The Hemp Community Podcast

Cannabis and Business

November 17, 2021 The Hemp Community Season 1 Episode 7
The Hemp Community Podcast
Cannabis and Business
Show Notes Transcript

In this episode we talk about the interaction between business and botany as we peer into the world of commercial cannabis.

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 Episode 7 – Canna-Business

 

Hi there and welcome to the hemp community podcast. My name is Dan and this week we’re going to be talking about cannabis and business.

It should come as no surprise that cannabis is a valuable commodity and arguably the most profitable plant in the world. The cannabis industry is a broad church that incorporates legal businesses and organised crime. Legal weed has bloomed in the last few years evidenced by the ever accelerating wave of cannabis legalisation that is working its way across America and the world. In today’s episode we’re going to discuss some of the different types of businesses that operate within the legal cannabis industry, and then we’re going to look forward and speculate about what the future holds for cannabis users and entrepreneurs in the UK.

To begin with I would like to remind listeners that cannabis is complex plant; there are thousands of varieties of cannabis that can be prepared and consumed in an infinite number of ways. The plant itself produces hundreds of useful compounds called cannabinoids, of which the 2 most popular are CBD and THC. In the UK, CBD is legally available and is found online and in high street shops the length and breadth of the country. Products containing THC fall under the definition of a controlled substance, and as such are only available under prescription from a specialist doctor. Unfortunately it is nearly impossible to access medical cannabis under prescription on the NHS, but there are a growing number of private clinics where patients can access medical cannabis if they can afford it. Given that the legalisation of cannabis always begins with medical access, it seems this is a good place to start.

Medical cannabis is worth an estimated 10.3 billion dollars in 2021, more than doubling since 2018. Big pharmaceutical companies like Bedrocan, Khiron, Canabo and Zoetic have well established in-house research teams, grow-ops and sophisticated lab tech to maximise the profit margins from their plant matter. Some of these companies have been operating for decades, and it may be of interest to you that the UK is the world’s largest exporter of medical cannabis products, courtesy of GW pharmaceutics and their isolate based oils. Associated with these producers there are of course logistics companies and dispensing pharmacies to get the meds into the hands of patients, not to much the teams of lawyers protecting intellectual property and patents. Every step of the plants journey increases the value of the product and companies normally charge hundreds of pounds for a small vial of something that literally grows on trees. Some cannabis prescriptions can cost thousands of pounds a month and the drug is remarkably safe and effective for a wide range of indications, so its not hard to see why so many pharmaceutical companies are trying to get involved in the cannabis industry.

In the US, the majority of medical cannabis is accessed through the dispensary model; qualifying patients are issued with a so called “weed card” that grants them permission to buy cannabis products from a specialist vendor, normally licensed or at least operating within the legal structures of the jurisdiction. In these circumstances, the doctor does not prescribe a specific product, but rather allows the patient to explore the option available to them. Staff in medical dispensaries are normally trained and knowledgeable and are able to make recommendations based on the experience of other consumers. Dispensaries are where many cannabis users first encounter the industry, but of course those cannabis plants and products had to start off life somewhere, and its probably wasn’t in a roadside retail unit. Although there are some dispensaries that operate their own cannabis farms, the majority of growers operate independently of retailers.

Cannabis farms have become a common sight in legal American states. The plant is hardy and versatile, and there are a lot of varieties to suit different climates and soils. Outdoor farms are popular particularly in hot and high-altitude states like California and Colorado. Some farmers set up bio-tunnels to allow their plants the outdoor experience with the added control of a tarpaulin to protect the flowers from inclement weather. Outdoor cannabis grows require less investment, and the flowers of these plants tend to enjoy a very good reputation; maybe there’s a little magic in the air. Conversely indoor farms require more investment and technical setup, but they can run all year round and the farmer has more control over the variables in the growing environment such as heat, light and nutrition. Indoor grows can vary in size from a few plants, to a few thousand; in recent years cannabis companies in the states have bought and renovated large commercial units turning them into enormous hydroponic farms. The agricultural tech sector has adapted and now offers solutions to businesses who want to convert an old Walmart or even a disused prison into cannabis growing facilities. The downside of indoor growing is that cannabis is tropical plant that likes a lot of heat and light; the carbon footprint of indoor cannabis farming is enormous and faces little regulation. For example in Colorado the cannabis industry generates more carbon than the coal industry and bin collections. These American mega farms are a far cry from the types of cannabis growing facilities we see in the UK, the majority of which serve the black market. The biggest legal cannabis farm in the UK is operated by British Sugar PLC under an exclusive license from the Home Office. It may be of interest to you that the managing director of British Sugar is married to a cabinet minister who formerly worked at the Home Office herself. Do you believe in coincidences?

Growing cannabis requires a patient and skilful farmer, but after the plant has matured the flowers are handed over to trimmers who deftly remove the fan and sugar leaves, revealing the dense nugs concealed in the foliage. There are machines that can do this job, but many companies employ people to trim buds and it is an example of one of the many employment opportunities that the cannabis industry offers for so-called un-skilled workers. 

Much of the cannabis industry’s revenue comes from buds, and some estimates say cannabis flowers make up approximately two thirds of sales across the sector. But as we know, there are lots of things that can be done with cannabis and so many processing sites use sophisticated extraction techniques to produce concentrates and oils that can be used as ingredients in other products, or sold as they are to a willing buyer. In particular, edible cannabis products are immensely popular and represent the fastest growing category in legal cannabis markets.

In years gone by, dosing with cannabis edibles was difficult to gauge and many cannabis users will have stories about the time they over did it on brownies or a similar product. Thankfully, the legal cannabis markets have given businesses time to experiment and refine their recipes to suit every pallet, and now cannabinoid infused foods range from single digit doses, to hundreds of milligrams in a product for special occasions. Cannabis and food are a marriage made in heaven and edibles offer new users and non-smokers an alternative to joints, pipes, bongs and vapes. Chefs around the world use cannabis in their cooking to enhance flavour and provide an unforgettable culinary experience for diners who want to feed their cannabinoid receptors as well as their tummy.

Cannabis retailers normally carry a range of flowers, concentrates, oils, edibles and accessories. During the pandemic, dispensaries were classified as essential services and some states even introduced home-delivery licenses allowing dispensary workers to drop off your weed right to your door, just like the old days. 

There are of course many other types of businesses operating in and around the cannabis industry. Artists who make smoking accessories and paraphernalia are able to increase production and offer their wares to a more mainstream market. The wellness industry has embraced cannabis offering yoga classes, group meditation and all sorts of health and wellbeing focused activities to be enjoyed alongside cannabis. Life drawing classes where everyone smokes? Yes please. Hill walking groups with edibles? Of course! I’ve heard of a business in Colorado that operates a bus service that takes passengers on a tour of the city’s best known dispensaries and will even drop you off at home afterwards!

It is estimated that there are currently 321,000 of the US population employed by the cannabis industry. Even during the 1st year of COVID the industry took on over 77,000 workers, more than double the previous year’s total. Cannabis is set to be worth over $130billion dollars to the US economy. And weed isn’t even fully legal yet!

What many people don’t realise is that because cannabis remains a controlled substance at a federal level, cannabis businesses are severely restricted in the kinds of banking and financial services they are able to access. The unusual consequence is that almost all cannabis transactions are handled in cash. Billions and Billions of dollars in safes. Employees paid in brown paper bags. A cash machine in the reception area of every clinic and dispensary in the country. Cannabis businesses can’t even use paypal, and even CBD businesses experience the same regulatory discrimination; if you smell like weed, the people in the bank will look at you funny. As soon as the American congress pass a bill legalising cannabis, the enormous financial services and banking industry can start to work with pot legitimately and I have no doubt that political leaders across the world are already being lobbied by cannabis industry reps. 

In the UK the medical cannabis industry is already valued at about £2 billion a year, and the CBD market has already more than doubled from £300m in 2019 to an estimated £690m by the end of 2021. People in the UK are using more and more legal cannabis, but the market looks very different.

For a start, cannabis flowers and anything with THC are still restricted to specialist prescription. Most CBD users in the UK are purchasing oil, gummies, balms capsules and other supplements and while there are some vendors who carry high CBD hemp flowers, normally imported from Switzerland and Italy, these products are not legal and selling them is a risk to the business and the consumer.

Another stark difference between the UK and American markets is the types of shops that we have on offer. In the early days it seemed to be only vape shops and Holland&Barrett that stocked CBD, as well as a few websites. It’s now common to see CBD in every high-street in health-food shops, pharmacies, and even supermarkets. Primark have a CBD infused mascara, tesco stocks Hemp milk, and many cafes will offer CBD oil or edibles for open minded customers.

There are of course the traditional headshops, the rocksteady stalwarts of the cannabis  retail industry. These types of shops tend to cater to a younger demographic, and offer specialist products and insight. Headshops in the UK sell a range of rolling papers, accessories, grinders, pipes, bongs, cleaners, kits, clothing, art and more. For better or worse, headshops picked a bad reputation from the epidemic of harm resulting from the sales of “legal highs”. In the mid noughties Shops started selling novel psychoactive substances that had been designed to circumvent old drug legislation. By the time the law caught up with chemistry, the so-called “legal highs” industry was worth millions and the sudden enforcement of new prohibition laws saw many small headshops go out of business.

In the last few years there has been an increase in the number of retail businesses dedicated to CBD. The first CBD shop in the UK was opened by yours truly in April 2018. Since The Hemp Community’s first retail front opened there have been many other boutiques, dispensaries and cannabis positive wellness retailers open up and down the country. There are already a number of well-funded, sleek and stylish high-end luxury CBD brands who are popping up in more affluent areas. Perhaps the key to making cannabis socially acceptable, is making it palatable to the middle classes.

Regardless of how popular CBD is in the UK, the cannabis industry is being held back by regressive THC policy. Farmers can’t grow, dealers get arrested and the pharmaceutical companies get rich. I think there are a number of positive contributions that legal cannabis can offer the UK economy, beyond the billions of pounds in tax revenue.

First and foremost I think that legalising cannabis should be done with the greatest respect and consideration of the end-users. It is telling that all of the worst cannabis policy is written by people who neither know, need nor love cannabis. Businesses of all shapes and sizes should be involved in policy discussions, but patients and recreational cannabis users should also be represented at the table. 

It's likely that the UK, and other European states will introduce some kind of commercial cannabis license that all businesses in the industry will be required to have. In the US and Canada, strict criteria and punitive fees have caused hardship for many small cannabis businesses who cannot compete with the inflated budget of pharma-backed weed giants. Equitable access for entrepreneurs to licensing is a must for a successful legal cannabis industry.

As well as being good for retail, legal cannabis has a lot to offer the hospitality industry, although very few American states have regulations permitting the consumption of cannabis within a business premises, although in recent years a few clubs and restaurants have opened with great fanfare. From personal experience, most cannabis users quite like the idea of having the choice of a retail or hospitality setting. In the same way that consumers of alcohol can choose between buying from a supermarket or having a drink in a bar, cannabis users should be able to either pick up a baggy from the weed store, or spend time in a booth with friends at a cannabis club. The coffeeshops of the Netherlands are a good example of how cannabis can easily inhabit a social space, and I believe that something similar would work quite well in Scotland as an alternative to pubs and clubs. In the post-covid world we need an excuse to get out of the house, so why not go smoke weed somewhere nice?

So many things in the UK cannabis market are dependent on decisions made by a government who are ideologically hostile to a liberated cannabis market, whilst being financially connected to a number of medical cannabis companies. As I have commented in previous episodes of the podcast, the rules that will govern the cannabis industry in the UK will be written by and large for the benefit of a select few companies, and these regulations are already starting to emerge.

In 2021, the UK introduced the Novel Foods Regulations that required all CBD products to be registered and approved by a central body. Despite hundreds of applications from as many businesses, only a handful of applications have been approved so far, and in the confusion many brands have had to either change their suppliers or leave the market entirely. There is now discussion amongst CBD business leaders about what they will do when enforcement of new regulations begins to kick in. My gut feeling is that a large number of small businesses are going to lose out while a select few big players will capitalise. For the record, much of the new regulations is focused on the presence of a trace amount of THC in CBD products; so-called Full-spectrum products that are the backbone of the UK industry. It is worth noting that many of the big commercial brands, the types you may see in supermarkets and pharmacies, are made using isolate CBD which has been heavily processed to remove all the extraneous and extra-curricular compounds of the cannabis plant. The resulting product is cheap, inoffensive and hugely profitable, but its not what consumers want. At the hemp community we sell isolate as a DIY ingredient, but the vast majority of our sales are for full-spectrum CBD and after almost 4 years, we’ve never had a complaint.

Regardless of when or how cannabis is legalised in the UK, it is clear that the industry is here to stay, and true to form like any good photosynthesising plant, the more light we give it the more it will grow. Cannabis industry jobs are already popping up on employment directories, and I think that it is reasonable to expect to see significant reform of laws within the next 5 years that will allow businesses, communities and individuals to get their hands dirty so to speak. I look forward to seeing hemp farms by the roadside and greenhouses where factories once stood. We can create tens or perhaps hundreds of thousands of well paid and fulfilling jobs for men and women of all ages. Everybody is invited. If you have a cannabis business plan, why not put it to work? Want to make edibles? A cannabis lawyer? Or do you just want to trim some buds? Cannabis is a big family.

Before we end this episode, I’d like to note that even where cannabis is legal, the black market still exists, and in some places thrives in cracks between poorly considered policy. A salient example would be Canada who legalised all adult-use cannabis 2018, and despite licensed dispensaries and online vendors springing up across the country, approximately 70% of all Canadian cannabis came from the black market. The reasons for this are varied, but include better prices, better quality, more choices and familiar faces in the illicit market; legal dispensaries received a mixed reception from communities who saw locally owned independent businesses shut down over licensing discrepancies, and most of the legal cannabis sold was wrapped up in a disproportionate amount of plastic waste. There were also many complaints regarding the quality of so-called corporate weed; lacking in flavour and potency, many cannabis flowers were in their packaging for months before reaching the end-user. Incidentally, the legal medical cannabis industry in the UK faces similar criticism with some flowers having even been recalled due to issues relating to quality control and safety.

My final thought for today’s episode is that like any functioning ecosystem, the cannabis industry needs variety. We need big businesses, and we need small businesses, and everything in between. I for one am very excited about the potential cannabis has to transform our society and economy, and I’m looking forward to the day when the arbitrary restrictions of cannabis prohibition are lifted, and businesses are able to innovate and play their role in the green rush.

 

Thank you very much for listening to the Hemp Community Podcast, on next week’s episode we’re going to talk about Growing your own cannabis