Lp,s are doomed!
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"They are corporations yes, but the legacy market is so rebellious by nature they do not work together and help each other so the best thing I can do is support the companies that are doing something"
What a load of crap!
Please stay with what you know.
Auxly sells cannabis cultivation facility in Nova Scotia, yielding CA$6 million
Bonno
July 5, 2022
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Canadian producer Auxly Cannabis Group sold its Auxly Annapolis indoor cultivation site in Kentville, Nova Scotia, for total proceeds of 6 million Canadian dollars ($4.6 million).
Proceeds from the sale of the facility to an undisclosed “private purchaser” will be used “to support Auxly’s ongoing operations,” the company announced in a Tuesday news release.
“Being able to monetize this non-core asset to strengthen our cash position in a non-dilutive way is fantastic for the company and provides us with additional capital to support Auxly’s strategic objectives,” CEO Hugo Alves said in a statement.
Auxly shuttered the Kentville facility and another site in Hortonville, Nova Scotia, in February, cutting roughly 55 jobs.
The Hortonville facility, an outdoor cultivation site called Auxly Annapolis OG, is still up for sale, a company spokesperson told MJBizDaily.
Business leaders need reliable industry data and in-depth analysis to make smart investments and informed decisions in these uncertain economic times.
Toronto-based Auxly, then called Cannabis Wheaton Income Corp., acquired the Kentville facility from Robinson’s Cannabis in an all-stock deal that closed in 2018.
Auxly is attempting to achieve profitability on the basis of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
The company reported an adjusted EBITDA loss of CA$5.6 million in its most recent quarter.
Cannabis retail is facing some serious challenges, with many markets in Canada reaching saturation. Locally owned stores are often in direct competition with well-resourced chains. Nonetheless, the sector is fragmented – no company controls more than 5% of the market – and all retailers are seeking innovative ways to differentiate themselves.
“There is often a lack of distinction with cannabis stores,” says Unity Marguerite Whittaker, who operates Oceanside CWeed in Parksville, on Vancouver Island. “In Parksville, we have four really good stores, one of which is government-owned, and each of which has a different point of view. That’s why it works.”
Whittaker says that one of Oceanside CWeed’s key differentiators is its approach to accessories.
“We’re creative,” she says. “For example, a lot of our customers are seniors, so we sell magnifying glasses to help them read the labels.”
And that’s just the tip of the iceberg. Oceanside CWeed also sells candles, high-end cannabis magazines, trays, ice-cube makers, drink caddies, bottle openers, shirts that have pockets for doob tubes and lighters, scissors for trimming joints, and reusable cotton swabs to clean bongs and dab rigs – among many other items.
“We even sell chopsticks to pull buds from containers, and necklace pokers to tamper joints,” says Whittaker. “It makes it fun and interesting, and helps to support sales. Still, the lack of broader thinking within retail kind of blows my mind. There are many, many products that function as cannabis accessories.”
The notion that accessories are integral to supporting a successful retail operation isn’t lost on the bigger players, either.
“From our early days we were an accessories retailer,” says Andy Palalas, Chief Revenue Officer at High Tide, which owns the Canna Cabana retail chain, and currently has 126 stores across Canada. “We’ve been around cannabis for a long time, and from the start we were of the firm opinion that cannabis enthusiasts who were buying bongs and pipes previous to legalization would also be our customers in the regulated market.”
The same message is being sent from opposite ends of the retail spectrum: to thrive, store owners would do well to sell with an eye to the larger consumer experience.
A Superette Cannabis location in Toronto
Segmenting the Value
In Canada, the cannabis retail market has matured to the point where customers are being segmented, much as in other consumer goods. Some big chains, like Value Buds and Canna Cabana, are hoping to capture the discount market. Other chains like Spirit Leaf, Choom, and Tokyo Smoke, provide a more tailored experience. Meanwhile, independent operations are as unique as their owners, with many working hard to differentiate themselves from the bigger brands.
“There are essentially four pillars for differentiation,” says Mike Dunn, who along with his partner, Brooke Silversides, runs 1922, an independent cannabis retailer in Old Town Toronto. “The first is location, the second is the in-store aesthetic, the third is inventory, and the fourth is people. That last one is important: the people working in your store need to feel that they’re cared for and supported.”
1922 is named after the last year that cannabis was legal in Canada. The interior aesthetic suits its Toronto neighbourhood, incorporating traditional art deco elements. In 2020, 1922 won ADCANN’s ‘Storefront Brand of the Year for Canada’, beating out over 400 other nominees.
“If your proof of concept works really well in Calgary and Edmonton, that’s great, but does that work in Downtown Toronto?” says Dunn. “In 2018, the market was heavily weighted to speed. Now, four years later, you need a clear strategy for where to put a store. From there, with increased institutional knowledge, once you really get to know your customer, it’s possible to scale.”
In this regard, Choom is a cautionary tale. The 11-store retail chain has stores in BC, Alberta, and Ontario, all of which have an aesthetic built around Hawaiian surf culture. The company sought creditor protection in early May, receiving an interim financing loan of $800,000 from licensed producer Aurora Cannabis.
In the most recent filing, the company alluded to two main challenges: “First, the opening of new cannabis retail stores continues to outpace market growth, in particular in Ontario where there are nearly 1,400 cannabis retail licenses in circulation, relative to 65 in 2020. Secondly, loss-leading priced retailers continue their focus on buying market share. This was most prevalent in the Alberta market.”
Choom has also noted that, according to its own data, the three most important attributes for consumers are product selection, store location, and friendly and knowledgeable staff. Price was in fourth place. This suggests that, with proper execution, smaller stores stand a chance against the big chains.
“The bigger stores’ views tend to be a bit binary,” says Dunn. “They can have a dramatically reduced ability to differentiate due to scale and complexity.”
That said, the big players are embracing analytics, the idea being that cannabis can function much like any other consumer packaged goods. Examples include High Tides’ Cabanalytics, and Fire and Flower’s Hifyre consumer technology.
Retail outlets are also expanding to include delivery. In the case of Fire & Flower, the company’s wholly-owned subsidiary, Pineapple Express Delivery, now offers 60-minute delivery services in some parts of Canada. Retail chain Superette has taken a simpler approach, partnering with DoorDash Technologies Canada Inc. in Toronto. This trend is now becoming normalized, with scores of retail locations supporting local delivery services.
“Delivery of both cannabis and accessories from online orders is just part of brick-and-mortar retail now,” says Palalas from High Tide, adding that Canna Cabana is adding in-store kiosks for people who know exactly what they want, and don’t need the assistance of a budtender.
And in many cases, all purchases – whether online or in-store, for cannabis or accessories – can accrue value within loyalty programs. As in any business, capturing customers is the hard part: after that, it makes sense to build incentives that keep them coming back.
Endgame
According to Cannabis Benchmarks, as of March of this year, Canada had 3,138 cannabis stores. Over a one-year period, this represents an increase of 1,344 stores, an astounding 75% growth rate. During the first quarter of this year, on average, 74 new stores were opening each month. Though this pace has slowed – 127 stores were opening on a monthly basis the year before – it is likely not sustainable. Inevitably, some smaller fish will be swallowed, or go belly up.
“There is greenfield available, but right now mergers and acquisitions are what’s really attractive,” says Palalas. “In retail location is king, and a lot of people are looking to exit the business. We’re well aware of how challenging retail cannabis can be because we battle it every day. We remain on an aggressive growth trajectory.”
There are some notable provincial distinctions. Alberta, for example, has an astounding 757 stores, of which 155 were added in the last year, so some attrition can be expected. By comparison, Quebec, which has double the population, but where legal cannabis products can only be sold through government-run Société Québécoise du Cannabis (SQDC) outlets, has only 89 stores.
In other markets, the big retail chains will battle it out, and smaller independent stores that uniquely match their local consumer base, like 1922 and Oceanside CWeed, will have a good chance of surviving.
“At Oceanside CWeed we have fun signs and a garden in the front window,” says Whittaker. “Our customers see the garden first. We are a small team. We come in, open the doors, and feel out the community.”
?? DW report: 4 million adults in Germany consume cannabis, health minister says
That's WAY less than Canada, where 6.2 million people consumed cannabis over a 3-month period in 2020.
If true, Germany's addressable cannabis market could be much smaller than previously known.
Which raises my earlier question: if large Canadian cannabis producers can't hack the Canadian market ($15 billion in losses, and growing), why do you think they'll be able to succeed in the German market?
Duh...
"German health minister: "Good friends of mine became addicted (to cannabis), later switched to other drugs and died" "??
b]Kiffen mit »Safety first«
Lauterbach wirbt für vorsichtige Legalisierung von Cannabis
Die Ampel will den Cannabisverkauf freigeben. Nun hat Gesundheitsminister Lauterbach den Weg zum Gesetz erläutert. Doch er warnt auch – mit einer persönlichen Geschichte.
30.06.2022, 13.10 Uhr
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Gesundheitsminister Karl Lauterbach (SPD) zum Abschluss der Cannabisanhörung
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Gesundheitsminister Karl Lauterbach (SPD) zum Abschluss der Cannabisanhörung Foto: Kay Nietfeld / dpa
Drogen sind in Deutschland legal – zumindest, wenn es um Alkohol und Zigaretten geht. Die Ampel möchte das Paket erweitern, die kontrollierte Cannabisfreigabe ist im Koalitionsvertrag vereinbart. Nun hat sich Gesundheitsminister Karl Lauterbach (SPD) zum Abschluss einer Serie von Expertenanhörungen dazu geäußert, wann und wie die Legalisierung möglich werden kann.
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Lauterbach sprach sich in Berlin klar für eine straffreie kontrollierte Abgabe des Rauschmittels aus. Das wichtigste Prinzip bei der Freigabe müsse aber sein: »Safety first«, also »Sicherheit zuerst«. Im Zentrum der geplanten Neuregelung müsse der Kinder- und Jugendschutz stehen, sagte Lauterbach. Denn Cannabismissbrauch könne bei jungen Menschen »ein Leben zerstören, bevor es richtig angefangen hat«.
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Der abschließenden Fachkonferenz waren vier vom Bundesgesundheitsministerium organisierte Expertenanhörungen vorangegangen. Dort tauschten sich mehr als 200 Fachleute verschiedener Disziplinen zu Pro und Contra einer Cannabislegalisierung aus. Die Ergebnisse der Beratungen sollten nun ausgewertet und in das Gesetzgebungsverfahren eingebracht werden, erklärte der Beauftragte der Bundesregierung für Sucht- und Drogenfragen, Burkhard Blienert (SPD). »Wir haben in den Hearings genau den wertvollen Input erhalten, den wir uns erhofft hatten.«
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Lauterbach räumte ein, er sei »selbst lange der Meinung gewesen, dass man Cannabis nicht legalisieren sollte«. Er habe seine Meinung aber geändert: »Die repressive Umgangsweise mit Cannabis ist gescheitert«, sagte er. »Die Risiken der derzeitigen Praxis sind größer, als was man erreichen könnte mit einer kontrollierten Abgabe.«
Stoff im illegalen Verkauf wird unreiner
Aktuell gebe es immer mehr gesundheitsschädliche Verunreinigungen des illegal gehandelten Cannabis, sagte Lauterbach. Bei einer legalen Abgabe könne die Qualität hingegen kontrolliert werden. Zudem werde der illegale Cannabismarkt »immer aggressiver«; Menschen würden schon in jungem Alter an die Droge herangeführt. Der Minister stellte klar: »Was wir nicht wollen ist, dass wir Cannabis verharmlosen.« Cannabis gehe immer mit Gesundheitsrisiken einher, vor denen vor allem Kinder und Jugendliche geschützt werden müssten. Gerade junge Menschen könnten bei Cannabiskonsum »sehr häufig auf der Strecke bleiben, was die schulische und berufliche Ausbildung angeht«, sagte Lauterbach.
She believes Trump won the election...
Deep i debt, Hexo hemorrages $146.66 million in Q3.
450 employees let go.
Hop latent viroid continues to infect cannabis across Canada
Bonno1-1-22
A disease that severely damages cannabis plants is rapidly spreading across Canada.
The hop latent viroid (HLVd) started emerging on cannabis crops in California as early as 2017 before first being noticed in British Columbia a few years later.
Once isolated to only a few whispers and rumours, it has now spread across Canada, infecting as many as 40% of licensed growers in the country, says Brian Coutts, a Strategy & Business Development Manager at A&L Labs. A&L is one of the few labs in Canada offering testing for the viroid.
“It’s out there more than anyone thinks,” says Coutts. “It was about two years ago now we had our first positive test, and it was in BC. Since then, it’s clear across Canada in every province.”
Coutts says by his estimate, he figures about 40% of cannabis growers in Canada currently have or have had to deal with HLVd, causing major crop losses for big and small scale growers alike.
The viroid both weakens the plant overall, creating smaller, more brittle plants and it affects cannabinoid and terpene production.
“Everyone is chasing that THC number, as they think that’s what the consumers want,” says Coutts, “and the number one problem with the viroid is that it can bring down those THC levels.”
“It’s out there more than anyone thinks. It was about two years ago now we had our first positive test, and it was in BC. Since then, it’s clear across Canada, in every province.”
BRIAN COUTTS, A&L LABS
One cannabis grower in Canada who has been vocal about his experience with the viroid is Benjamin Padovani, the owner of Treez Botanicals, a micro cultivator in Ontario. Padovani had to recently destroy all his plants, including clones in veg and flower rooms, as well as his mother plants and his entire genetic library, after discovering hop latent viroid.
Although he’s not 100% sure how he picked it up, Padovani says he suspects it was from a batch of clones he acquired prior to licensing. Because Health Canada allows growers to bring in an unlimited amount of starting materials in the form of clones, mother plants, seeds, and tissue culture (basically anything but flowering plants) prior to licensing as part of a one-time transfer, many applicants try to gather as many genetics as possible before they get their licence.
The value of this approach is having a robust and unique genetics library that can help a new grower stand out in the market. But with few controls in place and growers not always testing everything they bring into their facility, the risk of diseases like hop latent viroid or powdery mildew, as well as pests like thrips or aphids, can be a risk.
Issues with powdery mildew are well known in the industry, with—some growers hiding it and others being open about their experience in managing and eliminating it, a process that entails, like with the hop latent viroid and other similar issues, destroying all infected plant matter and thoroughly cleaning the facility.
“I had my genetics for years and never had this issue,” explains Padovani. “But because Health Canada only lets you bring in genetics the one time, I thought that I would do one last push to bring in some more before I was licensed, and I think it came in that way”
“I never bothered testing them and wasn’t careful because you never think it will happen to you. But it happened.”
“I noticed maybe two or three of my plants in one room looked like they had totally different characteristics than all the other plants of the same variety. Then in my second room, I noticed about 30% were completely showing signs of the virus. Then I noticed it was in my mothers, too.”
Padovani then looked at the plants under a microscope and saw a much lower level of trichomes than the uninfected plants, as well as much less of a smell.
Once he realized what it was, he then took samples and sent them to a lab for testing that confirmed his fears. When the results came back positive, he then quickly made the decision to just destroy all his plants and began working to clean his facility as thoroughly as possible, while also calling around to find a new supply of genetics so he can begin growing again.
“Once I did more research, I realized I was never going to get rid of it until I just torched everything. Now I’m cleaning everything in the facility and working on getting genetics from someone to start over.”
Coutts, at A&L, says the best approach to avoid bringing HLVd into their facility is making sure they buy genetics from a reputable supplier, testing everything that comes into the facility, and having working practices on site that will help prevent any infected plants that might still come through from passing anything on to other plants.
“You can pass it on with tools, by clothing. If you’re in one room and you’re brushing by the plant with your lab coat and then go into another room and touch other plants, you’ve spread it. It’s that easy. Clean your tools, use separate tools for each room, and leave enough room in your grow rooms so plants aren’t too crowded.”
He also says purchasing genetics that started as tissue culture is an important step.
“If you love the genetics that you’ve been growing, if they’ve been good to you and you love the THC content and the flower you’re producing, the only way to clean it up is tissue culture.”
One option for saving infected genetics is through Dr. Adel Zarei, the cannabis micropropagation lab manager at Safari Flower in Ontario. Zarei has spent the last few years developing a process using tissue culture to create new, HLVd-free plants from samples from infected plants.
Dr. Zarei says he has had success with several clients who had the viroid and wanted to save certain cultivars. The process can take around nine months and requires a small sample of the regenerative material from either the apical meristem or a tip of new root.
Following detection of any infection, he says the first step is to send it to a lab to confirm the presence of the viroid. Then, if the grower wants to save any specific varieties, they should take several samples and send them to a lab like Safari, before destroying the rest of their plant material and thoroughly cleaning their facility.
Then, once the facility is ready for new plants, always ensure you’re starting with something you can guarantee is disease-free.
“The last pass to eliminate or control this viroid is starting with a clean plant. Having a certified, virus-free plant would be a good choice to start with. “
Zarei says he started looking at propagation methods that could create clean plants from samples with viroid about two years ago when reports of it emerging in Canada were just becoming known.
Leaning on his experience working with the viroid in hop plants more than a decade ago, he says he’d like to see the industry focus more on research into what varieties of cannabis may be more resistant to the hop latent viroid. He points to similar research showing that some varieties of hops are more resistant to the viroid than others, speculating something similar is likely possible with cannabis.
Cannabis breeders need to take into account the strength of the plant in general, not just THC or other cannabinoids and terpenes, explains Zarei, but also specifically looking at resistance to the hop latent viroid and other known diseases that plague commercial cannabis production.
Back at Treez Botanicals, Padovani says he hopes more producers will be more willing to be open about this disease because it’s becoming so prevalent.
“I think it’s pretty much everywhere now, but it’s just not being talked about at all,” he continues. “That’s why I’ve been very open about it. I’ve posted on my social media because I think all the big guys have it, everyone has it, but they just don’t want to say it. I believe we’ll still persevere. I’m taking aggressive action now so that it hopefully won’t affect us in the near future. I believe we’ll bounce back, but it’s not easy.”
Thanks
Curious as how many canna drinks you drink per day?
ORGANIGRAM SETTLES CLASS ACTION LAWSUIT AFTER PATIENTS ALLEGE PESTICIDE POISONING
Bonno, 01,07,2022
Canada established a formal medical cannabis program at the end of 2013. Health Canada eventually mandated tests following incidents with banned pesticides. Despite this, an incident occurred in 2016 involving unauthorized sprays used on cannabis produced by Organigram. Several patients reported illnesses after using OGI’s tainted product. This led to class action lawsuit against Organigram approved by the Nova Scotia Supreme Court in 2019. This month, in the middle of 2022, Organigram agreed to settle the lawsuit with refunds and legal fees.
Pesticides and lawsuits
Third party tests revealed that cannabis produced by the New Brunswick cultivator contained:
Bifenazate
Malathion
Myclobutanil
Several lots of cannabis were subject to type two and three recalls in 2016 and at the beginning of 2017. The recall was due to potential contamination with unauthorized sprays. As such, patients who purchased cannabis covered by a voluntary or involuntary recall before February 14, 2019, are considered class members. And class members will receive refunds as part of the $2.3M CAD settlement.
A timeline documenting the class action lawsuit against Organigram was included in a news release by Wagners, the firm that filed the proposed class action. Whereas, Organigram published a separate news release on their website further documenting the settlement.
Organigram class action lawsuit
Refunds without personal injury
Dawn Rae Downton, the representative plaintiff, argued personal injury. The Supreme Court of Canada, however, refused to acknowledge an adverse health event. To accommodate this, Wagners amended their pleadings to remove any claims of personal injury. The Plaintiffs filed the final amendment on January 18, 2022. Yet, Wagners did not announce the update until April 25, 2022.
Following the amendment, the $2.3M settlement accounts for:
Refunds
Legal fees
Administrative costs.
Patients have been forced to remain content, even after alleging they were poisoned by Organigram’s tainted pot. The Licensed Producer admitted to their wrongdoing. But are refunds enough action for the class members?
Rubbing Organigram under the Health Minister’s skin
Organigram earned a repertoire for poisoning the populous, and not just patients. And the incident with myclobutanil-laced medical marijuana adds to their resume. The company began producing cannabinoids in a new section of their facility, whether from plants or yeast. In any case, cooling fans became clogged with infectious bacteria. The company allowed Legionella, a bacteria that can travel several kilometres in the air, to pool in a new cooling tower.
Organigram caused sixteen cases of Legionnaire’s Disease in 2019. And fourteen separate cases against the company dropped on the same day in December of 2021. The news remained silent on Organigram’s wrongdoings for three more months, though. In March and June of this year, the Minister of Health of the Province of New Brunswick responded to this author’s respective email requests. But the second correspondence simply questioned the impact of the first, which focused on Organigram.
A bill that imposes mandatory testing on cooling towers in the province was proposed eight days after Shephard first responded to this author. And two days after the Minister’s second response, a freedom of Information request previously withheld from CBC was released to the state-owned news agency. The request released on June 5 covers two outbreaks of Legionnaire’s Disease in the region. Further documented in the newly released information — first requested by CBC in August last year — was a lack of proper procedure on behalf of Organigram.
AMENDING THE CANNABIS ACT
JULY 1, 2022
Bonno
Amending the Cannabis Act? The Canadian government says they will review and amend it as soon as possible. But the deadline to begin the review is eight months passed. Scheduled for October 2021, Health Canada won’t comment on when the review will occur, only that any amending will come from a “credible, evidence-driven process.”
Health Canada also said the review could take up to 18 months. The latest federal budget promised a cannabis industry roundtable, but no details have been released. However, some remain skeptical that meetings between government bureaucrats and industry insiders will do anything except help out the larger producers at the expense of the smaller craft companies.
Forward Regulatory Plan
Amending the Cannabis Act
But will a review and amendment of the Cannabis Act work out in everyone’s favour? So far, the federal government plans to update the Cannabis Act through some regulatory changes that Health Canada will be taking the lead on.
These regulatory changes include:
Cutting back on regulatory paperwork “to simplify and reduce requirements related to record keeping, reporting and notifications, and to provide more flexibility in meeting certain requirements related to matters such as antimicrobial treatment.”
Amending the regulations to “facilitate cannabis research for non-therapeutic purposes.”
Increasing the possession limit for cannabis beverages (no indication of raising the THC limit or abandoning it altogether).
Allowing the sale of certain health products containing cannabis without a prescription
Amending Cannabis Act regulations to “restrict the production, sale, promotion, packaging, or labelling of inhaled cannabis extracts with certain flavors, other than the flavor of cannabis.”
Health Canada says these changes are unlikely to be ready until the end of the year.
Buying cannabis health products without a prescription is a step in the right direction. But the typical attitude of Health Canada bureaucrats is that public health and safety trump your personal autonomy. So the agency will now be targeting cannabis producers promoting terpene profiles that they’ve decided are not “flavors of cannabis.”
Why Bother Amending the Cannabis Act?
Why bother amending the Cannabis Act when the government should scrap it altogether? The entire Liberal Legalization scheme has insulted the Western legal tradition of free markets and the rule of law.
All they needed to do was remove cannabis from the Criminal Code. We already have laws on the books that facilitate peaceful associations. Tort and criminal law provide security, while contract, property, and commercial law facilitate cooperation and exchange. Politics doesn’t need to enter the picture. Politicians certainly don’t need to draft new legislation and create roles for their already inflated taxpayer-funded bureaucracy.
The three major hurdles for small craft producers are:
Barriers to entry because of the high costs of bureaucracy
Arbitrary rules on some products, such as THC limits on edibles and capsules
How the LPs can tap equity markets and starve out their competition who are malnourished because Excise taxes ensure Canada won’t ever have a middle-class of cannabis producers.
Will an industry roundtable consisting of large producers and government bureaucrats solve these issues? Or will they only address the excise tax since even the larger producers send half their revenue to Ottawa?
Time will tell, but LPs and bureaucrats seem to think the roundtable will be a cure-all.
I have my doubts. If you want some insight into what this “cannabis industry table” is going to be about, look at who supports it. If you want some insight into what amending the Cannabis Act will look like, take a gander at everything else this government has (or hasn’t) done.
A true, small L, classical liberal cannabis market won’t occur until Justin’s Liberals are out of power.
CANNABIS INDUSTRY TABLE PROMISED IN BUDGET 2022
Bonno APRIL 9, 2022
The merger of corporate and government power continues unabated with a “cannabis industry table” included in last week’s federal Liberal-NDP budget.
Three years after Canada legalized cannabis, the landscape is not what many were expecting. By initially shutting out the legacy market and giving large licensed medical producers first dibs on recreational retail, Canada’s cannabis industry was lining up to look like our telecommunications industry. That is, high prices, even higher barriers to entry, and as consequence, a protected cartel.
Instead, consumers demanded premium craft products. The LPs who began with a sea-of-green monocrop are now scrambling to market themselves to the connoisseur consumer.
Hence, why the federal Liberal-NDP government felt this country needed a “cannabis industry table.” Entitled “Engaging the Cannabis Sector,”
“Budget 2022 proposes launching a new cannabis strategy table that will support an ongoing dialogue with businesses and stakeholders in the cannabis sector. This will be led by the Department of Innovation, Science and Economic Development, and will provide an opportunity for the government to hear from industry leaders and identify ways to work together to grow the legal cannabis sector in Canada.”
Is a Cannabis Industry Table Necessary?
If you think “stakeholders” include the cannabis culture in this cannabis industry table, then I have some swampland in Florida to sell you. In the lead-up to legalization, they barely took notice of the legacy market. They continually referred to them as “organized crime.” Sure, some of us had an opportunity to speak with the Legalization Task Farce. But this is akin to allowing children to sit at the grown-ups’ table during holiday dinners.
It is also insulting to the Western legal tradition. We already have laws on the books to run society. And we’ve had them for hundreds of years. Tort law, property law, contract law, commercial law, criminal law. English common law is case-generated law. It evolved from the settlement of actual disputes.
We don’t need parliamentarians constantly creating new laws and regulations. And then empowering expensive bureaucracies to enforce it. In the Western legal tradition, laws were procedural and not preemptively created by politicians.
Cannabis industry table sounds like something from the game Monopoly
Who Supports This?
The announcement of a “cannabis industry table” was of course welcomed by industry executives. And by advocates who haven’t learned that “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.”
Optimists are certain the cannabis industry table will solve many regulatory problems with legalization. There’s hope that plain packaging and marketing rules will become less strict. And it’s quite possible, the big LPs want to make a profit as much as the little guys.
But skepticism is valid. Especially when George Smitherman, chief executive officer of the Cannabis Council of Canada and a former Ontario health minister, supports the initiative.
Before legalization, Smitherman wanted the government to “zap up the black market.” He said, “[D]o we really want, as a foundation, the entrenchment of the people who have been operating in the shadows?”
Smitherman was against home-growing, even a single plant. He once debated cannabis-activist lawyer Kirk Tousaw on CBC. Tousaw argued that legalization that throws people in cages for growing plants isn’t really legalization. Smitherman called that an “extreme vision.” He said legalization should not be “creating roles” for the legacy market.
Later, after legalization, he continued to criticize “the illicit world” for mislabeling legal cannabis products.
If you want some insight into what this “cannabis industry table” is going to be about, look at who supports it.
Cannabis and Big Data
Will Having A Cannabis Industry Table Actually Work?
Tasking Health Canada with a review of legalization should work out great. They haven’t started yet. Expect completion by the end of 2023, they say. I’ll put my money on the following year.
Whenever they get around to it, we can expect producers of all sizes to want several amendments to the Cannabis Act. Namely, higher potency levels on edibles and beverages, lower “sin” taxes (especially on CBD products), and changing (or at least clarifying) lab testing rules.
But is establishing a cannabis industry table all that necessary? The Ministry of Finance already plans to amend several excise tax regulations without the need for a lengthy roundtable process. They’re not lowering or removing the “sin” taxes. Only changing when producers need to pay them.
No Legalization for Classical Liberals
Budget 2022 also outlines how the government wants to work with Indigenous groups to create a new tax framework for their communities. (And it includes cannabis taxes). And while it’s great to see some progress on the Indigenous front after hundreds of years of dishonesty, it’s also a reminder of what governments are capable of.
The cannabis industry table is going to be inefficient. It will likely accomplish nothing but eating up taxpayer money. Or it’s another attempt to smuggle in an LP cartel. What it won’t be, is a progressive step in the liberalization of Canada’s cannabis industry. We already have a process for that. It’s called free markets and the common law. We just need politicians and regulators to get out of the way.
Cannabis producer Canopy swaps shares for $255 million of its debt
Bonno
July 1, 2022 -
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Canadian cannabis producer Canopy Growth reached a deal with noteholders to trade 255.4 million Canadian dollars ($198 million) of debt for shares and cash, thereby reducing a substantial portion of its convertible debt set to mature next year.
According to the arrangement reached with a limited number of noteholders, including parent company Constellation Brands, Canopy will acquire the outstanding 4.25% unsecured convertible senior notes due 2023 in exchange for common shares and approximately CA$3 million in cash.
The deal effectively means Constellation will own more of Canopy and other shareholders less.
“By addressing a substantial portion of our soon-to-mature convertible debt we are deleveraging our balance sheet, preserving capital, and reducing interest payments by over C$10.9M annually,” Canopy Chief Financial Officer Judy Hong said in a statement to MJBizDaily.
“These actions are critical as we navigate broader economic headwinds and will enable us to continue investing in the highest potential areas of our business to drive future growth.”
The transaction’s initial closing is “anticipated to be June 30, 2022,” according to the release.
On closing, roughly 34,073,160 Canopy shares will be issued to the noteholders.
Constellation, via subsidiary Greenstar Canada Investment Limited Partnership (GCILP), agreed to sell CA$100 million in notes – half of its CA$200 million in convertible debt holdings.
GCILP will receive between 21,929,914 and 30,701,880 Canopy shares, effectively increasing Constellation’s position by 5.4%-7.6% of the issued and outstanding shares.
Constellation currently holds 142,253,802 Canopy shares, representing 35.3% of the Canadian company.
Earlier this week, Fitch downgraded its rating for Canopy to CCC, the agency’s fifth-lowest rating.
Fitch said it could cut Canopy’s rating again if the Smiths Falls, Ontario-based company pursues a repayment/refinancing of notes worth roughly CA$600 million that Fitch considers a distress debt exchange.
Canopy shares trade as WEED on the Toronto Stock Exchange and CGC on the Nasdaq.
Constellation has bought almost 300M of crappy growth debt in exchange for shares in two new recent deals…
AMENDING THE CANNABIS ACT
CALEB MCMILLANJUNE 30, 2022
To Bonno
Amending the Cannabis Act? The Canadian government says they will review and amend it as soon as possible. But the deadline to begin the review is eight months passed. Scheduled for October 2021, Health Canada won’t comment on when the review will occur, only that any amending will come from a “credible, evidence-driven process.”
Health Canada also said the review could take up to 18 months. The latest federal budget promised a cannabis industry roundtable, but no details have been released. However, some remain skeptical that meetings between government bureaucrats and industry insiders will do anything except help out the larger producers at the expense of the smaller craft companies.
Forward Regulatory Plan
Amending the Cannabis Act
But will a review and amendment of the Cannabis Act work out in everyone’s favour? So far, the federal government plans to update the Cannabis Act through some regulatory changes that Health Canada will be taking the lead on.
These regulatory changes include:
Cutting back on regulatory paperwork “to simplify and reduce requirements related to record keeping, reporting and notifications, and to provide more flexibility in meeting certain requirements related to matters such as antimicrobial treatment.”
Amending the regulations to “facilitate cannabis research for non-therapeutic purposes.”
Increasing the possession limit for cannabis beverages (no indication of raising the THC limit or abandoning it altogether).
Allowing the sale of certain health products containing cannabis without a prescription
Amending Cannabis Act regulations to “restrict the production, sale, promotion, packaging, or labelling of inhaled cannabis extracts with certain flavors, other than the flavor of cannabis.”
Health Canada says these changes are unlikely to be ready until the end of the year.
Buying cannabis health products without a prescription is a step in the right direction. But the typical attitude of Health Canada bureaucrats is that public health and safety trump your personal autonomy. So the agency will now be targeting cannabis producers promoting terpene profiles that they’ve decided are not “flavors of cannabis.”
Why Bother Amending the Cannabis Act?
Why bother amending the Cannabis Act when the government should scrap it altogether? The entire Liberal Legalization scheme has insulted the Western legal tradition of free markets and the rule of law.
All they needed to do was remove cannabis from the Criminal Code. We already have laws on the books that facilitate peaceful associations. Tort and criminal law provide security, while contract, property, and commercial law facilitate cooperation and exchange. Politics doesn’t need to enter the picture. Politicians certainly don’t need to draft new legislation and create roles for their already inflated taxpayer-funded bureaucracy.
The three major hurdles for small craft producers are:
Barriers to entry because of the high costs of bureaucracy
Arbitrary rules on some products, such as THC limits on edibles and capsules
How the LPs can tap equity markets and starve out their competition who are malnourished because, Excise taxes ensure Canada won’t ever have a middle-class of cannabis producers.
Will an industry roundtable consisting of large producers and government bureaucrats solve these issues? Or will they only address the excise tax since even the larger producers send half their revenue to Ottawa?
Time will tell, but LPs and bureaucrats seem to think the roundtable will be a cure-all.
I have my doubts. If you want some insight into what this “cannabis industry table” is going to be about, look at who supports it. If you want some insight into what amending the Cannabis Act will look like, take a gander at everything else this government has (or hasn’t) done.
A true, small L, classical liberal cannabis market won’t occur until Justin’s Liberals are out of power.
Home / Cultivation
Will a looming recession sink the cannabis industry, or will it stay afloat?
author profile pictureBy Bart Schaneman, Editor
June 30, 2022 - Updated June 30, 2022
To Bonno
With the threat of a recession hanging over the U.S. economy, the nation’s cannabis industry appears to be on shakier financial ground than when the last downturn struck two years ago, at the start of the COVID-19 pandemic.
Marijuana companies weathered the 2020 coronavirus-induced recession relatively well, with sales booming thanks to federal stimulus checks and anxious consumers turning to cannabis for stress relief.
The industry emerged relatively unscathed by the recession.
This time around might be different.
Cannabis industry executives point to rising inflation – which tends to curb consumer purchases – as well as the lack of progress in Washington DC for federal marijuana reform.
Other factors are at play, too.
Newer state markets with limited licenses – think Florida, Illinois, Massachusetts, New Jersey and New York – commonly experience relatively higher wholesale cannabis prices and a less competitive landscape.
Industry officials said marijuana companies in those states are better positioned to weather a downturn than operators in more mature markets such as Colorado, Oregon and Washington state.
Cannabis businesses in those states face overproduction, falling wholesale prices and stiff competition.
As a result, a recession could play out differently depending on the state cannabis market.
“Every state is its own story, with a different regulatory structure,” said Kevin Bush, chief financial officer for Denver-based Sweet Leaf Madison Capital.
George Mancheril, CEO of Bespoke Financial, a Los Angeles commercial lender that works with cannabis companies, said marijuana stands out as one of the only industries where businesses are experiencing deflation.
Mancheril expects that most companies in mature markets won’t have a banner year but should be able to slog through and survive until the end of 2023 or 2024.
“That’s a baseline expectation,” he added.
Dim prospects for reform
Jordan Lams, chief executive officer at Moxie, a vertically integrated cannabis company based in Long Beach, California, said the lack of momentum for marijuana reform at the federal level is making it harder for companies to find capital.
Couple that with falling prices and increased costs stemming from inflation, and “it’s probably one of the more challenging seasons the industry has seen,” he said. “It’s a double whammy.”
Like cannabis companies, marijuana consumers are feeling the pinch of rising costs by way of gas and food prices, among other inflationary pressures.
In response, cannabis consumers could purchase more bargain-priced products and take fewer chances on their selections, according to Skip Motsenbocker, CEO of Pacific Stone, a cannabis cultivator based in Carpinteria, California.
“We do think consumers will be less likely to try new products and stay with brands they know, like and trust (and also) offer great value for their dollar,” he said.
Recession-proof?
Taking into account that the cannabis industry is still relatively young, it’s hard to know whether it is indeed recession-proof, Motsenbocker said.
“However, using the spirits and tobacco industry as an anecdotal guideline, historically these industries have experienced fairly steady demand during a recession.”
Jason Vegotsky, CEO of Petalfast, a sales and marketing agency for the cannabis industry based in Irvine, California, agreed.
“If you look at alcohol beverages, economic downturns typically do not hurt the industry,” he said.
“Instead, what we see is the consumer looking for value alternatives. I would expect the same trend in cannabis during an economic slowdown.”
Government officials and economists, meanwhile, offer a wide range of predictions about the possibility of a prolonged downturn in the U.S.
This week, New York Federal Reserve President John Williams said he expects the country to dodge a recession, but other economists believe the chances as much higher.
Economists at Nomura Holdings, for example, said on Monday that the U.S. economy will likely slide into a mild recession by the end of the year as the Federal Reserve raises interest rates to slow inflation.
Cannabis industry executives, for their part, are crossing their fingers.
Now versus 2020
The cannabis industry boomed during the brief COVID-19 recession and the pandemic lockdowns of 2020.
Then, consumers were flush with cash from government stimulus checks and had fewer options for spending their discretionary income, given that travel shut down and restaurants shuttered.
Ryan Smith, CEO and co-founder of New York-based cannabis wholesaling platform LeafLink, pointed to the resiliency of the marijuana industry during the pandemic.
“We saw this during the early days of the COVID-19 pandemic, when brands and retailers quickly adapted to new remote workflows, socially distanced retail models and changing government rules,” he said.
“The cannabis industry is well-positioned to succeed regardless of the headwinds it faces, economic or otherwise.”
But Gary Cohen, CEO of Cova Software, a cannabis POS and tracking software company based in Denver, said the situation is different this time round.
He pointed to rising inflation leading to less cash in consumers’ pockets – this at a time when shoppers have more options for where to spend their money.
Moxie’s Lams noted that “people are out doing a lot of different stuff now. People are going to have to make tough choices in how they allocate their finite funds.”
However, Lams said, cannabis keeps getting cheaper, much to the detriment of the businesses trying to make a profit selling it.
“You can cut costs and reduce staff to save money, but it hurts productivity. It’s a morale killer, and there’s a lot of morale killers out there,” he said.
Tips for companies to survive
The key to success in the cannabis industry is knowing that prices go down as markets mature and quality matters, Cohen said.
“If you can’t be a good, efficient operator, then you’ll die,” he said.
“If you want to weather this out, you need to think about the reality of where this market is headed.”
Nirup Krishnamurthy, chief operating officer of Schwazze, a Denver-based marijuana company, agreed, saying cannabis companies must keep their costs under control.
“It’s important that you have a certain percent of your business vertically integrated,” he added, saying that can help absorb large price fluctuations in the market.
John Yang, CEO and founder of San Francisco-based cannabis tech firm Treez, said marijuana companies should be reviewing their profitability and margins via hard data and industry trends.
“People need to focus on operations and on what they’re doing,” he said.
Troy Datcher, CEO of The Parent Company, a vertically integrated cannabis company based in California, said operators need to reduce costs by 20% more than they think they need to.
“Be proactive in managing your costs, reach out to venders and negotiate lower rates, defer all nonessential projects and run your business as efficiently as possible,” he said.
Not surprising to users but... Good call!
Inside The Process To Legalize Recreational Cannabis In Germany
Dario Sabaghi-Bonno-Contributor
Cover the international cannabis industry with a focus on Europe.
We predict another dud...
Why?
They want to use the Canadian American model.
Cannabis laws are implemented by canna naive bureaucrats! Bad start...
Add high taxation to the caper and you get bunk weed for a 70% premium!!
Jun 28, 2022,06:00am EDT
Berlin Hemp Parade 2016
BERLIN, GERMANY - AUGUST 13: Activists demanding the legalization of marijuana march in the annual ... [+] GETTY IMAGES
When the German government announced in late 2021 its plan to legalize recreational cannabis sales in Germany, experts and cannabis enthusiasts put great expectations on the so-called "traffic light" government's plan to regulate the industry.
Although Germany and other European countries focused in recent months on the war in Ukraine following the Russian invasion in February and the resulting efforts to detach themselves from Russian energy dependence, German officials had time to speed up the process of legalizing recreational cannabis.
The consultation process
Commissioner for Addiction and Drug Issues Burkhard Blienert officially announced on June 13 the kickoff of the first of five expert hearings to prepare for the planned legislative process to legalize recreational cannabis.
More than 200 leading German and international experts will exchange their views on the legalization.
The planned hearings will focus on health and consumer protection, protection of minors and prevention, supply chains, ecological and economic issues, criminal liability, control measures, and licensing to accompany the introduction of the controlled sale of cannabis for recreational purposes and international experiences.
The consultation process is crucial to understanding the required implementation of the plan to legalize recreational cannabis in Germany and represents a space for objections and reservations that can be openly addressed and discussed.
What legalization model could Germany adopt?
Although lawmakers are expected to introduce a draft bill on recreational cannabis legalization by the end of this year, we can already catch a glimpse of what it could look like in Germany.
First of all, the primary goal and guiding principle of the legislative process will be to ensure the best possible health protection for consumers and to ensure the protection of children and young people.
Primary goal should be to grow fire for pennies.
I,m a capitalist...
Losing money and getting a haircut selling weed is not an option.
Contact via email, Blienert highlighted that cannabis would remain banned for children and young people.
Finn Hänsel, managing director and founder of Sanity Group, one of the leading cannabis startups in Germany, explained that the debate over cannabis legalization should focus on the origin of cannabis products and what kind of products will be allowed to sell, their distribution, and marketing activities.
"I think the government needs to decide how they want to legalize cannabis across these three topics. The hearings about international experiences will be important to understand what happened in other countries and what lawmakers need to keep in mind. This is important for the German government to collect information and decide what model to adopt," he said in a phone interview.
It is too early to understand what legalization model Germany could adopt. In Europe, no country has yet legalized recreational cannabis sales.
The Netherlands, which pursues a tolerant policy toward the so-called "soft drugs," adopted the formula of the coffee shops. In Spain, where cannabis is only decriminalized, consumers have the opportunity to consume cannabis in the Cannabis Social Clubs.
But for Hänsel, these quasi-legalization models are not working.
"I think it should be all or nothing. These models will fail in the long term. For instance, in the Netherlands, where it is legal to sell cannabis products in coffee shops, distribution is dominated by organized crime. I would suggest the North American model for Germany as the legalization's final goal should be to minimize the illegal market," he said.
Good luck with that!
Asked whether he already has a cannabis sales model to adopt for Germany and whether pharmacies would play a significant role in the sales of adult-use cannabis products, Blienert said that these questions need to be answered in the coming months.
"We want a model that fits Germany," he said.
What has medical cannabis taught Germans?
The role of the pharmacies could be important to understand the room for maneuver of German and international cannabis companies that want to join the industry.
Medical cannabis, legalized in Germany in 2017, has contributed to showing society the plant's medical value and attenuating the social stigma.
Medicinal Cannabis Regulation Hearing By Bundestag Committee
BERLIN, GERMANY - MARCH 20: Franz Joseph Grotenhermen MD, expert and chairman of the working group ... [+] GETTY IMAGES
Blienert said that it certainly kicked the debate overall. "The change in government has finally set the course to sell cannabis to adults in licensed specialty stores. This will have many positive effects: better health and youth protection, less criminalization, and finally no more stigmatization," he said.
Hänsel explained that ten years ago, not many people were aware of the medical value of cannabis.
"The legalization of medical cannabis in 2017 helped Germans understand cannabis is not just a drug and helped fight the stigma around the plant," he said.
Price and convenience in the legal cannabis market
One of recreational cannabis legalization's main issues is understanding the best way to divert consumers from the illegal market.
US states that have legalized recreational cannabis have learned how simply regulating the cannabis industry doesn't necessarily mean eradicating the illegal market. In many US legal cannabis states, illicit activities are still thriving.
To avoid such a scenario, Hänsel thinks that the best way for Germany to cope with the illegal market is to focus on convenience and price.
But what about quality products?
"Convenience, availability, and other factors need to be met by the legal market. If lawmakers only allow pharmacies to distribute products, cannabis won't be widely available. I think Germany should have an open model in which pharmacies and licensed shops can sell cannabis. For instance, Berlin should have enough stores to satisfy the demand. Otherwise, people will likely continue to buy cannabis from the illegal market," he said.
Minimum age to consume cannabis
Another issue that lawmakers have to cope with is establishing the minimum age allowed to consume cannabis.
On one side, scientific experts say the ideal age to consume cannabis is between 21 and 25. But on the other hand, the age group excluded from the legal cannabis market will likely buy it from the illegal market.
As a recent report published by the European Monitor Drug Centre for Drugs and Drug addiction (EMDCDD), the mean age for first cannabis use in the European Union member states is 16.
Cannabis taxation in Germany
Taxation of cannabis products will play a significant role in defining consumers' behavior when recreational cannabis legalization is implemented.
High taxes on cannabis products, complex bureaucracy applications, and expensive costs on the shoulders of cannabis businesses could advantage the illegal market.
Cannabis Supporters Hope For Legalization
BERLIN, GERMANY - AUGUST 09: Participants, including one with a marijuana leaf emblem on her back, ... [+] GETTY IMAGES
Hänsel proposes that taxes on cannabis products shouldn't exceed 25-30%. Taxation must be included in the final price, not on top of the final price, which must be competitive with the offer of the illicit market.
"I think the German government should ensure that every single aspect of the legal market is on the same level of competition with the illegal market, including price, availability, and better product quality. If the government doesn't meet these criteria, people won't buy cannabis from the legal market," he said, adding that also capping THC levels in cannabis products would incentive people to continue to buy from the illegal market.
However, it will be necessary to understand whether keeping low prices will be economically sustainable for licensed stores and cannabis companies, which have to incur costs to keep their businesses running and offer better and safer products without contaminants.
Cannabis marketing in Germany
Regarding cannabis marketing, the German government is expected to be pretty restrictive on this topic and launch prevention campaigns targeting children and young adults.
"The key now is to establish a comprehensive and effective prevention campaign that teaches children and young people how important it is to feel good about their bodies and have good self-confidence," Blienert said.
But at the same time, Hänsel thinks that the government has to keep, on the one hand, the legal consumption of cannabis attractive enough to minimize the illicit market, and, on the other hand, it shouldn't encourage minors or people who haven't try it to start.
Legal and political hurdles
Besides the doubts about these details that will find an answer in the upcoming months, the coalition government that took upon its shoulders the legalization of recreational cannabis in Germany must face several legal and political barriers.
At the international level, experts warn that Germany may risk breaching the 1961 UN Single Convention on Narcotics law, which only allows signatory states to use cannabis for medical and scientific purposes.
Given that, Germany has two options. It could withdraw from the convention, but in this case, the process would take up to one year, or it could ignore the convention like Canada did when it legalized cannabis in 2018 without being yet sanctioned.
At the political level, the government coalition made up of the social-democratic SPD, the Greens, and the liberal FDP may get easy approval of a draft law from the Bundestag, the German federal parliament, where it retains the majority. However, it may be hindered by conservative opposition groups at the Bundesrat, the legislative body representing the sixteen German federal states.
The coalition government is expected to bring persuasive arguments to legalize recreational cannabis, including the protection of public health, the German experience with medical cannabis, the protection of children, the fight against the illegal market, and economic benefits.
According to a study published by the Institute for Competition Economics (DICE) of the Heinrich Heine University in Duesseldorf in November 2021, the legalization of recreational cannabis could bring Germany annual tax revenues and cost savings of about €4.7 billion ($4.96 billion) and create 27,000 new jobs.
Inside The Process To Legalize Recreational Cannabis In Germany
Dario Sabaghi-Bonno-Contributor
I cover the cannabis industry with a focus on Europe.
We predict another dud...
Why?
They want to use the Canadian American model
So...cannabis laws are implemented by canna naive bureaucrats!
Add high taxation to the caper and you get bunk weed for a 70% premium!!
Jun 28, 2022,06:00am EDT
Berlin Hemp Parade 2016
BERLIN, GERMANY - AUGUST 13: Activists demanding the legalization of marijuana march in the annual ... [+] GETTY IMAGES
When the German government announced in late 2021 its plan to legalize recreational cannabis sales in Germany, experts and cannabis enthusiasts put great expectations on the so-called "traffic light" government's plan to regulate the industry.
Although Germany and other European countries focused in recent months on the war in Ukraine following the Russian invasion in February and the resulting efforts to detach themselves from Russian energy dependence, German officials had time to speed up the process of legalizing recreational cannabis.
The consultation process
Commissioner for Addiction and Drug Issues Burkhard Blienert officially announced on June 13 the kickoff of the first of five expert hearings to prepare for the planned legislative process to legalize recreational cannabis.
More than 200 leading German and international experts will exchange their views on the legalization.
The planned hearings will focus on health and consumer protection, protection of minors and prevention, supply chains, ecological and economic issues, criminal liability, control measures, and licensing to accompany the introduction of the controlled sale of cannabis for recreational purposes and international experiences.
The consultation process is crucial to understanding the required implementation of the plan to legalize recreational cannabis in Germany and represents a space for objections and reservations that can be openly addressed and discussed.
What legalization model could Germany adopt?
Although lawmakers are expected to introduce a draft bill on recreational cannabis legalization by the end of this year, we can already catch a glimpse of what it could look like in Germany.
First of all, the primary goal and guiding principle of the legislative process will be to ensure the best possible health protection for consumers and to ensure the protection of children and young people.
Primary goal should be to grow fire for pennies.
I,m a capitalist...
Losing money and getting a haircut selling weed is not an option.
Contact via email, Blienert highlighted that cannabis would remain banned for children and young people.
Finn Hänsel, managing director and founder of Sanity Group, one of the leading cannabis startups in Germany, explained that the debate over cannabis legalization should focus on the origin of cannabis products and what kind of products will be allowed to sell, their distribution, and marketing activities.
"I think the government needs to decide how they want to legalize cannabis across these three topics. The hearings about international experiences will be important to understand what happened in other countries and what lawmakers need to keep in mind. This is important for the German government to collect information and decide what model to adopt," he said in a phone interview.
It is too early to understand what legalization model Germany could adopt. In Europe, no country has yet legalized recreational cannabis sales.
The Netherlands, which pursues a tolerant policy toward the so-called "soft drugs," adopted the formula of the coffee shops. In Spain, where cannabis is only decriminalized, consumers have the opportunity to consume cannabis in the Cannabis Social Clubs.
But for Hänsel, these quasi-legalization models are not working.
"I think it should be all or nothing. These models will fail in the long term. For instance, in the Netherlands, where it is legal to sell cannabis products in coffee shops, distribution is dominated by organized crime. I would suggest the North American model for Germany as the legalization's final goal should be to minimize the illegal market," he said.
Good luck with that!
Asked whether he already has a cannabis sales model to adopt for Germany and whether pharmacies would play a significant role in the sales of adult-use cannabis products, Blienert said that these questions need to be answered in the coming months.
"We want a model that fits Germany," he said.
What has medical cannabis taught Germans?
The role of the pharmacies could be important to understand the room for maneuver of German and international cannabis companies that want to join the industry.
Medical cannabis, legalized in Germany in 2017, has contributed to showing society the plant's medical value and attenuating the social stigma.
Medicinal Cannabis Regulation Hearing By Bundestag Committee
BERLIN, GERMANY - MARCH 20: Franz Joseph Grotenhermen MD, expert and chairman of the working group ... [+] GETTY IMAGES
Blienert said that it certainly kicked the debate overall. "The change in government has finally set the course to sell cannabis to adults in licensed specialty stores. This will have many positive effects: better health and youth protection, less criminalization, and finally no more stigmatization," he said.
Hänsel explained that ten years ago, not many people were aware of the medical value of cannabis.
"The legalization of medical cannabis in 2017 helped Germans understand cannabis is not just a drug and helped fight the stigma around the plant," he said.
Price and convenience in the legal cannabis market
One of recreational cannabis legalization's main issues is understanding the best way to divert consumers from the illegal market.
US states that have legalized recreational cannabis have learned how simply regulating the cannabis industry doesn't necessarily mean eradicating the illegal market. In many US legal cannabis states, illicit activities are still thriving.
To avoid such a scenario, Hänsel thinks that the best way for Germany to cope with the illegal market is to focus on convenience and price.
But what about quality products?
"Convenience, availability, and other factors need to be met by the legal market. If lawmakers only allow pharmacies to distribute products, cannabis won't be widely available. I think Germany should have an open model in which pharmacies and licensed shops can sell cannabis. For instance, Berlin should have enough stores to satisfy the demand. Otherwise, people will likely continue to buy cannabis from the illegal market," he said.
Minimum age to consume cannabis
Another issue that lawmakers have to cope with is establishing the minimum age allowed to consume cannabis.
On one side, scientific experts say the ideal age to consume cannabis is between 21 and 25. But on the other hand, the age group excluded from the legal cannabis market will likely buy it from the illegal market.
As a recent report published by the European Monitor Drug Centre for Drugs and Drug addiction (EMDCDD), the mean age for first cannabis use in the European Union member states is 16.
Cannabis taxation in Germany
Taxation of cannabis products will play a significant role in defining consumers' behavior when recreational cannabis legalization is implemented.
High taxes on cannabis products, complex bureaucracy applications, and expensive costs on the shoulders of cannabis businesses could advantage the illegal market.
Cannabis Supporters Hope For Legalization
BERLIN, GERMANY - AUGUST 09: Participants, including one with a marijuana leaf emblem on her back, ... [+] GETTY IMAGES
Hänsel proposes that taxes on cannabis products shouldn't exceed 25-30%. Taxation must be included in the final price, not on top of the final price, which must be competitive with the offer of the illicit market.
"I think the German government should ensure that every single aspect of the legal market is on the same level of competition with the illegal market, including price, availability, and better product quality. If the government doesn't meet these criteria, people won't buy cannabis from the legal market," he said, adding that also capping THC levels in cannabis products would incentive people to continue to buy from the illegal market.
However, it will be necessary to understand whether keeping low prices will be economically sustainable for licensed stores and cannabis companies, which have to incur costs to keep their businesses running and offer better and safer products without contaminants.
Cannabis marketing in Germany
Regarding cannabis marketing, the German government is expected to be pretty restrictive on this topic and launch prevention campaigns targeting children and young adults.
"The key now is to establish a comprehensive and effective prevention campaign that teaches children and young people how important it is to feel good about their bodies and have good self-confidence," Blienert said.
But at the same time, Hänsel thinks that the government has to keep, on the one hand, the legal consumption of cannabis attractive enough to minimize the illicit market, and, on the other hand, it shouldn't encourage minors or people who haven't try it to start.
Legal and political hurdles
Besides the doubts about these details that will find an answer in the upcoming months, the coalition government that took upon its shoulders the legalization of recreational cannabis in Germany must face several legal and political barriers.
At the international level, experts warn that Germany may risk breaching the 1961 UN Single Convention on Narcotics law, which only allows signatory states to use cannabis for medical and scientific purposes.
Given that, Germany has two options. It could withdraw from the convention, but in this case, the process would take up to one year, or it could ignore the convention like Canada did when it legalized cannabis in 2018 without being yet sanctioned.
At the political level, the government coalition made up of the social-democratic SPD, the Greens, and the liberal FDP may get easy approval of a draft law from the Bundestag, the German federal parliament, where it retains the majority. However, it may be hindered by conservative opposition groups at the Bundesrat, the legislative body representing the sixteen German federal states.
The coalition government is expected to bring persuasive arguments to legalize recreational cannabis, including the protection of public health, the German experience with medical cannabis, the protection of children, the fight against the illegal market, and economic benefits.
According to a study published by the Institute for Competition Economics (DICE) of the Heinrich Heine University in Duesseldorf in November 2021, the legalization of recreational cannabis could bring Germany annual tax revenues and cost savings of about €4.7 billion ($4.96 billion) and create 27,000 new jobs.
Canopy Growth settles Cointreau lawsuit $ over cannabis beverage name.
I updated this Bubble Chart for the cannabis sector #MSOgang pic.twitter.com/i4IpozDXKC
— WeedStreet420 (@WeedStreet420) June 7, 2022
Home / Canada
Fitch downgrades Canopy Growth, citing cannabis market-share losses
Bonno
June 28, 2022 - Updated June 28, 2022
SHARE
Fitch downgraded the rating for Canadian cannabis producer Canopy Growth to CCC, the agency’s fifth-lowest rating, and warned of potential further negative actions.
Fitch’s CCC rating carries substantial credit risk with a “very low margin for safety” and a “real possibility” of default, per the agency’s ratings scale.
Canopy’s issuer default rating was previously rated B-, or highly speculative.
Fitch Ratings said the downgrade reflects:
Significant market-share losses in the Canadian cannabis market.
Execution missteps.
Challenges pivoting its cultivation strategy.
“As a result, it is highly doubtful that Canopy can improve EBITDA trends to reach operating cash flow breakeven in fiscal 2025 (by March 31, 2025) as Fitch previously expected, and creates greater uncertainty around capital structure sustainability,” Fitch noted in its commentary on the ratings action.
Canopy’s financial year ends March 31.
The credit-rating agency said it could cut Canopy’s rating again if:
Canopy displays a lack of execution on its premiumization-cultivation strategy.
Fitch concludes the strategic incentive for alcohol giant Constellation Brands to support Canopy has slipped.
Canopy pursues a repayment/refinancing of notes worth 600 million Canadian dollars ($466 million) that Fitch considers a distress debt exchange.
Fitch noted that the Canadian cannabis market grew by 50% to CA$4 billion ($3.1 billion) in 2021, but Canopy’s Canadian cannabis sales fell 10% in fiscal 2022, partly from the shift away from the value segment.
Regarding the upcoming July 2023 repayment of the CA$600 million in notes, “Fitch believes Canopy’s financing options have become more limited given the broad downturn in market conditions,” the rating company said.
“Fitch expects the company could seek options to preserve liquidity given ongoing high cash burn. As such, the company could pursue a notes repayment option that Fitch views as a distressed debt exchange.”
Fitch also highlighted Canopy’s cash position, noting that cash and cash equivalents fell to CA$1.4 billion at the end of the previous fiscal year, down from CA$2.3 billion one year earlier.
Business leaders need reliable industry data and in-depth analysis to make smart investments and informed decisions in these uncertain economic times.
“The ongoing cash burn and M&A strategy combined with current market conditions have eroded Canopy’s liquidity position and could hamper its ability to access additional capital,” according to Fitch.
Canopy shares trade as WEED on the Toronto Stock Exchange and CGC on the Nasdaq exchange.
Data is no argument...
it,s the real deal!
Too lazy for due diligence?
You are doomed sir!
Home / Finance
Colorado cannabis company lays off workers, closes cultivation facility
Bonno
June 24, 2022 - Updated June 27, 2022
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One of Colorado’s largest cannabis brands laid off 33 employees – almost a quarter of its staff – and shuttered one of three cultivation sites.
The president of Denver-based Veritas Fine Cannabis confirmed the moves to alt-weekly Westword after downsizing rumors began circulating on social media.
Veritas is the latest U.S. marijuana company to cut expenses amid steadily declining wholesale flower prices and oversaturation of the cultivation and retail sectors.
Earlier this month, Oregon-based marijuana tech company Dutchie laid off 67 employees, about 8% of its 700 workers.
California-based Eaze recently laid off upwards of 25 workers, and Colorado-headquartered Akerna slashed 59 positions.
Home / Canada
Canadian cannabis producer Flowr cuts 40% of staff, sells assets to save cash
Bonno
June 27, 2022 - Updated June 27, 2022
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Canadian cannabis producer The Flowr Corp. eliminated 40% of its workforce and sold a large parcel of land in a bid to save cash.
The struggling Toronto-headquartered company didn’t say in its Friday announcement how many workers were fired and did not reply to queries.
Flowr said in a news release that the reduction in its headcount would result in more than 4 million Canadian dollars ($3.1 million) in cost savings per year.
In a related move, Flowr said it sold a 17-acre parcel of land for CA$3.4 million, the proceeds of which will “provide the Company with increased operating capital.”
The land sale is expected to close in mid-August.
“These cost cutting measures and sale of non-core assets are vital to getting the company to profitability,” interim CEO Tom Flow said in a statement.
“Flowr is a brand synonymous with quality and we continue to believe that our model to provide premium cannabis products to the market while reducing overall costs will lead to success.”
Flowr has experienced C-suite turnover in recent months.
Flow, who is Flowr’s founder, was appointed interim chief executive in March after director and CEO Darryl Brooker left “to pursue other opportunities.”
It’s the third time Flow has assumed the CEO post in some capacity.
John Chou is still listed as Flowr’s chief financial officer on the company’s website, but an auto-reply email from Chou said Mike Willets has assumed the role of interim CFO.
Flowr has been in cost-cutting mode for some time.
In 2020, the company cut its workforce by 25% to conserve capital.
The company also pulled out of some international markets in recent years.
Earlier this year, Flowr sold subsidiary Holigen Holdings, which owned two cultivation facilities in Portugal.
The sale was to United Kingdom-based medical cannabis company Akanda Corp. in a deal worth roughly CA$35 million.
One year ago, Flowr pulled out of noncore markets – including Australia, Spain and Uruguay – as part of a strategic review intended to put the business on firmer financial footing.
Flowr has lost CA$274.8 million since 2017.
Flowr trades on the TSX Venture Exchange as FLWR.
Why would they purchase a dud?
Jeff knows better!
Amazon does,nt have to deal with Amazon legacy.
Amazon is a tight ship.
They do not sell bunk weed.
June 24, 2022Bonno
Cannabis News
New Brunswick’s Organigram announced today that they have reached a settlement in the 2016 class action lawsuit following pesticide-related product recalls.
The Supreme Court of Nova Scotia has approved the notice of settlement, which was sent to class action members on June 24. The Court will hold a hearing to consider whether to approve the Settlement on August 31.
The law firm handling the case, Wagners Law Firm, has also released similar information and updates on their website.
If approved, the settlement will be used to provide Class Members a refund of the amounts paid to purchase the voluntarily recalled product, minus any refunds they have already received, as well as the payment of legal fees. Organigram has also agreed to pay the third-party claims administration costs.
As part of the Settlement, Organigram says it has agreed to pay an aggregate of $2,310,000.
In 2020, the Canadian Supreme Court declined to hear an appeal of a Nova Scotia court ruling dealing with a claim against Organigram for using unauthorized pesticides.
The appeal sought to overturn a ruling in a previous appeal heard in the Nova Scotia Court of Appeal that said that public injury claims made against Organigram Inc by patients who consumed their cannabis products cannot be established.
The original case filed in early 2018 came after a class action suit which consisted of a group of people who had been using the medical cannabis producer’s products. The patient and plaintiff argued they had experienced negative health effects after consuming cannabis from the producer which had been found to have been using an unapproved pest control product, myclobutanil.
The judge in Nova Scotia’s Court of Appeal’s case agreed with Organigram that there was little evidence of, or methodology, to prove the health claims made could be connected to their cannabis products. The patient sought to overturn that ruling in the Canadian Supreme Court but was not successful.
The judge agreed and dismissed this aspect of the class action. The associated reimbursement payments that are also part of the class action suit were allowed to remain and made up the current settlement agreement.
Organigram in the past has said they will continue to challenge these as they have already provided refunds.
“Organigram will continue to defend what remains of the Class Action as it has already voluntarily reimbursed many of its customers for this recall via a comprehensive credit and refund program”
Organigram’s unauthorized use of myclobutanil and/or bifenazate triggered public recalls for the cannabis producer in 2016 after testing by a third-party lab discovered evidence of unauthorized pesticides. In addition to the product not being allowed for cannabis production in Canada, Organigram was also certified as organic by Ecocert, a third-party organic certifier, who also disallowed those products. After initially losing their certification from Ecocert, they received it again in 2018.
Following the recalls, a class action suit was initiated by patients who said they had experienced negative health issues related to using their cannabis which potentially contained trace amounts of bifenazate and/or myclobutanil.
The burden of proving this array of negative health effects was a tough case to make, which helped guide the judge’s most recent decision, stating that the adverse health claims were “too generic”.
The court also noted that the generic testing described by the plaintiff’s doctor did not meet the “workable methodology” requirement of the law.
Among one of the concerns raised by the plaintiff was the fact that when combusted myclobutanil releases hydrogen cyanide, which is a cancer causing agent with numerous negative health concerns.
The plaintiff had argued that the symptoms she had experienced “coincided” with those associated with exposure to hydrogen cyanide, including lightheadedness and gastrointestinal symptoms.
In support of its decision, the court noted research that showed that cannabis itself also releases hydrogen cyanide, and in far greater amounts than would be attributed to any myclobutanil on the cannabis the patients in question consumed. The court document shows the judge stating “The amount of hydrogen cyanide produced by myclobutanil is obviously infinitesimal compared to the amount produced by smoking cannabis in the ordinary way.”
The recalls associated with the product noted that the levels of myclobutanil found on the cannabis products were incredibly low, up to 20 parts per million (ppm), potentially because the pesticide was applied at a very early stage in the plant’s growth, not in the flowering stage.
For reference, one ppm is one part in one million. One ppm is comparable to one second in 11.5 days or four drops of ink in one 55-gallon barrel of water.
Adult-use marijuana companies struggle to stay afloat amid overproduction, falling prices and poor quality products.
By Patrick Maravelias, Reporter
June 23, 2022
As mainstream businesses cope with surging inflation and the threat of a recession, many adult-use marijuana companies – growers, retailers and ancillary businesses alike – are struggling with their own host of problems.
Falling prices and a product glut in more established state marijuana markets are forcing companies out of business, triggering layoffs and setting off an industrywide scramble to stay afloat.
Colorado, Oregon and Washington state are among the more mature markets where wholesale cannabis prices have tumbled, because growers produced far more flower than retailers could absorb.
The falling prices have put added strain on cannabis growers and retailers.
Ancillary businesses also are struggling, with tech companies Akerna of Colorado and Dutchie of Oregon as well as California-based delivery operator Eaze recently shedding employees.
Compounding the problems of cannabis companies: Marijuana products are often taxed at a far higher rate than mainstream goods such as corn, milk and automobiles.
In Washington state, for example, taxes can account for nearly 50% of the price of marijuana products on store shelves, making it harder for owners to remain competitive – much less survive.
“My revenue has dropped month after month, year after year, and we are to the point now where we’re just barely able to keep our doors open,” said James Lathrop, owner of Cannabis City, a marijuana retailer in Seattle.
In response, retailers are using a variety of tactics to stay afloat, including:
Offering consumers steep price discounts.
Exiting the retail business altogether to focus on cultivation.
Opening entirely new businesses – such as a marijuana-themed beer lounge – in order to drive traffic back to their stores.
“It’s going well for almost nobody,” said Matt Walstatter, who sold his Oregon store, Pure Green, in 2019 to focus on cultivation.
“When I go to industry events, I don’t really talk about my business, because everybody is talking about how terrible it is and what a bloodbath.”
Below is a snapshot of market conditions in three states:
Oregon
Marijuana companies in the state are struggling to cope amid a flood of businesses opening their doors after voters in the state legalized recreational marijuana in 2014.
Oregon adds a state tax of 17% to cannabis products, while municipalities are permitted to impose an additional tax of up to 3%.
Initially, there was no limit on the number of retail licenses the state doled out.
According to Walstatter, this led to a surplus of retailers and eventually forced the state to impose a moratorium on new cannabis licenses in April 2018.
“The retail market here is really, really, really crowded,” Walstatter said.
“It used to be when we got started that people would drive past stores to come to our store.
“And after a while it wasn’t that they were driving past two or three, it was that they were driving past 10 or 20.
Master the complexities of growing cannabis indoors with fundamental tips and guidance from experienced cultivation professionals.
At last count, Oregon had 787 cannabis retail stores, according to the Oregon Liquor and Cannabis Commission. The state’s population totals about 4.2 million.
Walstatter said two high-volume retailers opened on either side of his store soon after he opened, which made it tough to remain competitive.
He said he has seen many businesses like his either sell their stores to multistate operators or close up shop because of the stiff competition.
A tight labor market isn’t helping.
“I was talking to one grower who we work with, and he has no employees left,” Walstatter said. “He waters 600 outdoor plants himself every other day; he literally cannot afford help.”
Colorado
After Colorado became the first state in the nation to begin adult-use sales, in January 2014, businesses there rode a steadily rising sales tide for years.
Now sales – and prices – are falling. Business owners are shuttering their doors or putting their companies on the sales block.
The state imposes a 15% excise tax on retail cannabis products. Localities add a sales tax of up to 2.9%.
While cannabis companies in newer state markets typically enjoy rising sales, Colorado operators have suffered a steep decline over the past year.
According to the Colorado Department of Revenue, marijuana sales in April totaled $153 million, a 25% decline from April 2021.
The price of wholesale cannabis flower is also down – 43% in the first quarter of the year compared to a year earlier.
Colorado cannabis retailers have also reported heavy oversaturation in the retail space, which recently led to the closure of all seven Buddy Boy stores in Denver.
The situation has been just as bad for growers.
Chris Becker, head of revenue and partnerships for Denver-based cannabis brand The Honeybee Collective, said the market price for a pound of wholesale marijuana flower has dropped from $1,600 this time last year to about $800.
“It’s been a tough year for cultivators,” he added. “Most people built their businesses around getting at least $1,500 a pound.”
With cost of production around $800-$900 a pound, Becker said, many of the smaller cultivators with 3,500- to 5,000-square-foot grows are likely to go out of business.
“I can’t see people growing in Denver for much longer,” he added.
John Andrle, owner of Denver cannabis grower and retailer L’Eagle Services, said the market indicates “some serious trouble for everyone in the industry, notably growers, but extending to stores, product manufacturers and more.”
Marijuana grows are selling for pennies on the dollar, if they’re selling at all, Andrle said.
“Stores aren’t faring much better, mostly because so many are for sale,” he added.
He estimated half the stores in Boulder are currently for sale.
Washington state
Marijuana businesses in the state are coping with steep taxes.
Washington state legalized cannabis for medical use in 1998, and adult-use sales began in July 2014.
The state has a strict licensing limit, with the number of retail licenses capped at 556 – well below the nearly 800 stores currently operating in neighboring Oregon.
The state’s population, by comparison, is nearly double that of Oregon’s, at 7.5 million.
And, at a whopping 37%, the retail excise tax on marijuana purchases is much higher than in Oregon or Colorado.
“This is in addition to the regular state of Washington sales tax, which, in Seattle, is 10.2%,” Cannabis City’s Lathrop said.
“So now it’s a 47.2% tax on a product that people can effectively grow in their closet if they want.”
Lathrop said that while he might have less storefront competition than do retailers in other states, Cannabis City struggles to bring in customers who would rather shop on the illicit market rather than pay such a high tax.
“The only people that are winning are the high-volume stores that happen to be in an area where they’ve had a monopoly for a while,” Lathrop said.
Cannabis City has been open since 2014. But Lathrop said he will be forced to close his store if market conditions don’t improve.
He has even opened a cannabis-themed lounge – it serves beer, since marijuana clubs are banned in Washington state – in an attempt to drive traffic back to his dispensary.
But it’s been to no avail.
“I’m on the edge of, do I go bankrupt?” Lathrop said.
“Do I sell my store and walk away with nothing after eight years of being in an industry? Or can I still make it happen?”
Patrick Maravelias can be reached at patrick.maravelias@mjbizdaily.com.
Bonno & Bart Schaneman contributed to this report.
Canopy Growth, which lost money, market share & dignity this year, has given its executives raises.
First up is someone named Julious Grant, chief commercial officer, who was given a raise to C$57,000 *per month* (which is almost how much the median worker took home *per year*).
This represents a very small raise from Mr Grant's previous massive monthly salary, but it's a raise nonetheless.
Mr Grant was the top earner among all Canopy executives in 2021, with comp worth $4 million
Canopy lost $1.7 billion in 2021 and $578 million in 2022.
All $ CAD
Next up is CEO David Klein, who sees his compensation increased.
The CEO of the company that lost >$2 billion over 2 years selling weed is now eligible for a bonus worth 400% of base salary, which would come out to $5 million if all milestones were achieved.
It's bonus season at Canopy. The stonk fell 85% in the last financial year. This is what the company granted to execs on June 14 - just over 1 week ago:
In the past year, the ???? federal government gave Canopy $69.1 million in taxpayer subsidies as part of the #CEWS boondoggle.
What did taxpayers get out of it,
@cafreeland
? How much trickled down to Canopy employees?
What corporate earnings say about your business
Corporate earnings reports might not seem like the most thrilling reading – especially in a dynamic industry like cannabis.
Even so, Wall Street earnings releases are worth your time – both for what they can tell you about our industry and how they can help you craft better financial communiques.
Quebec-based marijuana company Hexo recently reported results for its third fiscal quarter ended April 30. Its news release was a 3,500-word lesson in what not to do.
It only needed about 10 words: Hexo lost $146.7 million on $63.6 million in revenue.That was the story. Those were the numbers.
Here’s what the news release led with instead: “Hexo is committed to streamlining our operations across all functions, allowing our top-selling brands to remain competitive in the marketplace whilst aligning to our long-term financial objectives of becoming cash flow positive and driving growth,” Hexo CEO Charlie Bowman said. “As we move forward, we remain keenly focused on our financial objectives and taking the necessary steps to achieve them, including maintaining a lean organization and concentrating on operational excellence.”
Huh?
Not to be too hard on Hexo – it has enough on its plate without anyone else piling on – but does that mean anything to you? Does it mean anything to anybody?
Straight Talking
Lesson one: ?Always lead with a clear statement of the news. Don’t hide, don’t hedge, don’t spin. Give the news, good or bad. Then own it.
There’s no better model for this then Bill Self, the head basketball coach at the University of Kansas. If you want a master class in how to give a financial presentation, watch Self give a post-game interview.
No matter how spectacularly his team performs, Self never focuses on what the team did well. He ignores the whole highlight reel. Instead, Self finds and focuses on the opportunities he missed, the strategies he could refine, the players he could redirect. The guy could win a national championship and come out saying next time his team will do better.
Lesson two: Lead with clear comparison using standard metrics.
Instead of starting its news release with standard revenue figures, Hexo gave a bullet point about its efforts to restructure some debt. That’s clearly information shareholders must have, so it had to be included. But it did not have to lead the news release, and choosing to lead with something secondary seemed like deliberate opacity.
Straight revenue and earnings might not always be the whole story, but it’s always the best starting place.
Hexo dumped an entire spreadsheet into its news release. They could have done better.
Financial documents should always include the complete version at the end but simplify and declutter the data as much as possible.
Here’s how Hexo could have presented the same information (all dollar figures in Canadian millions):
Takeaway: If you run the numbers, readers are less likely to. Decide what the secondary points of the release should be and put other material disclosures at the end.
Lesson three: If the financials show a significant variance, explain it. If revenue was flat but selling, general and administrative expenses shot up, say why.
In this release, we see major year-over-year changes, all of which should be clearly spelled out. Why did the cost of goods sold rise at twice the pace of revenue?
When companies and news outlets include these details, it does more than tell you about one company. It gives you the basis for a series of comparisons. In other words, the numbers tell you how Hexo did relative to its last reporting period. But you can also discern how well Hexo did relative to rival companies.
Comparing your business to Hexo might not tell you much. But keeping an eye on earnings in the cannabis space will tell you a lot – especially if you take the time to compare public companies’ number to your own.
Andy Obermueller,
editorial@mjbiz.com
Bankruptcy Law
DISTRESSED DAILY: Weed Firm Canopy Growth Faces Liquidity Crunch
June 21, 2022, 8:37 AM
Canadian cannabis company Canopy Growth Corp. is having trouble adjusting to changing consumer preferences, which may threaten the ability to refinance its convertible debt due next year.
The company has faced earnings deficits and is likely to have continued pressures from supply-chain issues and increased competition, S&P Global Ratings analysts Monysh Bandeally and Madhav Hari wrote in a report last week.
Canopy “significantly” underperformed S&P’s expectations in the 2022 fiscal year as consumer tastes for premium products evolved, the analysts wrote. During the last fiscal year, the company didn’t have enough inventory to meet demand for select strains and high-potency ...
IS THE CANADIAN CANNABIS EXPERIMENT A FAILURE?
CALEB MCMILLANJUNE 21, 2022
Is the Canadian cannabis experiment a failure? Things may look rosy on the surface, but underneath, Canada’s legal cannabis regime is struggling. Whether it’s smaller craft producers sending half their profits to the federal government in excise taxes or larger producers racking up a record amount of losses. For many, the Canadian cannabis experiment is a failure.
Excise Taxes
Canadian cannabis experiment
The Canadian cannabis experiment’s biggest failure comes from excise taxes. Since the government claims activities like smoking or drinking are morally degrading, they are subject to “sin” or excise taxes. This tax takes $1 per gram off wholesale flower regardless of production costs or retail price. So if you’re producing wholesale cannabis at $8 per gram, and your competitors are producing cannabis at $10 per gram, you’re paying a higher tax for being more productive and efficient.
Furthermore, large licensed producers can absorb excise taxes more than smaller producers. All they have to do is sell cannabis at a loss and wait for their smaller competitors to starve.
“I think it probably speaks to how unhealthy the funding side of the industry is,” says Nawan Butt, Portfolio Manager at Purpose Investments.
“If you take a look at the largest players, the amount of losses they’ve racked up, even just this year, the numbers are absolutely massive. And the reason is, they can tap equity markets at any point that they want, helping them absorb these losses and try to maintain market share until the point where it’s survival of the fittest or survival of the fattest, in this case.”
Smaller niche players are finding their market share. But without the volume to increase their margins, they’re left alive only due to tax breaks and flexibility offered by the Canada Revenue Agency.
“The healthy players are unfortunate to be in such a position because the larger LPs just won’t allow them to realize the value that they’re creating in this environment. Because they have an almost unlimited bank account they can tap on. Which is to the frustration of the smaller LPs,” says Nawan.
Unprofitable LPs
The large licensed producers (LPs) represent the biggest failure of the Canadian cannabis experiment. They originate from the unconstitutional medical cannabis regime former PM Stephen Harper tried to set up. These large-scale pharmaceutical companies now sell to recreational and medical customers.
They’ve never been cash flow positive. Before legalization, large LPs inflated the potential of the cannabis market. They forecasted record numbers based on nothing at all. Canada’s top LPs, like Canopy and Aurora, indicated sales more than triple what the government predicted. Aurora claimed it would grow a third of Canadian cannabis. And despite a supply gut in the legacy market, Aurora kept building greenhouses.
“If you take a look at the top players in Canada, take a look at where their stock prices are compared to where their all-time highs were, and we’re taking a look at losses 99 cents on the dollar,” says Nawan. “It’s all to the determent of the equity holder for the LPs. And I’m surprised more equity holders aren’t appalled at some of the decisions management have taken.”
Government Bureaucracy Ruined the Canadian Cannabis Experiment
Canadian cannabis experiment
It’s clear the federal government’s bureaucracy ruined the Canadian cannabis experiment. It was a failure before the first retail store even opened. “My experience working in government is people who work in government know what they’re doing. This is a program that’s designed to fail. No one in the government wanted legalization of cannabis,” says David Hurford, Volunteer Secretary at the BC Craft Farmers Co-Op.
As early as 2016, Justin Trudeau said the Canadian cannabis experiment was not about “creating a boutique industry.”
And that’s clear with plain-packaging rules, inaccurate warning labels, and the big red “THC” label on all cannabis products (including CBD-only strains). Or by having a producer application process requiring tens of thousands of dollars in start-up capital, having provincial monopolies as distributors, and, in some provinces, crown corporations handling all retail.
“I think the world is watching the Canadian experiment and we are not giving them positive signs on how to conduct this business,” says Nawan.
Future of the Canadian Cannabis Experiment
“I think the Canadian market is still a very long way from its ultimate stage. There’s a lot of work that still needs to be done,” says Nawan.
What kind of work? For starters, excise taxes are crippling the industry. Unlike other “sinful” industries, the government levies the tax on manufacturers, not retail. If the government wants to call cannabis consumption immoral and tax people for it, it should impose no more than 10% of the retail price.
Second, politicians can scale back government bureaucracy. Give provinces more power and eliminate Health Canada‘s involvement with recreational cannabis. Giving each province more responsibilities can ensure a Canadian cannabis experiment that works for everyone. Places like British Columbia can have their boutique industry while Quebec can continue its strict anti-business, public health approach.
Third, reform the licensed producer system. Again, production licenses are something that the federal government can hand to the provinces. Something has gone wrong at the federal level. Or it’s been designed to fail. Either way, this is not how you legalize cannabis.
“If we look at some of these US players, they’re the ones doing it right,” says Nawan. “They’re the ones that have tight belts and can execute, as well as scale in this environment where they don’t really have equity markets to tap. They’re making the most of what they have, and I think Canadian LPs have a lot to learn from them.”
“I’m just very disappointed that it’s been almost four years of legalization now and our top five LPs have yet to turn a profit.”
If that doesn’t indicate the Canadian cannabis experiment is a failure, then what does?
Hexo paid 235$$$ million for Zenabis last year. Lol
Zenabis is under protection
Alex The Chemist ????
@AlexTheChemist
·
3h
Hexo thread worth reading for perspective on their downfall from an industry leader to life support. Over billion and a half dollars evaporated through bad mergers and decisions, market share loss, hundreds of jobs lost. Hard to read without cringing.
Quote Tweet
Matt Lamers ????
@matt_lamers
· Jun 15
NEW: $HEXO lost another $147 million in its latest quarter, bringing aggregate losses since 2014 to $1.8 billion
Hexo's revenue plunged 14% sequentially to just $45.6 million in Q3.
?? Hexo "entirely withdrawing" its guidance on synergies and sales ??
Tilray buying moribond hexo was a great move by Simon.
New Brunswick
Atholville cannabis producer sheds 142 jobs
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Hexo, formerly called Zenabis, once employed 475 people but is now down to 108
Bonno ·· Posted: Jun 15, 2022 6:31 PM AT | Last Updated: June 15
HEXO, formerly called Zenabis, is shedding 142 jobs from its Atholville plant. (Nicolas Steinbach/Radio Canada)
14
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A major cannabis producer in northern New Brunswick is cutting more than half its local workforce.
Hexo, formerly called Zenabis, is laying off 142 workers at its Atholville plant.
The Ottawa based Hexo bought Zenabis in 2021.
The plant employed about 475 people just two years ago, and at one time was expected to bring more than 700 jobs to the Restigouche region.
We asked Hexo for comment, but didn't receive a reply.
Zenabis bought a warehouse in Atholville in 2014 to turn into a marijuana production facility. (Radio-Canada)
The layoffs announced Wednesday leave the plant with just 108 employees and are raising questions about the company's future in the region.
"I'm going to try and talk with the CEO tomorrow," said Jean-Guy Levesque, the mayor of Atholville
"I'm going to try and see exactly where they are. Are they going to shut down the place? Are they going to try and keep on?"
Fall from grace
What was then Zenabis bought its Atholville warehouse and plant location in 2014, before the company was even licensed to grow cannabis.
At the time, the company was touted as an economic messiah for the economically depressed region, with one CBC New Brunswick headline reading, "Small New Brunswick village banks on pot to revive economy."
But cracks in the cannabis foundation soon began to appear.
While there were once thoughts of up to 700 people working at the plant, only 108 remain. (Gabrielle Fahmy/CBC)
In early 2020, the company said it was reducing its entire workforce by 22 per cent but would not say how many of those jobs would be in Atholville.
Levesque said he's been told that the issue isn't with the community, or the product it makes, but with a glutted cannabis market still struggling with black market sales.
Job losses hitting Atholville cannabis producer, Zenabis
New Brunswick hopes cannabis can help drive rural economic recovery
"They have more than they're able to sell right now," said Levesque.
Levesque said the job losses are a blow to the region.
Mayor Jean-Guy Levesque says the company told him an abundance of product, and issues with the black market, are among the reasons for the job cuts. (CBC)
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He said many of the affected workers have been offered severance pay of up to eight weeks, which should dull the immediate financial impact.
And the region is in desperate need of workers, so there is work out there.
"Maybe they're going to be able to find a job pretty fast," said Levesque, adding that training that would be needed first.
Gamma irradiation is a bitch.
Ok lets review you Gamma irradiated harsh burning throat junk weed nobody wants.
OK lets review your bunk dry burning throat Gamma irradiated hay weed...
irradiated cannabisSCIENCEIrradiated Cannabis is Real: Now What?
While irradiated cannabis may sound scary, the weed industry says not to worry. Consumer advocacy groups, however, are raising concerns.
ByBonnoPublished on June 15, 2022SHARETWEET
Is irradiated cannabis really a thing? If you’re in Canada, the answer is likely “yes,” and the practice is catching on in throughout the US where marijuana is legal. Even while cannabis producers and the irradiation industry keep assuring us that it’s safe as a means to “remediate” harvested flower—reduce bacteria, molds and other pests—they point to decades of employment of irradiation to extend the shelf-life of food products and keep them free of bugs and pathogens.
Cannabis consumers should be aware, however, that food irradiation has never lived up to industry expectations since it was approved for widespread use in this country in the 1980s. And some consumer advocacy voices are skeptical that this is the way for the cannabis industry to go.
Industry Reassurances
Irradiated cannabis got some rare media coverage when Forbes ran a write-up on the practice April 30. The piece focused on the example of EOS Farms, a licensed producer in Massachusetts, which uses an irradiating device supplied by Rad Source Technologies of Georgia. Rad Source is one of the top producers of such devices for the US cannabis industry, with clients in several states, including California, Colorado, Oregon, Michigan, Illinois and Washington.
The article cites proponent assertions that for immuno-compromised patients, i.e. cancer survivors, remediation techniques such as irradiation “could be the difference between a safe smoke and a life-threatening fungal infection.”
It also notes the special imperative for such remediation in Massachusetts, which has stringent regulations, limiting the total amount of bacteria and other life forms in cannabis. This is in contrast to states such as California, that just bar or restrict specified harmful bacteria and molds like e. coli and aspergillus.
The story notes other widely used remediation methods, such as ozone and hydrogen peroxide. But EOS Farms went with irradiation because of its supposed lack of “residual effect”—leaving the terpene and cannabinoid profile intact.
The article acknowledges consumer wariness of “nuclear weed,” but portrays a high probability that such critics have themselves smoked irradiated cannabis—if unknowingly.
Origins in the Military-Industrial Complex
The cannabis industry has adopted the practice of irradiation from the food industry—where there has similarly been no lack of criticism.
Food irradiation is the process of exposing boxes or pallets of food products to high-energy gamma rays, electron beams or X-rays (all of which are millions of times more powerful than standard medical X-rays) to break apart the bacteria, spores and insects. The source is generally the artificially produced (not naturally occurring) radioactive isotope cobalt-60. It doesn’t actually make the food radioactive (barring any mishap).
Rad Source markets its products as “non-nuclear irradiator solutions”—meaning that devices such as its 420 Cannabis Remediation System utilize an electric photon generator rather than a radioisotope such as cobalt-60. The device doesn’t produce any radiation when not in use, and there’s reduced risk of contamination either through mishap or in disposal.
However, this is a comparatively recent innovation and it’s still the same X-rays that are emitted from the device—“non-radioisotopic” might be the better term than “non-nuclear,” strictly speaking. Concerns about disposal were raised after the Goiânia accident in Brazil in 1987, when discarded radiological materials were found and handled by local residents, resulting in the deaths of four people and the contamination of some 200.
Irradiators that use cobalt-60 fall under the oversight of the US Nuclear Regulatory Commission, and this method has long been the norm in the industry. The process has been around for the past 60 years but was for the first three decades largely under study by the US Army, and only slowly taken up for study by the commercial sector. The Food & Drug Administration (FDA) permitted the use of irradiation for potatoes and wheat in the 1960s, but it wasn’t widely adopted.
At first, the process was explicitly portrayed as a commercial use for nuclear waste products. It was the US Energy Department, which produces nuclear weapons for the Pentagon, that funded the irradiation test facilities and provided them with radioactive isotopes. A 1982 editorial boosting food irradiation in the Toronto Globe & Mail, cited in a study on the website of the International Atomic Energy Agency, explicitly stated: “Acceptance of gamma processing would mean a great deal to the troubled nuclear industry, which is aggressively marketing the process as a means of selling the by-products of nuclear research.”
Consumers Say “No”
Irradiation was only approved by the FDA for general use in the US food industry in 1986. This approval was met with protest by many consumer advocates, who noted studies finding that radiation can reduce nutrients and create “unique radiolytic products” in the treated organic material. Formaldehyde has been found to form in irradiated starch, benzene in meat, peroxides in plant tissues and formic acid in sucrose. These are of varying toxicity (benzene is a carcinogen), and the quantities produced were found to be acceptably small by the FDA. But studies also found that irradiation can paradoxically increase the susceptibility of treated foods to carcinogenic aflatoxins.
In 1986, the FDA regulators approved to require that all irradiated foods must display the international symbol for irradiation. The FDA website states: “Look for the Radura symbol along with the statement ‘Treated with radiation’ or ‘Treated by irradiation’ on the food label.”
The Radura was certainly designed by slick PR pros. It’s an innocuous stylized image of a flower in a circle, with no hint of any symbology (e.g., the atom, the radioactivity warning sign) popularly associated with radiation. And, significantly, there were loopholes: Ingredients in processed foods, and all spices, are exempt from the labeling requirement.
Yet, you’ve probably never seen the Radura in any supermarket. Why? Consumer advocacy group Food & Water Watch offers some possible reasons. They report that consumer feedback indicated that taste and texture were both negatively impacted, especially in irradiated meats. And there was apparently reluctance to purchase even irradiated vegetables.
A 2006 Food & Water Watch report on the state of food irradiation found “an industry in free fall.” It stated that “the food irradiation industry appears dead in the water—at least for now. Very few irradiated items are actually sold to consumers, representing a virtually invisible fraction of food sales nationwide.”
The report noted that what had been the industry’s leading company, SureBeam, filed for Chapter 7 bankruptcy (complete liquidation, not reorganization) in 2004.
In approving the process, the FDA itself noted that “irradiation causes certain changes in foods…that…can affect the flavor or texture…in a way that may be unacceptable to some consumers.”
Indeed the industry’s own Food Irradiation Update Newsletter reports that of irradiated food products marketed in the US in 2010, spices accounted for the overwhelming majority—80,000 tons out of 103,000. Not coincidentally, we may assume, that product doesn’t have to be labeled.
After the 2001 anthrax terror attacks, in which deadly spores were mailed to Congressional offices, incoming mail at targeted federal buildings in Washington, DC was treated with massive doses of radiation—far greater, it must be noted, than those typically used in the food industry. Mailroom handlers started complaining of skin irritation, headaches and nausea, as well as tingling, bleeding and a metallic taste in their mouths. These reports dealt a further blow to food irradiation’s public image.
Jaydee Hanson, policy director at the Center for Food Safety, reached by Cannabis Now, states flatly: “Stores didn’t want to display that symbol.”
Generally skeptical of the practice, he also stresses that any handling of radioactive materials poses risks. “You don’t want workers being irradiated, in addition to the problems with the food.”
Hanson ultimately believes the entire mentality represented by irradiation and other forms of remediation is backwards. “We believe there are ways to keep our food safe without irradiation,” he says. “Killing the pathogens after they’re in our food is the wrong approach. The FDA should be working to make sure the pathogens don’t get into our food in the first place.”
The Preventative Principle
A similar perspective is advanced by Kyle Baker, co-founder of Illinois-based Ecobuds, an industrial hygiene service for indoor cultivation facilities, and its newly launched sibling company CleanTheory, offering similar expertise for hydroponic horticulture.
Baker acknowledges that irradiation “is generally regarded as safe” and is an “acceptable form of pathogen removal” along with alternatives such ozonation—exposing product to ozone. But he adds: “There’s degradation of materials in any type of remediation. Ozonation creates formaldehyde from organic compounds, which you don’t want to breathe in. Even irradiation isn’t fully successful without a very large dose, thereby decreasing product quality. By definition, remediation means the product didn’t meet quality standards acceptable for market.”
Baker continues. “The ultimate control mechanism is prevention or avoidance,” he says. “That’s why our focus is making sure facilities are clean, using Good Manufacturing Practice. We need GMP standards for the cannabis industry to make sure we’re putting out product as safely as possible.”
For Baker’s business, this means treating equipment and facilities (not the actual product) with chlorine dioxide, and consulting on best practices. “We make sure clients change the filters in HVAC systems, and supply them with equipment to increase filtration, increase the air changes per hour. This is what helps clients have less disease and a safer product that complies with standards and is safe for employees.”
Baker sees this in terms of managing the “bioaerosol process system”—the relationship between soil, water, air and light—to replicate natural conditions.
“In the outdoors, lightning strikes create ozone that kills airborne bio-aerosols. There are natural things that occur on Earth that keep a check on antagonists. We try to recreate that balance, for instance, by making sure fertigation systems are clean,” he says, referring to irrigation systems that also deliver fertilizers.
The Phoenix-based Foundation of Cannabis Unified Standards (FOCUS) is working to build an eventual federal framework for a legalized industry. FOCUS is in a formal partnership in this endeavor with the Association of Food & Drug Officials (AFDO), an organization that dates back to the establishment of federal regulation of these industries with passage of the 1906 Pure Food & Drugs Act.
Lezli Engelking, president of FOCUS since its 2014 founding, has this blunt assessment about irradiated cannabis: “My assumption is that it’s way more common than it should be.”
In Engelking’s view, an overemphasis on remediation reflects the vacuum in federal regulation.
“Usually, there’s a federal agency that provides guidelines for an industry—whether it’s the FDA, EPA or USDA,” she says. “But cannabis is only regulated at the state level, without any federal oversight. With voter initiatives, states had to build programs from scratch, often by people with no background in cannabis. So, there weren’t any guidelines, just testing requirements. Cannabis producers have more rules and regulations than the oil and gas industry, but no official guidelines for how to conform to them. If the product doesn’t meet standards, small farmers who can’t afford to sacrifice a harvest have to remediate. But remediation is reactive in nature. If they did things right the first time, they wouldn’t have to remediate.”
The lack of federal oversight also means that irradiated cannabis policy is left to the states—few of which seem to have provided much clarity. Nevada attempted to impose labeling of irradiated cannabis with the Radura. But Rad Source petitioned the Nevada Cannabis Compliance Board to drop this requirement, noting that the FDA labeling rule only applies to food, not drugs—and arguing that cannabis is a drug, not a food. The requirement was indeed dropped.
Engelking also notes that while the FDA categorizes irradiation as “generally recognized as safe” (GRAS), “it’s recognized as safe for the way its being used. But if you’re smoking flower that’s been treated, it’s different from food. There’s a lot of research on this in the food industries, but not the cannabis industry. When you combust and inhale something, it’s a different reaction, and there’s not a lot of good data yet. We need better data on whether irradiated cannabis changes the chemical profile of the flower, and whether it impacts the terpene and cannabinoid profile, too.”
She concludes by emphasizing what she said a few minutes ago: “If operators knew how to prevent growing cannabis with mold or pests, they wouldn’t even have to go through that step.”
Is Irradiated Cannabis Organic?
The absence of unified national standards is especially critical where the question of organic certification is concerned. USDA standards don’t consider irradiated foods organic. But of course, there’s no legal organic certification for the cannabis industry in the US because of its federally prohibited status.
One of the few studies on the effects of irradiated cannabis was undertaken in 2016 by Dutch researcher Arno Hazekamp and published in the journal Frontiers in Pharmacology. It found: “The effect of gamma-irradiation was limited to a reduction of some terpenes present in the cannabis but keeping the terpene profile qualitatively the same. Based on the results presented in this report, gamma irradiation of herbal cannabis remains the recommended method of decontamination, at least until other more generally accepted methods have been developed and validated.”
In an implicit acknowledgement of continued consumer wariness, the study noted that the corporate euphemism game is continuing in Canada: “To cushion the impact on their customers, the obscuring term ‘cold pasteurization’ was introduced when, in fact, gamma irradiation treatment was applied.”
Federal legalization has made cannabis irradiation far more widespread in Canada than the US. Health Canada officially recommends irradiated cannabis as a method of marijuana remediation. Canadian cannabis regulations do mandate that edibles made from irradiated bud be labeled—although not smokable or vape products. Yet, in a seeming contradiction, Canada’s food irradiation regulations are far more restrictive than those in the US—only potatoes, onions, wheat and flour may be irradiated.
Clearly, many more studies are needed. But Ronnie Cummins, international director of Organic Consumers Association, tells Cannabis Now: “We wouldn’t recommend allowing irradiated cannabis to be considered organic. USDA rules on organic production and labeling, the culmination of a decades-long mass grassroots-based consumer and farmer campaign, prohibit the use of GMOs, toxic pesticides, chemical fertilizers, sewage sludge and irradiation in organic production.”
Pointing to his group’s “What’s Wrong with Food Irradiation” page, Cummins says: “Irradiation of foods, fiber and cannabis products, utilizing the waste products of the nuclear industry, pose serious risks for human health and the environment, and serve to legitimize the dangerous practices of the nuclear power and nuclear weapons industries. The Organic Consumers Association urges cannabis growers to avoid irradiation and instead to certify their products as ‘USDA Organic’—thereby guaranteeing consumers that their cannabis is free of GMOs, toxic pesticides, chemical fertilizers, sewage sludge and irradiation.”
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Bonno
@breeder_steve
· Jun 13
Replying to @HadwinHapp and @ms_janeen_davis
The markets are young. The consumers are largely unsophisticated with pedestrian tastes. They're largely content with generic indoor which is the wine-kitz of cannabis. Sure, it looks fine in the glass... but in essence is just sterile, by-the-numbers, uninspired hipster hay.
Canna World
@CannaWorld4
Bonno
1h
Some people have never tried properly cured weed and it shows ??