emerging market: cannabis 30pmpxe... · headlines of the day… • dea sued for issuing no new...

Emerging Market: Cannabis

Risk Vs. Reward

Totally polarizing…

Beer, wine, liquor, opioids, cigarettes

Illegal Federal Class 1 drug

Protect our involvement to avoid complications with mainstream customers

Headlines of the day…

• CEO’s removed

• Celebrity Investors out in CA due to high cost of meeting regulations

• Mergers and Acquisitions

• Lawsuits

• Community Rejection of retail and farm sites

• Legislation coming but slow

• Banking totally misunderstood—reforms in Congress

Headlines of the day…

• DEA sued for issuing no new applications for cannabis medical research since 2016

• Walgreen, CVS, Caremark carrying CBD oil lotions, essential oils, tinctures, etc., driving growth of nutraceuticals market. Traditional amber glass vials.

• CBD remains illegal in food and drink yet it is available everywhere.

• Wider distribution will drive need for processing and packaging automation.

FDA Inconsistent

June 2019 FDA was at Natural Products Association meeting, said we have limited resources, so while illegal, we are most concerned with disease claims.

News of the day…

Lung Illness Outbreak

• CDC is investigating 2,506 Cases• and 54 Deaths “Amid the health scare, the amount of the

legal pot industry's revenue that comes from vape products has dropped by 15% nationwide, with some states, including Oregon, seeing decreases of more than 60%.” (Source: AP)

I don’t know what the big deal is…

“We’ve been selling into the “Tea and Spice” category for the last 40 years.”

The plant…amazing variety of products

• Flower—pre-rolled, oz. bag, tins, glass

• Extracts…nothing wasted

• Oils—vape, many non-narcotic (CBD)

• Edibles—anything you can imagine

• Softgels, pills, patches, sub-lingual sheets, etc.

Four markets…

Medical—very little testing, FDA approved seizure drugCurrently, 65% of cannabis sales stem from medical marijuana.

Medical marijuana is now legalized to varying degrees

in 30 states with legislation pending in 14 more.

Source: PMMI Business Intelligence “Up In Smoke.”

Four markets…

Medical Experts believe that by 2021 every state in the U.S. will have

legalized cannabis for medical use, and sales of medical

marijuana will top $15 billion.

Four markets…

Recreational—Now adult use…targeted baby boomers, found millennials

Lure of the tax dollar, jobs, travel and hospitality

Hard-core hippies from way back

Destination bachelor/bachelorette parties and weddings

Combination of vape, smoke and edibles

Four markets…

Recreational use of cannabis, which is fast growing, usually outpaces sales of medical marijuana by a ratio of 15:1 in the first few years after legalization. Nevada, where tourism will boost sales of recreational cannabis, expects that ratio to be more like 20:1.

Colorado, California, Oregon…the good,

the bad and the ugly.

Four markets…

Recreational—a regulatory nightmare that doesn’t end.

Changes to acceptable limits—Cannabis Quenchers football season promotion

California edibles and infused alcohol restrictions last summer

Local resistance banning farms or retail outlets

Long-term order and delivery of packaging materials difficult

Four markets…

Evergreen Herbal

“When packaging laws change as frequently as they do, it’s difficult to forecast and build momentum. We’re sticklers about it and we do our best to be compliant,”

-Andy Brassington, Evergreen Herbal’s Chief Financial Officer

Four markets…

Both medical and recreational heavily burdened to test every batch, collect bar codes at point of sale into state data base

Label info about strength, purity, source,

date harvested, farm

Black market ignores or counterfeits.

Four markets…

Some printed details include:

• cannabis strain name

• lab analysis of THC and CBD levels (% and mg per pkg)

• barcode for stocking and POS inventory changes

• QR code linking customer to the site

Four markets…

CBD—wide variety of lotions and sprays, tinctures—often misunderstood

No regulatory tests or FDA approval. Self-tested in labs.

Nutritional supplements. Illegal to add…make claim

Black Market—still going strong, price

undercutting, counterfeiting barcodes and seals.

The Edibles Dilemma

Social cues for packaging

My liver vs. your liver

Dosing difficult

Can be child-resistant but once that bottle or that pouch of chocolates is opened, how do you limit access?

The Edibles Dilemma

“At least a dozen elementary students exposed to marijuana gummies, police say; mom arrested” Ohio!

Not just minors, seniors especially those with dementia, or

Seniors not protecting their own supply

Animals, too, suffer poisoning with ingestion ASPCA and others

Have Issued statements

The Edibles Dilemma

Headline from Washington State newspaper…Jan. 2019

“Here's how new packaging, labeling and product design rules for

cannabis-infused edibles and beverages could decimate edibles

manufacturers’ bottom line in the state.”

California last summer said “NO” to anything resembling

regular grocery packaging, kids products, no cannabis infused alcohol

The Edibles Dilemma

The opinions expressed here do not reflect the views of the management…Look to the pharmaceutical industry for solutions. They validate for the FDA their tamper-evident or senior friendly packaging performance.This social clue (medicine is serious business) actually works here.Bottles with locking caps, blisters with single dose

No one cannabis industry…

Seattle retail thrivingSophisticated stores anddisplays—education andfun for couples and “newbies” welcome.

Contrast with Nevada or California…

Show licenseTwo or three customers at a time—waiting room, locked doorsLimited selection, some packaging and brandingDispensary

Sophisticated packaging and branding…

Perpetual “Help Wanted” sign

Packaging…

• Glass jars• Rigid plastic tubes and mini-film canister• Flexible pouches-tamper evident, child-resistant foil• Paperboard cartons• Glass vials with dropper, tins, modified atmosphere • Jars, tubes, dispensing spray and pump• Logistics and processing – TUBS!

A packager’s dream…

Investments…

LicenseLandExpertise—crop scienceEquipment—irrigation, lighting, security, logistics…Interviewing, background checks,hiring, training, payroll & HR.

The early years…

Packaging afterthought…

West Coast turned to China

Auctioned used or sub-par equipment. “5 months ran it into the ground”

Cheap materials, huge volumes, long delivery time, quality issues, bad for environment, equipment free with material contract

Branding name and quality…

Unlike CPGs who can promise consistency with processes, cannabis growers get varied results with flower.

Strains and hybrids evolve. Growing conditions indoor vs. outdoor

Build loyalty through social media and activism


Soulshine commitment to sustainability and to Animals

“After figuring out our logo, box design and what the brand should mean to us, it was important to focus on the packaging.”


Soulshine brands itself “Cannabis For A Higher Purpose ™” and goes a step further, contributing a portion of every sale to a local pet rescue.


Athletes for Care

Celebrity Endorsements

Health and wellness


Honest Marijuana

Science: THE VISIONOur goal is to provide consumerswith the purest marijuana experience on the planet.

We pride ourselves on using world-class organic growing methodologies, pioneering the science of marijuana preservation and leading the way with innovative consumption methods.

Processing and packaging…

Extremes. Highly automated mostly in medical, CBD or targeting Canadian market

Much hand labor--manual trimming, weighing, bagging, labeling. Sticker shock to automate.

Testing and regulatory compliance a headache everywhere

Semi-automatic-–no need for speed

Machinery and Automation

Package type and size can impact

feeding, conveying, labeling, cartoning

Mate your package with your machine

as early as possible


The perpetual “Help Wanted” turnstile of employees coming and going (and walking out the door with your secrets) is a drain on HR, training, production, etc.


Cannabis operations typically do not require multiple entire packaging lines running at 350 packages/min, with auto-feed and cameras, sensors and software confirming label placement, and rejecting those that don’t pass for rework.

• Print and apply• Labeling • Flow wrapping candy, cookies• V/F/F/S with weighing• Track and trace barcode scanners• Fillers• Cappers• Shrink banding• Heat sealing• Blister Machines


“Whoever automates and scales the fastest is who will win”

Patrick Wlaznak, Soulshine

Scalable speed to market where no infrastructure exists


Testing machinery

No problem for CPGs. In pharma, these may be sugar pills similar in size, weight and coating.

As your products cannot cross state lines, work with your machine builder to identify appropriate materials (such as hops) to run through the machine during testing.

Bring the testing to them!

Materials

In some states, like Washington, products are packaged at the grower or processor level in tamper-evident packaging, not to be opened until they are purchased from the retail shelf.

Some states require opaque containers, while

others allow for transparent packaging.

Materials

All of these packaging configurations have existed for years, and many products just like yours have already been set up to be processed and packaged semi-automatically or automatically.

Materials

Confectionary, bakery, beverage, tea, sugar—all of these vertical industries have worked through your learning curve, made mistakes, found solutions.

The pharma market has taken on serialization, individual barcodes linked back to batch, tracked and traced through the supply chain.

Materials

Variances by State

No hard and fast rules for labeling, closures, sizes and distribution channels.

Compliance is a challenge for packaging manufacturers, complicated by these frequently changing rules, specific to each state where medical or rec cannabis is legal.

Appearance, labeling and distribution channel regulations are state-specific as well, which have an effect on what packaging materials a customer selects.

Child resistance: Costs

• Some cultivators/producers in CA said they hope the CR laws will eventually go back to the CR exit bag.

• While safe, it’s very costly to buy CR primary packaging for their products.

Child resistance: Costs

• One end user noted CR packaging is often at least 5x more expensive and weighs 5x as much… shipping $.

• A veteran from Colorado: when she first started long ago, she had 14 products, but dropped to 7 because she couldn't afford CR packaging for all.

• For unique products—such as a pasteurized cannabis drink—a resealable CR bottle cap may not exist. Companies have to develop ($$$).

The People

Ex-military

Farmers

Big money

American Express, Google,

PepsiCo, Apple, etc.

All across the country

Big tobacco and big alcoholic beverage

The changing consumer—mindful drinking (calories and cutting down drinking behavior)

Sober events

Drinking will shift to non-alcoholic

cannabis infused drink.


The products you see now are NOT the products that will be produced by process-oriented giants.Formula and flavoring Recipe control and consistent productionWide distribution


Unlike beverage, where alcohol will be replaced by low-dose social drink that offers an engaging experience not “wasted”

Current cigarette smokers will use both products throughout their day.

Benefit by vape shop distribution.

But new smokers/vapers will never see nicotine and its inherent problems for the tobacco industry.

GTI represents the next level

• Hiring CPG Brand Managers focusing on user experience• Professionals in logistics, processing and packaging

engineering• Operate multi-state• Automate to scale• Transition from medical to “adult use.”

GTI represents the next level

Dogwalkers brandA new approachPackaged ExquisitelyClio award-winning

Hot Off The Presses…

"Suddenly we're jumping through hoops like every other company in California," he said. "We were well on the way to [being cash-flow positive] but then we had to jump through hoops to change our packaging ...

…and then change our packaging again."


Cannabis Market “Steps Up” With A Focus onPackaging and Branding

The cost of automation is a big hurdle, according to a new study from PMMI Business Intelligence, “Cannabis Market Update: Unique Challenges for THC and CBD Products”

https://www.pmmi.org/report/cannabis-market-update-unique-challenges-thc-and-cbd-products



• Recreational growth will rapidly outpace medical.

• Flower will continue to lose share as a product format.

• Packaging has become a major concern now for producers, primarily; sustainability, regulations, and branding.


• The regulatory landscapes for both CBD and THC are expectedto continue to become more relaxed, especially restrictions on retail CBD.

• Public support for the cannabis industry, particularly CBD use, continues to increase.

• 92% of CBD companies are classified as “low tier,” with sales of less than $1 Million or available in less than 100 stores.


Latest Market Valuations… U.S. 2018 $10 billion expected to surge in 2030 to $30 billion

In 2019, legal cannabis sales accounted for slightly more than one-fourth of sales in the Canadian market.

29% legal 71% black marketof all cannabis sales of all cannabis sales


“Every participating company interviewed for this white paper, whether they are growers, processors, or packagers, is looking toward a future of automated operations to meet demand. “

“Cannabis Market Update: Unique Challenges for THC and CBD Products”

PMMI Business Intelligence



“Cannabis Market Update: Unique Challenges for THC and CBD Products”

PMMI Business Intelligence.

“Our greatest obstacle in advancing automation to meet growing demand is budgeting for the cost of equipment.”

— Project Manager, Leading Canadian Cannabis Producer for Medical and Recreational THC and CBD.


Thank You

Resources:

PACKAGING WORLD www.packworld.comHEALTHCARE PACKAGING www.healthcarepackaging.comPMMI BUSINESS INTELLIGENCE pmmi.org/researchMJ BIZ Daily Newsletter, trade shows, conferences

http://www.packworld.com/

emerging market: cannabis 30pmpxe... · headlines of the day… • dea sued for issuing no new...

Documents