Cannabis Plants Growing In a Room
What the Cannabis Industry Can Do to Go ‘Green’

With massive energy and water use, as well as the use of pesticides and plastics, sustainability issues are a mounting problem facing the cannabis industry. But there are innovators — cultivators, executives, city governments, and innovative entrepreneurs, among others — trying to fix these issues.

“We all know the cannabis industry hasn’t been good stewards of the environment in the past for a whole bunch of reasons,” said Erik Williams, the chief operations officer of Canna Provisions Inc., a cannabis company about to launch two dispensaries in Holyoke and Lee, Massachusetts. “One is having to re-create the sun indoors and another is the opaque packaging and the over-packaging that comes with regulations.”

These are the major sustainability issues facing the cannabis industry, and how the industry is addressing each.

Reducing Energy Use and Costs

Indoor cannabis production takes a lot of energy. A standard grow facility uses 10 times the amount of electricity per square foot as a regular office building of the same size. This is due to the many needs of a grow operation such as high-intensity lights, fans, heating, cooling, water pumps, and CO2 injection systems, according to the Southwest Energy Efficiency Project. While indoor farming requires a lot of energy in general, there are added problems for cannabis manufacturers due to heavy regulations. One example are the security precautions that require growers to maintain cameras and store video footage. “With security compliance keeping backup data on a hundred or so cameras for 90 days or 6 months, that is, in and of itself, a massive energy cost,” Williams said.

In general, the states that adopted cannabis legalization early on were less focused on energy use and more concerned with safety and security issues. Colorado had no sustainability guidelines when Tom Stevenson, CEO of Bonsai Cultivation, began plans on the company’s 28,000-square-foot wholesale recreational cannabis operation in Denver in 2014. So the company relied on its own “internal sustainability thinking” and used recirculating water chillers that uses cooled water to air condition the facility, reducing energy needs by about 30%. Bonsai Cultivation also reduced its light-to-plant ratio resulting in installing about 400 fewer lights than a standard grow would need without sacrificing the needs of the plants. An additional 40% in power savings didn’t hurt, either.

With little guidance from state governments on sustainability issues in the cannabis industry, cities and counties have been stepping in. The Cannabis Sustainability Work Group, launched in 2016 under the auspices of Denver’s Department of Public Health & Environment (DDPHE), provides guidance on cannabis sustainability issues through meetings, workshops, and a cannabis environmental best-practices guide. It also co-hosts an annual Cannabis Sustainability Symposium, the only conference in the U.S. dedicated to sustainability education for the cannabis industry, according to adviser Emily Backus.

Certifiably Green Denver, another DDPHE program, provides Denver cannabis businesses with free expert advice on finding opportunities to save money and conserve resources for water, waste, energy, transportation and business management, said Backus.

And now that cannabis legalization has continued to spread throughout the U.S., states looking to legalize recreational cannabis are taking lessons from early adopters.

Cannabis is a Water Intensive Crop. Water Conservation Can Help Reduce Overall Use

According to the U.S. Government Accountability Office, 40 states expect to see freshwater shortages by 2024. Some of those states allow production of cannabis, a notoriously water-intensive crop. Indoor growing tends to be much more water-efficient compared with outdoor grows that can waste water through runoff and evaporation — but indoor growers can still be wasteful.

Brandy Keen is the co-founder and senior technical adviser of Surna Inc., a manufacturer of water-efficient indoor cultivation equipment and a cultivation consultant. She recommends installing a condensate reclamation system. The system can capture the water in the air inside the grow room for reuse. It can end up saving thousands of gallons of water and hundreds on a grower’s water bill.

Other water conservation practices include growing aeroponically or hydroponically — water-conserving methods that don’t require soil — and giving cannabis plants small waterings throughout the day, which help to limit runoff and evaporation, as opposed to one big watering.

Pesticides and Fungicides Can Be Reduced Through ‘Organic’ Farming Methods

Among the problems with pesticides and fungicides in the cannabis industry are the surreptitious use of unapproved chemicals. Another area of concern is the as-yet-unanswered question of what exactly happens when certain chemicals, even those approved for food crops, are burned and inhaled by consumers.

Because of gaps in testing regulations in state legislatures, inconsistent lab practices, and in some cases the lack of pesticide testing at all, myriad pesticide-related issues have dogged cultivators and lab testing facilities in California, Colorado, Oregon, and Washington, such as the use of myclobutanil-based Eagle 20, a fungicide typically used in grape growing that when heated, releases the toxic gas hydrogen cyanide.

But these issues are being met head-on through more rigorous testing, additional regulations being implemented in the mature markets, and better rules being set in the new markets, according to Stevenson. His company grows using natural pesticides approved for organic farming (although cannabis products can’t actually be labeled organic since certification a federally managed program). Some growers are moving towards more natural pest-fighting compounds, such as neem oil.

Plastics, Plastics, and More Plastics

The main issue of plastics in packaging revolves around state requirements on child safety and labeling, which often necessitates companies rely on single-use plastic child-proof bottles and oversized containers to fulfill labeling requirements. These items often end up in landfills.

“The amount of single-use plastic that’s being created by the cannabis industry and the types of plastics that are being used is a massive problem,” said Ron Basak-Smith, Co-Founder and CEO of Colorado-based Sana Packaging. “I don’t think we even realize what we’ve created with the rules around this industry.”

Basak-Smith and his partner are hoping to take on the industry’s plastic problem. Sana Packaging is manufacturing hemp-based containers that are industry-compliant. The company also manufactures in the U.S. to cut down on environmental issues associated with transportation and potential labor abuses overseas.

Rather than regulators, it often comes down to the cannabis companies themselves to take the initiative regarding sustainability. CannAmerica, which owns a portfolio of cannabis brands in Colorado, Nevada, and Maryland, was able to use less plastic and cardboard and reduce transportation inefficiencies while shipping the same amount of infused gummies by switching from hard plastic containers to Mylar packaging.

“It’s worth it for companies to take the time to think about sustainability because you can find efficiencies that are good for the environment and also help the bottom line,” said Diana Anglin, CannAmerica’s Director of Licensee Alignment and Operations.

Sustainability can also help a cannabis company’s bottom line. Along with cutting down energy and water consumption and charging higher prices for sustainably grown products, companies can also tout being green. Williams believes that educated consumers can influence the industry to produce products equitably, efficiently and in environmentally sound ways by voting with their dollars. That education has to come from the cannabis companies themselves.

“We not only want to lead by example but want to create a newly educated consumer who is demanding these things anywhere they buy their cannabis,” Williams said. “You can do really well doing a lot of good.”

Women Vaping a Vape Pen filled with Cannabis
Denver Dispensaries Expect Huge 4/20 Sales. Here’s What Will Be in Store.

As the U.S. eagerly watches the April 20 sales story of 2019 unfold, Colorado is still the undisputed leader in holiday weed tourism.

In 2018, Colorado saw a 128% increase on sales on 4/20 compared with the typical Friday, Marijuana Business Daily reported. Sales in the state spiked higher than California at 102% and Nevada at 106%. Washington, though, saw a slight dip, reporting at 97%.

Dispensary storefronts and brands are preparing to exceed 2018’s numbers by a long shot.

Here’s what Denver companies are doing to prep for the weed store madness.

Must Stock up on Vapes

Seth Wiggins, Chief Revenue Officer of The Clear, a concentrates company on shelves in Colorado, California, Washington, and Oregon, said his company prepares inventory about 45 days in advance of this date.

“Every year, it seems to get a little more exciting. We prepare with a buffer beyond what we think that growth will be to ensure we have an ample product supply for our customers,” Wiggins said.

Looking at 2019, The Clear is expecting sales to exceed a normal retail day by as much as 150%. The Clear will be delivering concentrates to retailers to the very last minute to match this demand.

“We’ve gotten at least a dozen emergency phone calls today [April 18, 2019] asking, ‘Can you get us more product?’ ” Wiggins said. “I’ve employed every single person in the office to do hot-shot runs. Stores are already running out.”

April 20 demands a “better safe than sorry” mentality when it comes to stocking up on supplies across states.

“We certainly expect to see the biggest lift here in Colorado,” Wiggins said, “but we prepare in a similar fashion across the board.”

Which products are top of mind?, “Cartridges and disposables are the most popular this time of the year,” Wiggins said. “It’s the convenience.”

The largest cannabis chains in The Clear’s network — Livwell, Maggies Farms, Native Roots — began planning and stocking inventory for 4/20 as early as January 1, 2019.

Wiggins’ parting advice for business owners? “Plan early and often, the thing about planning is, always have a plan C. Because it’s going to change.”

‘This is Cannabis Christmas and we are the North Pole.’

Dispensary owners see the holiday from a different and equally busy vantage point. On the ground on 4/20, Simply Pure founder and CEO Wanda James is Mrs. Claus.

“This is cannabis Christmas and we are the North Pole,” James said as she worked on last-minute preparations for the store to open its doors in Denver’s Highland neighborhood.

“It takes over a month to stock the shop and get everything packaged with prerolls, eighths, quarters, and ounces. We work hard to get all the advertising just right, which we planned way back in January with the designers,” James said.

Simply Pure’s marketing efforts are creative and reach into as many avenues as possible, reserving its presence in the 4/20 media frenzy with articles, email blasts, even TV appearances.

This year, Simply Pure co-owner, veteran, Denver City Council candidate and cannabis chef Scott Durrah will be promoting the store in a very on-brand way — competing on Viceland’s premiere episode of “Bong Appétit Season 3 Chef Challenge.”

For a small-business owner, James said exposure on social media is key. James explained that the in-store pop-ups with brands that are meant to engage customers both in person and in pixel.

“Our product partners have claimed their day in the store and created promotions with us exclusively,” she said.

The retailer has a working relationship with the surrounding neighborhood, the backdrop which plays its own role in the holiday. Partnering with local restaurants and bars helps to position the shop as a destination location. “We have worked with the surrounding businesses to cross promote them and the specials we do as a ‘hood,’” James explained.

Simply Pure also takes an all-hands-on-deck mentality to staffing the space.

“Our Budologists are always on point, however, they have no vacation days during this week. Everyone is technically working or on call,” James said.

Judging by the expression on the face of this staff member, they don’t mind.

Scientist experimenting cannabis
Cliintel Capital Management takes on Cannapharmarx, predicts revenues of C$25M

Cliintel Capital Management Group LLC Founding Partner Rick Batenburg III tells Proactive Investors that the private equity firm specializing in incubating cannabis companies, has taken on Canadian-based Cannapharmarx Inc (OTCMKTS:CPMD), saying the fund found the cannabis company attractive due to its ability to grow at large, industrial scale.

Batenburg says, in addition, the company has stabilized its energy cost by using an on-site power plant and using natural gas, and he expects the company to produce 110,000 kg of cannabis per year, expecting the company to pull in over C$25 million in 2019.

How to Invest in Cannabis (A guide for regular people without millions in the bank)

Richard Batenburg, CEO & Founder of Cliintel Capital Management Group, talks about how to see through the smoke and mirrors of cannabis investing.

Listen to “Episode 49 – How to Invest in Cannabis (A guide for regular people without millions in the bank)” on Spreaker.

Cliintel Capital Management Group is a venture capital firm that provides funding to companies in the heavily regulated cannabis and finance industries. In the past 3.5 years, CCMG has funded and incubated 11 cannabis startups- all of which saw profit.

Founder Rich Batenburg started the fund in 2015, shortly after Colorado legalized cannabis. He has since become one of Colorado’s most successful investors and has firsthand knowledge of the pitfalls and the upsides of investing in this fast moving industry. While his fund is clearly for HNWI’s (High Net Worth Individuals) with over $1M in liquid assets, this interview has plenty of useful information for RFLUs (Regular Folks Like Us).

To get you started, here are 3 quick tips:

Buy cannabis like you’re buying a car. Read the public filings. Get to know the business plan beyond “We’re gonna grow a bunch of weed and sell it.”

Know your own horizon. If you want to make fast money you’ll have a better chance if you can find a solid grow operation in a state that has just legalized. There is inevitable a scarcity of product at that point.

If you’re more risk averse consider ancillary businesses like real estate that don’t touch the plant. Think pick and axes (or in the case of cannabis, brothels and bars).

Listen in to learn more.

Martha Stewart’s Partnership With Canopy Growth Is Great for Cannabis Investors

Earlier this week, Martha Stewart and Canopy Growth (CGC – Get Report) announced a partnership that will see the consumer goods scion come on board as an adviser with the Canadian cannabis company.

The stigma of using the product is lessened through the association with Martha Stewart, who is a mainstream figure, which can only benefit the cannabis industry, according to Cliintel Capital Management CEO Rich Bateneburg and CFO Rick Batenburg.

“The real benefit they’re getting is they’re de-stigmatizing the industry for us right there. That means that I’ve got bigger access to bigger capital markets because less people are scared. That’s the biggest piece and I learned it. I think it’s great. Martha Stewart is sorta a new bellwether to uh, and proof point that the stigma’s coming off,” Rick Batenburg told TheStreet.

Canopy Growth itself said that it hopes to tap into Stewart’s “deep understanding of what consumers in the United States and around the world want.”

TheStreet’s Jim Cramer agrees with Batenburg and expects the partnership to be a tailwind for the company.

“When you have a Martha Stewart get behind [CBD], that matters. In the same way that it matters that Rob Sands and Bill Newlands, who was a great teacher we had, backed Canopy. This is very important,” Jim Cramer said.

What the Marijuana industry can learn from the cable industry
What The Marijuana Industry Can Learn From The Cable Industry

History repeats itself and our job is to learn from it in advance. It turns out, the saga of the cable industry holds a great deal of insight for the reflective and well-studied cannabis entrepreneur.

On their surfaces, the cable industry and the cannabis industry couldn’t be more different. However, as we will discuss today, they have both had similar developments and both face potentially tough regulatory challenges.

Cannabis is expected to grow at an astronomical rate as more states legalize it and billions of dollars of investments flood into the industry. The prosperity of legalization is countered by the crippling effects of federal laws and state regulations. Places like Michigan and some Canadian provinces are seeing lawmakers put up barriers even after voters approved recreational cannabis. Cannabis companies can also fall prey to local zoning regulations as many states allow for local municipalities to decide if and how cannabis companies can operate within city limits.

Today’s cable industry may not resemble the fledgling legal cannabis industry, but looking back at its history reveals the challenges it faced and the challenges that the cannabis industry itself may face.

The development of the cable industry

The cable industry has been around for over 70 years, and in that time has had game-changing innovations, yo-yoing regulatory frameworks, and continual threats to its business model from internal and external sources. Nevertheless, the cable industry has managed to persist and adapt through it all (though, there has been a consistent eulogization of the industry for the past decade).

Consolidation, layoffs, and shifting competition still drive ripples through the industry. So much, in fact, I woke up to this story on the morning news in Denver, Colorado recently.

From its beginnings as a small band of local, independent resellers, the industry is now dominated by massive conglomerations. According to the California Cable and Telecommunications Association, the cable industry begins in the mountainous regions of Arkansas, Oregon, and Pennsylvania in 1948. Soon after, the cable industry grew into a nationwide industry, though for the first two decades it did so under strict regulations that kept cable companies from importing distant television signals.

In the 1970s, deregulation allowed for cable industries to expand their offerings to include nationwide broadcasts. During this time, cable providers were able to grow their user bases exponentially. The 80s and 90s provided a rollercoaster of regulation and deregulation as the cable industry became the dominant force in home entertainment. At the same time, historic mergers like Time Warner and AOL transformed the definition of a cable provider. In the new millennium, challenges from satellite providers, streaming providers, and rapid advances in technology have threatened the cable industry’s way of life.

The legal cannabis industry in the U.S. began as a niche market in a few states over two decades ago. Now, more and more states are making recreational and medical marijuana legal and pressure is building for nationwide legalization. As the cannabis industry emerges from the shadows of the black market, it will become subject to strict regulations and economic challenges.

While different from those of the cable industry, the cannabis industry should look to the cable industry to see how they dealt with the challenges of becoming a national and regulated industry.

I spoke with veteran cable executive turned cannabis leader, Richard Batenburg, Jr., the chairman of Denver-based private equity fund management company Cliintel Capital Management Group about what the cannabis industry can learn from the cable industry. He likens today’s cannabis industry roll-out to the 1970’s cable television explosion.

“We’re in the late 70’s, where the ‘cable cowboys’ like John Malone built up smaller cable companies for acquisition by larger ones,” Batenburg told me. Malone became the CEO of TCI cable in 1973 at 29 years old, later to sell the firm to AT&T for more than $50 billion in 1999.

“The time to plan for the future and inevitable acquisition is now,” Batenburg, the author of Change Is Great: Be First! stressed.

And here’s why.

The challenges and lessons of the cable industry

Regulatory changes bring booms, busts, and mergers

The late 1980s marked the emergence of cable as a dominant economic and cultural force that surpassed broadcast TV. A friendly regulatory environment and plenty of investment allowed for a nationwide infrastructure to be built out. As The New York Times reported at the time, the success of cable industry came through easy expansion without the need to market itself.

However, that success and the monopolies in many areas would bring down a wave of new regulations. More recently, huge acquisitions like Charter taking on Time Warner Cable have fueled growth and, as happened in the 80’s, brought activist and regulatory pressure.

The constant regulatory changes, along with technological advances like satellite and streaming television, have made the cable industry reinvent itself again and again. In order to exert influence on those regulations, industry giants spend millions on lobbying. Comcast, for example, spent over $15 million in 2018.

    Lessons for the cannabis industry:

More than the cable industry, the cannabis industry faces a yo-yoing regulatory environment. Federal, state, and municipal regulations today are often contradictory, overlapping, and expensive to keep up with. Now that the industry is coming out of the shadows, the marijuana industry needs to step up its lobbying presence in state governments and the federal government.

Batenburg recalled how overbuilders in cable’s “wide open West” came in and talked counties to plant in the ground. That kind of lobbying begins at the local level, and we’re seeing that today in the way licensing is being administered across legal cannabis states.

Considering that it took until 2018 for the federal government to recognize the difference between hemp and marijuana, the industry has a long way to go when it comes to educating lawmakers. In 2018, the marijuana industry spent just over $2.5 million. Industry groups need to bring together players in legal states to create a war chest for the coming fight for national legalization.

Integrated processes and systems are vital

Behind the scenes, cable companies are monstrous amalgamations of systems and processes run by thousands of employees. Those systems are there in part as a measure to maintain compliance with regulations that help ensure consumer privacy and broadcast standards.

Mergers, however, highlight how disparate systems create problems for the health of the industry. As Network World reported, when Charter acquired Time Warner Cable and Bright House Networks, Charter “took on a monumental task of merging many different systems to make one cohesive customer experience.”

The enterprise arms of each company used conflicting platforms for online payments and billing, and complicated product sets and other inefficiencies have made the merger a challenge on the back end. And herein is the crux of Batenburg’s foreshadowing: Plan for the future.

“Most [cable] roll-ups were pretty painful because systems and culture weren’t uniform,” Batenburg said, “because the back-office and systems like CRMs, billing, supply chain, and other technology weren’t standardized or thought through in advance.”

    Lessons for the cannabis industry

The need for consistent, unified systems and processes is even more urgent in the cannabis industry. Even in the nascent stages, the cannabis industry has seen a rash of high-profile acquisitions and mergers. Every type of cannabis business is required to provide stringent record-keeping, and disparate systems will make the prospect of mergers a compliance nightmare.

Before we get to the point of cable-industry-level mega-mergers, the cannabis industry needs to create a universally understandable system for the integral processes that have to do with compliance. A Canadian blockchain company DMG Blockchain Solutions Inc. is trying to create a global supply chain platform for the industry that can bring together producers and retailers.

“Have a unique operational and cultural advantage,” Batenburg stressed. As a seasoned expert at building end-to-end processes to help front line employees deliver products and services to customers, he’s been able to bring this mindset to the cannabis companies he works with.

Such efforts will be needed in the U.S., as well. Part of that effort will come through the innovation of companies who provide ancillary products and services to the industry. The other part must be part of the national legalization lobbying effort. Right now, each legal state has its own standards and requirements for record-keeping. A unified regulatory framework will be needed to ensure the cannabis industry can become an interstate and international success.

High costs a barrier to operation

These days, the cable industry is notoriously costly to operate in, as cable TV companies must pay high prices for sports and broadcast programming via retransmission consent fees. The high costs have been passed on to consumers and made it one of the least popular industries in the nation. It’s also pushing out smaller providers, forcing companies into mergers to survive.

“Cannabis, unlike cable, will not be able to play host to smaller providers in remote, less-populated areas like Nebraska, the Dakotas, and Kansas,” Batenburg explained. There’s simply no sustainability to it.

In the early 2000s, cable companies pushed to roll-out fiber optic networks to replace older, slower metal cables. Not long after, though, economic shifts like the 2008 recession changed the calculus of fiber optic upgrades. With minimal competition from startups, giants like Verizon and AT&T realized it was too expensive and that consumers had nowhere else to go. As a result, America’s broadband cable industry is falling behind the rest of the world, with speeds less than half countries like Norway and Hungary.

    Lessons for the cannabis industry

The cannabis industry faces high operating costs, but with federal prohibition in effect, that high cost is exacerbated by the fact that it is mostly an all-cash industry, with little access to banking (for the most part). Right now, the infrastructure of the cannabis industry is limited to local markets. However, as the cannabis industry goes global, the U.S. will need to play catch-up with Canada and China, who are two of the world’s biggest producers.

While U.S. domestic cannabis growth will remain a boom market for the near future, producers will need to look beyond the borders to maintain growth at some point (once the federal government okays inter-state and international cannabis trade, of course). As the Canadian operators are discovering after national legalization, there’s a huge need for people who can create and scale supply chain operations that keep down costs but maintain compliance with federal regulations.

“Cannabis companies must ask themselves, ‘If we grow 200%, and buy more space, machines, and facilities, does the system, processes, and culture scale to accommodate this?’,” Batenburg suggested. Cable companies didn’t do that well, and right now, most cannabis companies aren’t either. “To be successful in the long haul, cannabis businesses need to be consciously developing systems, processes, and culture that are optimized and can be scalable,” Batenburg stressed.

As the U.S. industry ramps up in legal states, operators there should create supply chain operations today that are poised to scale up nationally in the near future. Otherwise, the cannabis industry faces the high costs of creating a national infrastructure like the cable industry faces today to keep up with advancing technology and consumer expectations.

Conclusion

The cannabis industry has an opportunity to set the stage for a successful national rollout today. With foresight on the part of companies and industry advocates, cannabis can avoid many of the headaches that have plagued the cable industry. It’s never before been more important for cannabis businesses to systematize their processes, procedures, and culture with the goal to always be attractive to an acquirer.

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