The company’s new CEO, Joe Bayern, is ‘pleasantly surprised’ by the Georgia runoffs, and says the U.S. cannabis industry could hit $50 billion by 2025.
When the U.S. Senate runoff elections in Georgia went democratic on Jan. 6, swinging the majority of the upper chamber, it opened the door for pro-cannabis legislation at the federal level. Prepared to take advantage of the potential of those results, multistate operator Curaleaf executives pulled the trigger to financially position their vertically integrated company by raising roughly $250 million of capital and $50 million through a revolving line of credit. New CEO Joe Bayern, who started his role Jan. 1, says his team wants to accelerate its 2021 projects to keep up with anticipated market growth. Curaleaf operates in 23 states with 96 dispensaries, 23 cultivation sites and more than 30 processing sites. Here, Bayern talks with Cannabis Business Times about raising capital, expectations for the cannabis market and the next wave of growth for Curaleaf.
Tony Lange: What was your reaction to the U.S. Senate runoffs in Georgia, and why did Curaleaf act quickly to raise roughly US$250 million on the Canadian Securities Exchange (CSE)?
Joe Bayern: I think everybody was pleasantly surprised, at least from the cannabis industry, that both of those seats went democratic. Even before the Georgia race, we had filed a shelf prospectus back in November to be able to raise capital if the markets were moving in our favor, and they were. It also allowed us to get some institutional investors into our stock, which is important of us. I think people are now saying it’s time to jump in. We think the Senate race was a catalyst for the industry, and it was just the first step in what we think is going to be a pretty exciting 2021 as far as positive legislation for the cannabis sector.
TL: What are your company goals for growth and expansion in 2021 and beyond?
JB: We think [U.S. cannabis] could be a $100-billion market at some point. So, we want to be the leading industry player. By 2025, there’s no reason why we can’t get the [U.S.] industry to about a $50-billion market size, and we want to take a dominant share of that market. With that, we’re preparing ourselves to be able to grow, not only in our current footprint, but as we think about building an omnichannel consumer product company, [the question] is: How do we expand our distribution and costs that are appropriate across multiple channels to bring new consumers into the category?
TL: What other avenues have you used, or plan to use, to position yourself financially to take advantage of the 2021 M&A landscape?
JB: We want to accelerate some of our projects that we had scheduled for the back half of 2021 and the beginning of [2022] because we think the market growth is going to accelerate. We want to be ready for that growth. As we continue to see what we’re calling “a green wave of acceptance,” of consumers accepting cannabis as more mainstream products, we’re going to continue to see increased demand. We want to be prepared to be able to meet that demand. We’re looking at extending capacity through bolt-on acquisitions in a targeted way. And then the next thing is we’re really investing in the next wave of growth, which is predicated on innovation and developing different products backed by science. We can provide a better alternative to what’s in the market today; whether it’s alcohol or whether it’s prescription drugs for things like sleep or chronic pain; cannabis is a better alternative to those products.
Tony Lange is associate editor of Cannabis Business Times, Cannabis Dispensary and Hemp Grower.
This interview has been edited for length and clarity.
Will the Smokable Hemp Market Go Up in Flames?
Columns - Guest Column
While smokable hemp presents an opportunity for growers, its varying legal status across states makes the market’s long-term viability uncertain.
Hemp prices have fluctuated dramatically over the past two growing seasons, as hemp farmers know all too well. The biomass market in particular has drifted downward significantly from the heady days of 2019, according to a report by PanXchange, a leading benchmark price provider in the U.S. hemp industry. Although some market observers such as Hemp Benchmarks report that prices have stabilized during the past several months, this is cold comfort for growers who expected to turn a profit from biomass.
One bright spot has been the smokable flower market. Several industry analysts describe smokable hemp—which, in this article, refers to loose flower, pre-rolls and other inhalable products excluding vapes—as a fast-growing, lucrative market. Market research firm Nielsen Global Connect estimated the smokable hemp market may see sales upwards of $80 million in 2020, according to the firm’s external communications manager.
Others, like Hemp Benchmarks, report that prices per pound of smokable hemp are roughly 20 times that of a pound of biomass. Anecdotally, I know several growers who successfully sell smokable hemp direct to consumers and whose business model depends on those product margins.
But the smokable hemp market has its challenges. Chief among those is the number of states that prohibit the sale of smokable hemp. Several states have enacted laws that expressly ban the sale of the product, including Georgia, Hawaii, Iowa, South Dakota and Indiana. The primary reason states have prohibited smokable hemp is because law enforcement has raised concerns about differentiating it from higher THC cannabis, as both look and smell the same.
Smokable hemp’s legal status in other jurisdictions is unclear. In some cases, the laws and regulations arguably prohibit the sale of smokable hemp. Take Arkansas, for example, where the definition of a “marketable hemp product” excludes living hemp plants, leaf materials and floral materials. Per the state’s law, a licensee may not sell these materials to persons who do not hold licenses. While the law does not explicitly state that licensees cannot sell smokable hemp to the general public, it’s arguable that because floral material is not a marketable hemp product, smokable hemp isn’t either.
Based on Harris Bricken’s analysis of state laws, other states where the legal status of smokable hemp is potentially unclear include Mississippi and Utah.
Then, of course, some states have virtually no restrictions other than complying with the generally applicable hemp regulations. A few examples here are Oregon, California, Minnesota, West Virginia and Wyoming.
This confusing and frequently changing patchwork of state laws and regulations does no favors to a farmer seeking to market and sell smokable flower.
Federal Solution Unlikely
Perhaps the federal government will step in and override state laws that prohibit smokable hemp sales as incompatible with the Agriculture Improvement Act of 2018 (the 2018 Farm Bill). However, most of us tracking this issue believe such intervention is unlikely.
Market participants have also expressed concern over whether the U.S. Food and Drug Administration (FDA) will step in and regulate, or even ban, smokable hemp. Most legal observers, myself included, also doubt this will happen. The FDA has bigger fish to fry and lacks the institutional will to do anything about smokable hemp. (Recall we are still waiting for regulations on CBD.) Also, the FDA arguably does not have jurisdictional authority to regulate smokable hemp as it does tobacco under the 2009 Family Smoking Prevention and Tobacco Control Act. This is because the FDA’s definition of “tobacco products” doesn’t include products without nicotine or tobacco.
And although Congress has been favorable to the hemp industry as of late, it is not clear whether this extends to smokable hemp. In short, growers should not expect a “federal fix” to the smokable hemp problem any time soon.
alexkich | Adobe Stock
Case Study: Indiana
One lawsuit that may tip the scale is underway in Indiana. In C.Y. Wholesale, Inc. v. Holcomb, a collection of wholesalers and retailers filed a case, along with the Midwest Hemp Council (together referred to as the “plaintiffs”), against the state of Indiana. The plaintiffs assert the state’s prohibition on smokable hemp is incompatible with the 2018 Farm Bill and are looking to overturn it.
Before examining the import of the lawsuit, let’s take a brief look at Indiana hemp law and litigation history.
In 2019, Indiana passed Senate Enrolled Act 516 (SEA 516) to establish a regulatory framework for hemp production under the 2018 Farm Bill. The act criminalized the possession of “smokable hemp,” which is defined as any industrial hemp product “in a form that allows THC to be introduced into the human body by inhalation of smoke.” (So, under this law, hemp containing 0% THC technically could be marketable as smokable hemp.)
One important question under SEA 516 relates to the potential of a hemp company transporting smokable hemp through Indiana on the way to another state. On its face, Indiana’s law made this a criminal act.
Days before SEA 516 was to go into effect, the plaintiffs filed a federal lawsuit in district court challenging the law and seeking a temporary injunction to stop Indiana from enforcing the smokable hemp ban. The plaintiffs argued that the ban was impermissible (otherwise known as the legal term “preempted”) by the 2018 Farm Bill’s mandate that states must allow all forms of industrial hemp to be transported through their territories.
The district court agreed with the plaintiffs and issued an injunction blocking portions of SEA 516. The state of Indiana appealed the case to the Seventh Circuit Court of Appeals (the court where the newest U.S. Supreme Court Justice, Amy Coney Barrett, came from).
While the appeal was pending, Indiana enacted Senate Enrolled Act 335 (SEA 335) to save SEA 516. This new law tried to clarify that Indiana’s prohibition on the delivery and possession of smokable hemp did “not apply to the shipment of smokable hemp from a licensed producer in another state in continuous transit through Indiana to a licensed handler in any state.”
So, this means smokable hemp passing through Indiana to another state is not a criminal act, but manufacturing, possessing or delivering smokable hemp remains a crime. However, this change did not shortcut the appeal.
EKKAPON | Adobe Stock
In July 2020, the Seventh Circuit appeals court ruled the district court’s injunction was too broad and sent the case back to the district court for further proceedings. The appeals court found that the part of SEA 516 that prohibits the “manufacture” (including cultivation) of smokable hemp did not violate the 2018 Farm Bill because the bill allows states to regulate hemp production. However, the appeals court also said the part of SEA 516 that criminalizes the “possession” of smokable hemp is likely preempted (impermissible) under the 2018 Farm Bill.
The plaintiffs recently sought to amend the complaint to add new allegations to challenge both Indiana laws—SEA 516 and SEA 335. The plaintiffs contend that both laws are preempted by the 2018 Farm Bill and the criminalization of parts of the hemp plant conflicts with the legalization of all parts of the hemp plant.
The district court allowed the plaintiffs to add these new allegations, so the case will proceed. But Indiana may seek dismissal, and there may be another appeal.
The outcome of this case could prove to be a bellwether for smokable hemp. Other courts may not be bound to follow a federal court ruling in Indiana, or even the Seventh Circuit. But a well-reasoned decision will have significant persuasive weight in other courts. And there is always the possibility of the case going to the U.S. Supreme Court, where a decision would be binding nationally.
If the plaintiffs ultimately prevail, Indiana’s prohibition on smokable hemp will be struck down. Following that decision, other states’ smokable hemp bans may be challenged and struck down as well. States could also be reluctant to enact prohibitions on smokable hemp if Indiana’s law is overturned.
But if its smokable hemp ban stays in place, other states may enact similar measures. The legal battle for smokable hemp may occur court-by-court or among state legislatures.
This case is one to watch in 2021.
Editor’s Note: This article originally appeared in the January 2021 issue of CBT’s sister publication Hemp Grower.
Jesse Mondry practices law in Portland, Ore., with international law firm Harris Bricken.
6 Cannabis HVAC Tips For Severe Weather
Departments - Upfront | Quick Tips
Safeguards to protect your cannabis crops against extreme conditions
HVAC systems in action on L'Eagle Services rooftop in Denver.
Photos by Meredith McLoughlin
Editor's note: This article was previously published in the October 2019 issue of Cannabis Business Times.
Whether it’s extreme heat or bone-chilling cold spells, severe weather is always a potential issue for cultivators. Major weather events can wreak havoc on crops if cultivators aren’t prepared for the worst. Knowing how to properly manage heating, ventilation and air conditioning (HVAC) systems can make the difference between safely riding out the storm and a potential crop failure. Here are six tips cultivators should consider to prevent potential losses when extreme weather hits.
1. Know your local climate, and keep an eye on the weather forecast.
In Colorado, we are no strangers to rapid, sudden weather changes, and they are common in many other major markets, as well. Blazing hot summer days, spring and fall thunderstorms and winter snowfalls can lead to disaster if you’re not prepared. Check forecasts regularly so you know what to expect and when to expect it.
2. Winter is coming. Try capping off your intakes.
During winter, growers often completely cap off the intakes on the roof of their flower rooms. Pulling cold air from outside and pushing it into a hot flower room is a recipe for humidity spikes and dripping ducts. We pull the outside air into the veg room, let it warm up and then direct that warmer air from the veg room into the flower rooms.
3. Unusually hot weather? Consider regulating your air exchanges.
Car air conditioners often have a recirculate function that cools the cabin faster by continually chilling already-cooled air. You can apply the same idea to your grow. Instead of using energy to cool outside air, focus on maintaining the already-regulated inside air. When you do need fresh air, pull it at night when it’s coolest.
HVAC systems in action on L'Eagle Services rooftop in Denver.
4. Don’t be afraid to run your rooms a little hot to take the load off your system.
HVAC units should not run at 100% all the time. Operating your system at full blast leads to frequent and costly breakdowns. You can reduce maintenance costs and system downtime by running your system more gently by reducing fan speed and thereby increasing temperature. And a little extra heat in the grow room isn’t always a bad thing. Cannabis can handle some heat, especially if you’re supplementing with CO2. Anything over 85 degrees Fahrenheit is a cause for concern. Ideally, I like to keep my rooms around 74, so that extra 11 degrees is the wiggle room. However, hot grow rooms can lead to flower problems, such as foxtailing and yellowing, so monitor the environment closely (see tip No. 5).
5. Familiarize yourself with the vapor pressure deficit (VPD).
VPD is the difference between the water pressure in the air and the water pressure within a saturated environment, when both are measured at the same temperature. This metric helps you track your plants’ comfort much more precisely than just temperature and humidity. If you’re running your grow rooms a little hot, tracking VPD will help you foresee any potential problems with your grow and address them before they happen.
6. Always have a contingency plan.
There’s no getting around it: Extreme weather puts a strain on cultivation systems and sometimes things go wrong. Power outages and broken parts happen. Consider installing a backup generator, and always maintain good relations with a reliable electrician and HVAC expert. Finally, consider running hypothetical emergency scenarios so you and your staff are fully prepared when extreme weather hits.
Meredith McLoughlin is a cultivation expert most recently with L’Eagle in Denver.
Does Cannabis Market Maturity Impact Product Selection?
Departments - Upfront | Sales Trends
2020 sales trends reveal consumer preferences across the new to seasoned cannabis adult-use markets of Michigan, Massachusetts and Oregon.
As legal adult-use cannabis markets evolve, how does the consumer base change? Are the purchasing patterns of a seasoned Oregon consumer who has been shopping on the legal market since 2015 similar to those of a purchaser who walked into a Michigan adult-use dispensary for the first time in 2020?
It turns out the answer is largely yes—product purchase patterns are quite similar across U.S. state markets, regardless of market maturity.
Data from Brightfield Group
Brightfield Group has broken down 2020 cannabis sales by product category for three states: Michigan (new market), Massachusetts (established market), and Oregon (seasoned market). The three demonstrate that there are some universal trends in product popularity, namely:
Flower, edibles, and vapes/concentrates are top sellers.
Flower is highly popular, driving at least half of sales and at least double the revenue of the second-ranking product types, in both new and seasoned markets.
The data shows that there are minor shifts in market behavior over time, however. Some examples include:
Edibles and drinks are more popular in newer markets. These products drive about 11% of sales revenue in mature Oregon, 13% in established Massachusetts, and 19% in new Michigan.
Vapes and concentrates are only slightly more popular in mature markets versus new markets, but they do begin to significantly outpace edibles as markets mature. Vapes and concentrates together drive 26% of sales revenue in mature Oregon, 27% in established Massachusetts, and 24% in new Michigan.
The message for those planning inventory and stocking shelves for burgeoning and maturing state industries alike? There will always be a market for these top sellers (barring regulatory limitations), though edibles sales may wane over the long-term.
While the breakdown of cannabis consumers in each state may be different demographically, with customers consuming for various reasons, when they leave the dispensary, the product mixes in their baskets tend to look very similar.
Jamie Schau is head of research with Brightfield Group.
3 Essential Fertigation Tips
Departments - Upfront | Quick Tips
These tips can help you keep your fertigation system functioning at its best and ensure the highest-quality nutrition for your plants:
Automated irrigation systems (fertigation) have been used in large-scale agriculture for decades, though the concept and use of the technology is relatively new to the cannabis industry. Irrigation is one of the main elements of day-to-day operation that can easily be automated, and the crop-improving results can be seen almost immediately.
Let’s be honest, hand-watering thousands of plants is a waste of time, water and resources. Relying on people to provide consistent dosage of a precisely mixed nutrient solution to each plant is highly ineffective.
Photos by Brian Kraft
Problems can arise with any automated system, so routine maintenance and monitoring can prevent and advert any disaster that may arise.
Our weekly checklist for our system is fairly simple. These tips can help you keep your fertigation system functioning at its best and ensure the highest-quality nutrition for your plants:
1. Check injection measurements.
Constant monitoring helps ensure you are delivering exactly what your plants need.
2. Monitor total dissolved solids (TDS) or turbidity levels.
Our system recycles 100 percent of our nutrient solution and dehumidification runoff, so we monitor TDS levels of our gray water as well.
3. Clean and calibrate pH and Electrical Conductivity (EC) probes.
This is one of the most common maintenance needs, and it is essential to keeping your system functioning at maximum capacity and consistency.
Plant health, yields and quality of your garden will improve drastically once you learn the system. Increased employee productivity and the employees’ ability to focus on the plants' needs should also be instantaneously noticeable.
Scott Reach is founder and COO of RD Industries, parent company for Rare Dankness.
Legislative Map
Cannabis Business Times’ interactive legislative map is another tool to help cultivators quickly navigate state cannabis laws and find news relevant to their markets. View More