North America Cannabis Industry

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CannTrust continues its fight to remain in the industry following a set of violations that nearly sank the company, according to BNN Bloomberg.

Initially, CannTrust’s situation seemed untenable. But when Bonify – a company known for allowing massive amounts of illegal cannabis into its supply – regained its license, CannTrust’s case actually has a fighting chance.

After months of investigation and internal changes, CannTrust submitted a remediation plan to Health Canada, aiming to meet all compliance requirements in the coming months.

 

Aiming for First Quarter 2020

 

CannTrust’s license was suspended in September. But rather than make gradual progress to improve operations, Health Canada discovered additional violations as time went on.

But after months of treading water, CannTrust has regrouped and intends to push forward. BNN Bloomberg explains:

 

“CannTrust Holdings Inc. has submitted a remediation plan to Health Canada as part of its efforts to regain the regulator’s trust and return to compliance. The embattled cannabis producer says it’s aiming to complete all of the activities detailed within the plan by the end of the first quarter of next year, according to a release late Thursday.”

 

CannTrust has a lot of work ahead of them in the coming months. With issues like illegal grow rooms, poor labour practices, black market seeds, security flaws and deliberate attempts to withhold information from Health Canada, the company has built up quite a rap sheet since July.

 

No Specific Details

 

CannTrust’s specific steps have not been publicly announced. However, they do give a general idea as to what the plan entails.

The company says their plan includes:

 

“…an expanded internal training program, a strengthened governance and operations framework, infrastructure enhancements, and prescribed accountabilities and timelines for a variety of specified tasks.”

 

From what we can glean, the plan is highly focused on efficiency, compliance, facility enhancements and training – all of which were lacking prior to CannTrust’s suspension.

Although we are kept guessing about whether CannTrust will succeed, interim CEO Robert Marcovitch is optimistic, saying:

 

“CannTrust is confident that its remediation plan addresses all the compliance issues identified by Health Canada.”

However, not everyone shares Marcovitch’s optimism. Derek Dlay, an analyst at Canaccord Genuity believes CannTrust is on the right track, but also adds:

 

“Having said that, there is still significant uncertainty whether CannTrust will eventually achieve full compliance in the near term.”

 

Realistically, only CannTrust knows how much legwork is ahead of them. Those of us on the outside can only speculate.

 

Massive Layoffs

 

Unfortunately – albeit unsurprisingly – CannTrust was forced to scale back its workforce. In September, the company laid off 180 workers. Now, another 140 are joining them in order to save money in the interim.

CannTrust says these layoffs will save them $400,000 per month in labour costs. However, they need to rehire these employees within 35 weeks, or the total severance will be $880,000.

Marcovitch is not happy with the situation, but admits that it is necessary in order to reflect the company’s current sustainability. He explains:

 

“This was a difficult decision, but it is imperative that our workforce reflects the current requirements of our business. Reducing [CannTrust’s] current operating expenses supports our financial sustainability, and places us in the best position to fully resume production upon the reinstatement of our [licences]. We look forward to rehiring at that time.”

 

 

WeedAdvisor’s Compliance Solutions

 

Out of all the errors producers, distributors or retailers can make, non-compliance is arguably one of the most egregious. Whether accidental or intentional, the consequences may amount to millions in fines, lost productivity and severe loss of public trust.

WeedAdvisor understands the critical balance required to ensure compliance, which is why one of our many business solutions include key functions like inventory tracking, real-time data, safety monitoring, reporting and more.

We help our clients remain compliant in a seamless, automated fashion, so they can focus on providing the best products possible.

 

 

 

 

 

 

 

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Marijuana legalization continues to be a hot topic on a federal level. Historically, however, those on the right wing of the political spectrum have always been the strongest voices of opposition. But it appears that even in the biggest conservative strongholds, bipartisan support for legalization is growing.

One such example – according to the Miami New Timesis Florida, a Republican state that (begrudgingly) accepted medical marijuana following public and legal pressure. Seemingly striking while the iron is hot, Florida’s population wishes to up the ante to full legalization, despite strong Republican roots among the electorate.

Judging by recent opinion polls, Florida could soon be the next state to fully legalize recreational marijuana.

 

Key Issue in 2020

 

While the Florida government may not be keen on the idea, public pressure is mounting. Like it or not, legalization is something that will have to be addressed:

 

“With three different petition drives hoping to bring recreational marijuana to Florida, legalization will most likely be on the 2020 ballot.”

 

To get a feel for how much support exists, the University of North Florida conducted a poll, finding that 64% of Floridians support full marijuana legalization. Furthermore:

 

“Of those polled, 73 percent of Democrats, 54 percent of Republicans, and 64 percent of independent voters support legalizing marijuana for adults.”

 

As expected, Republicans were the least amenable to legalization, yet still over half are in favour. This makes legalization one of the few unifying issues in a time when ideological lines are more divided than ever.

 

Intense Pressure

 

To say that the Florida government is under some serious pressure would be an understatement. In fact, there are currently three different active petitions to legalize recreational cannabis in the state.

But the one drive to gain the most traction also has some serious backing:

 

“To date, the frontrunning Make It Legal Florida initiative, backed by multistate cannabis companies that stand to gain billions, claims to have garnered more than 100,000 petition signatures since it began last month.”

 

Granted, the people behind the signatures are ordinary citizens, but it obvious in this case that there is a massive financial agenda behind it.

However, this may not be a bad thing. Having support is important, but having powerful support from the cannabis industry is infinitely better.

On the other hand, there are those who criticize Make It Legal and have concerns about the implications should they succeed in legalizing marijuana:

 

“Critics have said Make It Legal Florida will make the cannabis industry a monopoly. While the petition organizers say they have obtained more than 100,000 signatures, the state Department of Elections says the group only has 17,873 that are verified.”

 

It is likely that the state will verify more signatures, since the petitions are still being counted. Still, the involvement of large lobbyists and corporations is a double-edged sword that can help a cause but still lead to negative consequences down the line.

Nonetheless, advocates seem content to have the organization on their side.

 

Legalization Requirements

 

Although proponents are optimistic, getting legalization put on the 2020 ballot and approved will take serious legwork:

 

“State law requires the Florida Supreme Court to review a petition once it receives 76,632 signatures. After the petition is considered, 766,200 signatures are required for a legalization amendment to appear on the 2020 ballot. In order to legalize recreational marijuana in Florida, at least 60 percent of voters would then need to vote for the amendment.”

 

But with three active petitions – one which (allegedly) has 100,000 signatures – and an average support of 64%, it is safe to say that the cause is close to reaching its minimum requirements for consideration.

 

WeedAdvisor’s Continued Support for Federal Legalization

 

We always find it encouraging when states progress toward major cannabis reform. But serious talks of legalization in a conservative state like Florida indicate something big.

Legalization has crossed party lines. The growing bipartisan support – although still a little lopsided – is critical in ensuring future changes to drug laws on both a state and federal level.

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Canadian licensed producer Hexo Corp. recently announced that it will lay off 200 workers, reports the Ottawa Citizen. With its main plant in Gatineau, Hexo began as Hydropothecary, a medical cannabis provider with its own line of proprietary strains, sprays and other products.

Recently, the company made headlines for its new cannabis product, which undercuts the average price of illegal marijuana by about one dollar per gram. Unfortunately, it may be some time before this product takes off. Meanwhile, the company has to cut costs.

A once expected cannabis boom soon fell short of expectations after several variables were introduced, both before and after legalization. In Hexo’s case, the predicted $400 million net profit did not materialize.

The worst part is that none of this is Hexo’s fault, meaning there is little they can do to remedy the situation.

 

A Regrettable Decision

 

As of May 2019, Hexo had 1072 employees, which are now about to be cut down to around 800. To their credit, however, Hexo has expressed regret over the move. CEO and co-founder Sébastien St-Louis said in a statement:

 

“This has been my hardest day at Hexo Corp. While it is extremely difficult to say goodbye to trusted colleagues, I am confident that we have made sound decisions to ensure the long-term viability of HEXO Corp.”

 

Whether in the interest of fairness, finance or both, the layoffs will span all levels of the organization, from junior employees to executives. Every one of their facilities – Gatineau, Belleville, Montreal, Niagra and Brantford –will lose employees.

 

Black Market, Regulations and Slow Rollout to Blame

 

Although the last year has seen some improvements, there are still massive obstacles that stand in the way of Hexo’s (and other companies’) profits. The Ottawa Citizen explains:

 

“In its statement, Hexo cited a number of reasons for the layoffs: the delay in opening retail cannabis stores; regulatory uncertainty; pricing pressures; and ‘jurisdictional decisions to limit the availability and types of cannabis derivative products [that] have contributed to an increased level of unpredictability.’”

 

The “jurisdictional decisions” Hexo mentions is Quebec’s overzealous decision to ban certain edible products. Despite the fact that the federal government approved many of the affected products, items like baked goods and other sweet items will be banned in recreational stores. This is bad news for Hexo, who is working on chocolate and candy edibles.

Furthermore, topicals will only be available for medical recipients. Given that a large portion of Hexo’s customer base is located in Quebec, this seriously cripples Hexo’s profitability.

Meanwhile, its other cash cow, Ontario, suffered from lower sales due to its delays in opening physical dispensaries, which are still currently limited to 75. However, 22 of those 75 approved stores are currently open, along with just 24 in Quebec.

Finally, there is the black market, which still dominates around 80% of the cannabis market. Hexo’s new value strain may help make a dent in illicit sales, but this will take time.

 

WeedAdvisor’s Role in Supporting Licensed Producers

 

Naturally, we are saddened by the latest news from Hexo, both for its employees and the industry itself. With stories like these, it is easy to believe legal cannabis has a bleak future.

But keep in mind that analysts made similar doomsday stories during the initial rollout, when things were in much worse shape.

Until revenue increases for licensed producers, saving money is crucial. WeedAdvisor’s many business solutions are not only inexpensive, but also meant to improve efficiency and ensure compliance, preventing potential fines and other financially harmful issues.

 

 

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The first year of legalization saw its share of scandals. But while CannTrust stole the spotlight in the summer of 2019, Winnipeg-based licensed producer Bonify was arguably worse.

As we covered in our article from early 2019, Bonify’s most egregious offence was when it sourced and sold illegal cannabis into the open market. This was during a volatile time, where pressure to provide inventory was massive as a huge shortage bottlenecked the nascent cannabis industry.

However, BNN Bloomberg now reports that Bonify, despite the seriousness of their violations, had its licensed reinstated after a massive overhaul.

 

“A Landmark Moment”

 

When it comes to dealing with punitive measures from the government, there was no precedent for whether or not working to improve would even yield results. But Bonify proved that, while Health Canada does not hold back when it comes to non-compliance, it is possible to bounce back.

When Bonify’s licensed was suspended, they brought in RavenQuest Biomed to get them back in the right direction. Now, RavenQuest CEO George Robinson says:

 

“Having guided Bonify through corrective action vis-a-vis operational procedures, proper record-keeping, training, and all other standard operational procedures within the Bonify facility, we now have the roadmap to licence reinstatement for non-compliant operators. This is a landmark moment in an industry that has faced several high-profile compliance challenges.”

 

Essentially, Bonify went from a complete regulatory disaster to total redemption – although it took about eight months to accomplish. More importantly, it provides a living guide for companies like CannTrust, who are still fighting to once again become compliant.

BNN Bloomberg explains:

 

“Bonify’s ability to sell cannabis legally again also offers a clear pathway for other suspended producers to return to compliance with Health Canada if they can demonstrate that they can abide by the regulator’s various measures aimed at ensuring public safety and compliance with the law.”

 

A Learning Experience

 

The Bonify debacle has taught us some very valuable lessons. First of all, Health Canada is not to be trifled with. It is likely that offending licensed producers underestimated the government’s resolve to enforce compliance.

But we are in a time where image is critical. Any health issues from contaminated or substandard cannabis can drastically affect consumer confidence – something we desperately need in order to fight the black market. Consequently, regulators will scrutinize LPs very closely.

Second, it is clear that actions have consequences. Bonify’s offences were severe and the punishment more than fit the crime.

However, the third major lesson here is that there is always the opportunity to be better, whether it is due to Health Canada’s orders or voluntary, proactive measures to improve best practices.

In the words of George Robinson:

 

“The lessons from Bonify are clear: Follow the rules, train your staff and run a clean, well-designed facility capable of producing high-quality cannabis without cutting corners.”

 

WeedAdvisor’s Compliance Solutions

 

WeedAdvisor understands the severity of non-compliance and its effects on both the industry and consumers. It is also important to understand that it is possible to unintentionally fall short of Health Canada’s highly intense standards.

Keeping track of every critical area is no easy task. But thanks to our business solutions, we make compliance automatic, easy and inexpensive.

Inventory tracking, real-time data gathering, reports, safety and quality compliance are just a few areas that our solutions effectively cover. In turn, this brings valuable protection against fines or suspensions, while ensuring continued public confidence.

 

 

 

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The first year of legalization saw its share of scandals. But while CannTrust stole the spotlight in the summer of 2019, Winnipeg-based licensed producer Bonify was arguably worse.

As we covered in our article from early 2019, Bonify’s most egregious offense was when it sourced and sold illegal cannabis into the open market. This was during a volatile time, where pressure to provide inventory was massive as a huge shortage bottlenecked the nascent cannabis industry.

However, BNN Bloomberg now reports that Bonify, despite the seriousness of their violations, had its licensed reinstated after a massive overhaul.

 

“A Landmark Moment”

 

When it comes to dealing with punitive measures from the government, there was no precedent for whether or not working to improve would even yield results. But Bonify proved that, while Health Canada does not hold back when it comes to non-compliance, it is possible to bounce back.

When Bonify’s licensed was suspended, they brought in RavenQuest Biomed to get them back in the right direction. Now, RavenQuest CEO George Robinson says:

 

“Having guided Bonify through corrective action vis-a-vis operational procedures, proper record-keeping, training, and all other standard operating procedures within the Bonify facility, we now have the roadmap to license reinstatement for non-compliant operators. This is a landmark moment in an industry that has faced several high-profile compliance challenges.”

 

Essentially, Bonify went from a complete regulatory disaster to total redemption – although it took about eight months to accomplish. More importantly, it provides a living guide for companies like CannTrust, who are still fighting to once again become compliant.

BNN Bloomberg explains:

 

“Bonify’s ability to sell cannabis legally again also offers a clear pathway for other suspended producers to return to compliance with Health Canada if they can demonstrate that they can abide by the regulator’s various measures aimed at ensuring public safety and compliance with the law.”

 

A Learning Experience

 

The Bonify debacle has taught us some very valuable lessons. First of all, Health Canada is not to be trifled with. It is likely that offending licensed producers underestimated the government’s resolve to enforce compliance.

But we are in a time where image is critical. Any health issues from contaminated or substandard cannabis can drastically affect consumer confidence – something we desperately need in order to fight the black market. Consequently, regulators will scrutinize LPs very closely.

Second, it is clear that actions have consequences. Bonify’s offences were severe and the punishment more than fit the crime.

However, the third major lesson here is that there is always the opportunity to be better, whether it is due to Health Canada’s orders or voluntary, proactive measures to improve best practices.

In the words of George Robinson:

 

“The lessons from Bonify are clear: Follow the rules, train your staff and run a clean, well-designed facility capable of producing high-quality cannabis without cutting corners.”

 

WeedAdvisor’s Compliance Solutions

 

WeedAdvisor understands the severity of non-compliance and its effects on both the industry and consumers. It is also important to understand that it is possible to unintentionally fall short of Health Canada’s highly intense standards.

Keeping track of every critical area is no easy task. But thanks to our business solutions, we make compliance automatic, easy and inexpensive.

Inventory tracking, real-time data gathering, reports, safety and quality compliance are just a few areas that our solutions effectively cover. In turn, this brings valuable protection against fines or suspensions, while ensuring continued public confidence.

 

 

 

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One universally notorious consequence of legalization is that large grow operations a ripe for the picking by thieves. Given the size of some of these fields, keeping every area safe is a logistical nightmare. Consequently, it is not hard for thieves to sneak in and take plants – as is the case with one story reported by ABC News.

However, ever since hemp was legalized in the U.S., it effectively became an involuntary decoy for people trying to steal marijuana from local growers.

It is fair to say that petty thieves are not exactly a pillar of intelligence, especially when it comes to botany (or any science, for that matter). Unfortunately, one Indiana grower is just a single example of an increasing and concerning trend.

 

Mistaken Identity

 

To those familiar with cannabis, the physical differences between hemp and marijuana are blatantly obvious. Unfortunately, criminals are not aware of this key distinction and legitimate businesses pay the price for that ignorance, as is the case with one Indiana grower:

 

“People are stealing hemp plants from a local legal growing hemp business after mistaking the plants for marijuana. US Hemp Co. launched in 2019 and the business started harvesting in Indiana’s first legal hemp crop in 80 years. Will Weaver, one of the founders at US Hemp Co., chased down two suspects in Elkhart County on October 17 after watching the suspects remove the hemp plants from one of the business’s fields.”

 

Weaver says this is a chronic issue that understandably “…makes you feel violated.” He says that every time he catches people trying to steal his plants, they always say they thought they were stealing marijuana.

Unfortunately for Weaver and those like him, this problem is gaining momentum. According to ABC News:

 

“Between the customers, US Hemp Co. harvests for and themselves, there were 11 days straight and approximately over 20 people put in jail over hemp thefts during the past few weeks, according to Weaver.”

 

“None of it is Marijuana”

 

Weaver makes it clear that there is nothing in his field worth stealing:

 

“In reality, none of it is marijuana. All of it is below 0.3 THC level…so you could smoke the whole field, you’ll never get high.”

 

Furthermore, stealing hemp is a lesson in futility. Even if thieves get away with a tiny haul of hemp plants, there is no way for them to make money.

Unlike marijuana, there is no black market for hemp. Weaver also explains that selling the hemp through legitimate channels (the only real option) would require a certificate of analysis and a license – neither of which hemp thieves are likely to have.

 

Still Does Damage

 

Although the joke is effectively on the thieves who get caught and charged, it is no laughing matter for Weaver and his counterparts in the industry. He explains:

 

“There’s no value to [hemp]. It looks a little different, it smells different and there’s no value to them. They’re just taking money out of our pocket…that’s all they’re doing.”

 

Weaver frankly explains that this grow operation is his livelihood. These pointless thefts affect his bottom line and – in turn – his livelihood.

 

WeedAdvisor’s Concern for Unintended Consequences

 

Legalization of cannabis has been beneficial, but with it came some unintended consequences. In the past, we have mentioned thefts and armed robberies at Canadian facilities. It appears that legalization has the same effect in the U.S.

Unfortunately, little can be done other than to increase security. However, small growers do not have the resources to hire security staff or services.

Although we would like to see this trend reverse – and it may very well do so – having a controlled substance so easily within reach is simply too tempting and, more importantly, too easy, for some unscrupulous people to not steal.

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Former chair of Canada’s marijuana legalization “task force,” Anne McLellan, is happy with the outcome of legalization, but that does not mean she has no concerns, according to CTV News.

Anyone following legalization’s progress can agree that its initial rollout was catastrophic, leading many permanently back to the black market.

However – as we and many others predicted – the situation is improving. With the black market being less prolific and supply shortages on their way to becoming history, McLellan is happy, aside from a few warning signs – especially (but not exclusively) around vaping.

 

Where Legalization Stands

 

A lot has changed in the last year, which involved a mix of positive and negative events. Most licensed producers worked diligently to ensure supply needs were met, but there were still problems along the way.

The biggest obstacle is the black market and its advantage over legal cannabis. CTV News says:

 

“In the second quarter, household expenditures on legal pot was $443 million, up from $172 million in the fourth quarter of 2018. But illicit pot expenditures were $918 million in the second quarter, down from $1.17 billion in the fourth quarter of last year…”

 

These numbers are rather encouraging, but we are nowhere near the point where the open market overtakes illegal cannabis.

We should point out, however, that these changes show a reduction of about $252 million in sales for the black market, while legal cannabis revenue increased by roughly $271 million – a 60% jump.

 

Current “Red Flags”

 

McLellan points out that there are a few “yellow flags veering to red,” specifically when it comes to public trust and health.

 One notable event was Redecan’s moldy cannabis, which resulted in a complete recall from the Ontario Cannabis Sfore (OCS) and other retail sources.

However, the most scandalous example is CannTrust, a disgraced medical and recreational licensed producer whose license was recently suspended by Health Canada. What began as a detection of unlicensed grow rooms soon revealed a variety of other violations, including attempts at a cover-up by senior management, along with the growth of illegal seeds.

McLellan admits that CannTrust’s actions make the legal industry look bad during a time when public confidence is critical.

Discouraging as this may be, McLellan points out that this is not unusual. Canada went through the same thing generations ago. McLellan explains:

 

“The last time we did this was with the end of liquor prohibition, and dare I say, no one in this country was alive to see or understand how that took place. That took years to create a regularized, normalized legal market around liquor.”

 

Today, the alcohol industry is legitimate and perfectly regulated. If history is any indication, cannabis will soon reach the same point.

 

The Vape Crisis

 

According to McLellan, the vaping illnesses reported in the U.S. are at the forefront of everyone’s minds and bad PR for legal cannabis. With the death toll in the U.S. hitting 33 people, Canada finally saw its first confirmed case, discovered in Quebec.

Vitamin E acetate is the biggest suspect, which is used as a cutting agent in illegal THC vape products. Health officials are still waiting for definitive proof, but the legal market will not contain any contaminants or fillers that pose such a risk. According to Global News:

 

“A Health Canada spokesman said in an emailed statement that it is monitoring the situation in the U.S. and Canada and that additives such as vitamins — vitamin E acetate is one suspected culprit — are prohibited from use in cannabis vaping products. He added that it ‘will take additional action if warranted and as appropriate, to protect the health and safety of Canadians.’”

 

Unfortunately, many people will recoil in fear at legal THC vapes as well, which McLellan sees as a threat to public trust in the system.

 

WeedAdvisor’s Prediction of a Brighter Future

 

As a provider of business solutions to the cannabis industry, we understand the struggles legal marijuana continues to face.

Controversies and health concerns are likely to stay for quite some time, but ongoing research and possible reforms will hopefully solve these issues in the end.

But until that time comes, WeedAdvisor encourages everyone to support the legal market and stay informed on any emerging health issues.