Keeping tabs, seed-to-sale, on the country’s hottest industry is not as easy as it sounds.
April 1, 2016
RFID tagging. Weekly inspections. Constant communication with enforcement agents. Developing software with service providers.
This is only some of what cannabis producers, processors and dispensers have to contend with to comply with state seed-to-sale tracking regulations. Companies like BioTrackTHC, Franwell and MJ Freeway are now chasing what the latter’s COO, Jessica Billingsley, called potential multimillion-dollar business opportunities.
“With the potential federal legalization in the U.S. market, we’re looking at a market in the tens, if not hundreds of millions,” Billingsley says of the marijuana tracking industry.
Hawaii awarded the most recent state contract to BioTrackTHC to the tune of $159,000. In exchange, BioTrackTHC will create a software system to monitor and track the state’s new medical dispensary market.
But every state does tracking a little differently, creating a complicated regulatory landscape. California, America’s biggest produce grower and the first state to legalize medical marijuana, elected not to treat cannabis as a drug.
“California was the first state in the nation to declare cannabis an agricultural product. Because of that, a lot of these pre-existing systems, systems that are already tracking agricultural products, become applicable,” says California Grower’s Association Executive Director Hezekiah Allen.
In the currently implemented system, plants are tracked individually using RFID tags. By using an already existing system, the state is saving costs on purchasing and running completely new software. Add to that the apparent equal treatment cannabis receives in comparison to other agricultural products.
However, growers face high administrative costs having to tag every single plant, says Allen.
RFID tags used to track plants from seed-to-sale. Brandon Park of Blue Roots Cannabis estimates a worker spends an hour to make sure one plant is properly tracked from seedling to leaving the facility.
PHOTO: Jermaine Amado
Complying with state tracking regulations can be very expensive. RFID readers range from the hundreds to thousands of dollars. A roll of waterproof labels on which to print the tag is advertised at up to $150 on MJ Freeway’s website, with the corresponding printers ranging from $385 to $635. And that is without counting the man-hours spent individually tagging plants.
One way to curb those costs is to grow a smaller amount of bigger plants. While this workaround may seem like a great idea, it actually takes more water to grow a heavy 180-day-growing-season plant than a light 80-day growing season plant, says Allen. That’s a problem for a state that has suffered some of its worst droughts in recent history.
The solution, suggests Allen, is to move from an individual plant-tracking system to a batch-tracking system. But states seem to have an aversion to that, as it is easier to divert product onto the black market.
For the states that require marijuana-specific tracking systems – Colorado, Hawaii, Illinois, Nevada, New Mexico, New York, Oregon and Washington – the pros and cons are different.
Illinois is a particularly interesting case to study. During the application process for producer and processor licenses, Illinois officials required applicants to include an exhaustive product-tracking plan that met or exceeded the state’s minimum requirements. The license winners are now held to the standards they put forth in their applications, even if they went far beyond the state’s requirements.
This presents a challenge for tracking service providers like BioTrackTHC, which owns Illinois’ tracking contract. Every client system has to be customized to fit the producer’s unique tracking requirements — sometimes with mixed success, as the business management system still needs to be designed “in the context of the state’s traceability system,” BioTrackTHC CEO Patrick Vo says. “The state system aggregates the seed-to-sale data that is submitted from each of the licensees, independent of what inventory management and point-of-sale they use,” he adds.
Revolution Enterprises is one of those licensees that has gone beyond the mandatory minimum. The company’s two facilities have encountered problems with the available tracking systems.
“There is very limited reporting capability within the software,” Tim McGraw, Revolution Enterprises’ CEO, says. It is all the more important for his reports to be accurately updated because he says state inspectors visit his facilities “at least weekly, sometimes two or three times a week.”
Illinois can afford to be so strict in its enforcement because it only awarded 10 producer licenses. In other states that have relatively uncapped licenses, such as California and Washington, tracking compliance becomes an enforcement issue since state agencies may not have the resources to conduct such consistent inspections.
While it may be more challenging for those states to enforce their tracking regulations, the penalties for failing to meet state standards are still severe. The key to avoiding issues is to be proactive, says Brandon Park, a partner at Blue Roots Cannabis in Washington state.
PHOTO: Courtesy MJ Freeway
“With the potential federal legalization in the U.S. market, we’re looking at a [marijuana-tracking] market in the tens, if not hundreds of millions.” — Jessica Billingsley, COO, MJ Freeway
“We’re in constant communication with the Liquor and Cannabis Board,” he says. “So when you do have problems within [the tracking software] ..., they’re very willing to listen ... and work with you.”
Park estimates a worker spends an hour to make sure one plant is properly tracked from seedling to leaving the facility.
Home growing could be an issue in Colorado, Oregon and Alaska, where anyone can home-grow a certain number of plants, not many in the industry see it as a real concern tracking or safety-wise.
“If someone wants to grow a couple of plants in their backyard in a legal weed state, that should be okay,” James Lathrop, owner of Seattle’s Cannabis City, says.
About the Author: Brian MacIver is a recent graduate from the Medill School of Journalism. He writes about drug policy and trends, sports and anything else that catches his eye. You can find him on Twitter at @TheBrianMacIver.