numerous and confusing as the stories companies are pitching.
Companies often position themselves as pharmaceutical companies, citing potential medical benefits of cannabis.
They are not pharmaceutical firms, not even close.
Even more perplexing is the fact that some of these same companies also sell recreational products.
This is as contradictory as Walgreens selling cigarettes.
How can we expect to develop informed and loyal customers, if cannabis companies, and even the industry as a whole, are jumping from one strategy to the next, constantly changing their values?
I see great danger in constantly pointing at the proposed health benefits of cannabis while pushing recreational products.
Here’s a tale of caution that I found in an academic paper:
“In the 15th century, when (it’s) use (…) by the indigenous populations in the New World was first observed by Columbus and the plant was brought to Europe, (…) this new one was used to treat a wide range of conditions. Indeed, (it) acquired a reputation as a panacea, to the extent of being called the ‘holy herb’ and ‘God’s remedy’.”
The title of this paper: “Medicinal uses of tobacco in history.”
The cannabis industry has great potential but currently falls short.
Instead of complaining, we should self-reflect and improve.
In short, stop complaining and start evolving.
Markus Roggen can be reached at markus@DelicLabs.com.
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