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NJBizconNext

Last week MJBizConNEXT took place in New Orleans. This summary takes a look at the most important takeaways from the conference, which focused on the future of the cannabis and hemp industries.

Social Equity Provisions in Illinois

Industry experts suggested that Illinois could serve as a model for other states who are struggling to implement equity in their cannabis markets. They became the first to legalize recreational cannabis by legislature rather than popular vote in May. House Bill 1438 included a robust social equity program.

Within the statute, tax revenue will fund expungement of more than 700,000 cannabis convictions. Low-interest loans, job training, and mentorship programs will also be part of the recreational cannabis rollout from the start. Donna More, a managing partner of the Chicago office of Fox Rothschild, says that Illinois will benefit from having “a mix of established operators and newcomers, including the social equity players.”

Don’t Underestimate Start-up Costs

A common issue in the failure of cultivation start-ups is the lack of initial capital. Many growers entering the market either fail to account for their overhead or skimp on quality equipment initially. Jennifer Martin, the founder of Cultivation Sector Consulting, advises against taking shortcuts in the initial stage, specifically for temperature and humidity systems. Otherwise, when the system fails, the losses are far greater than the initial cost of well-made equipment.

While cannabis does grow like a weed, the variance in quality and potency depends on the environmental conditions. High-end systems will pay for themselves by preventing mold issues and allowing for a flower that can fetch a premium on the market.

Are Biosynthetic Cannabinoids the Future?

Jason Poulos, CEO of Librede in San Diego, grows cannabinoids through biosynthetic engineering. His process of cellular agriculture uses yeast as an incubator for cannabinoids. This method requires less space than marijuana to produce the same amount of cannabinoids faster and cheaper. It costs about $200 to create a kilogram of cannabinoids using his techniques. Poulos claims it is easier to produce rarer cannabinoids and expects biosynthetic cannabinoids to be mainstream in three to five years.

Growing With LEDs

Much of the cannabis on the market around the world is cultivated indoors. While it allows for ultimate control of the environment and year-round cultivation in the harshest climates, it’s a massive drain on the power grid. LED lighting is a newer technology that consumes about half of the energy of traditional high-pressure sodium bulbs.

Many experienced growers have been slow to adopt citing concerns about reduced yield and terpene profile, but today’s LED lights now produce yields and quality on par with older technologies. Not only do they run more efficiently, but they also produce far less heat, making cooling and dehumidification cheaper in the long run.

When Will Institutional Investors Enter The Market?

“Institutional investors have a major problem with cannabis being a cash industry,” said Scott Greiper, president of New York-based Viridian Capital Advisors. The passage of either the SAFE Banking Act or the STATES Act would remove “some of the existentialist threat” keeping them away.

Mergers & Acquisitions Centering Around Hemp

“In the mania of M&A, hemp is a primary driver. But the hemp industry won’t support thousands of brands,” Scott Greiper said. Late entries to the US CBD market like Cronos have been met with skepticism over whether they can achieve any significant share in an already saturated playing field.

Bethany Gomez, managing director of Florida-based research firm Brightfield Group, said many large companies are seeing CBD as too risky without regulation and are waiting on the FDA. This allows smaller companies to gain a foothold in the marketplace before Pharma, Ag, Tech, and Alcohol enter the mix.

The Importance of Brand Ambassadors

Jennifer Culpeper, the founder and chief creative director of Brand Joint, a Maryland-based branding agency that provides specialized strategy and design to hemp companies, explained that ambassadors, aka influencers, are the key to hemp and CBD marketing. She points to brands like Yeti coolers, which used famous hunters and fishermen to build its name around their social media. Lululemon was also cited for building their brand by cultivating a community. Using influencers on social media, they attracted consumers to free yoga classes at their stores, ultimately creating a “tribe” of brand ambassadors who promoted the brand for the company.

References

“MJBizConNEXT Cannabis Business Takeaways: Part 1.” Marijuana Business Daily, Marijuana Business Daily, 18 June 2019, mjbizdaily.com/mjbizconnext-cannabis-business-takeaways-part-1/.
“MJBizConNEXT Cannabis Business Takeaways: Part 2.” Marijuana Business Daily, Marijuana Business Daily, 18 June 2019, mjbizdaily.com/mjbizconnext-cannabis-business-takeaways-part-2/.

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