SUPPLY CHAIN OVERVIEW
Because cannabis raw goods produce so many different types of consumer goods, our industry looks less like wine and more like corn.
Nursery & Cultivation
The heart of the cannabis industry and frankly, the heart of its culture is in nursery and cultivation.
Cannabis genetics are crafted, honed and duplicated in the Nursery. Currently, there are three ways that cannabis plants are propagated, from (1) seed, (2) clone and (3) tissue culture. The most common form of propagation is cloning, where clippings from a “mother” plant are taken to start new plants. Here is a basic overview of cannabis plant cloning.
Due to its illegality, the cultivation of cannabis in the U.S. has developed a variety of farming formats, each with unique advantages and disadvantages. These are as follows:
Outdoor: Full Sun
Outdoor: Hoop House
The manufacturing of cannabis consumer goods can be confusing for many because of the sheer variety of products formulations and types.
A simple way to understand cannabis consumer packaged goods (“CPG”) is to break them down into two feedstocks:
cannabis flower in the raw (i.e., “buds”); and
cannabis resins and oils extracted from flower glands
Cannabis genetics are vast and ever evolving and sale of cannabis flower, or “buds,” accounts for the majority of consumer purchases. The production of cannabis flower typically results in the following CPG form factors:
Jarred or bagged flower (“buds”)
NOTE: a growing segment of consumer CPG is cannabis flower infused with concentrates (see below)
Cannabis oil is extracted from the resin of flowers through myriad processes, each designed to render particular qualities of oils. The production of cannabis oils typically result in the following CPG form factors:
Concentrates for smoking, e.g.:
Butters, Sugars, Sauces & Diamonds
Together, flower and oil product are the bedrock concepts of cannabis manufacturing.
Testing & Distribution
Cannabis testing is the central quality control point in cannabis markets. While different states place the requirement to test on different sectors of the supply chain (i.e., by license type), all markets segregate testing to independent laboratories.
Distribution regulations vary state to state, but normally, Distributors are responsible for obtaining final testing of cannabis product, placing quality control and regulatory labels on packaging and delivering final goods to retail outlets.
Laboratories use fairly complicated scientific equipment like mass spectrometers to test cannabis flower and oil produced goods before they reach market. Typically, laboratories test for the following types of information to be put on labels:
Cannabinoid content (e.g., % of THC and CBD) per piece and total package
Mold & water activity
Heavy metals residue
In almost all markets, Distribution acts as the central point where product is delivered, tested, quality controlled and distributed out to retailers. In some states, like California, the distributor is also responsible for collecting taxes from the supply chain – creating tremendous confusion. Increasingly, distributors serve not just the quality control function, but a sales force function for many brands who are not economically strong enough to fund a sales team.
Much like the alcohol industry, distribution enterprises have developed significant strength in the cannabis industry evolution.
Retail & Delivery
The final step of the supply chain is to deliver cannabis CPG, whether flower and oil derived, to the end consumer. There are two flavors of retail sales: retail stores and retail delivery.
As more and more states adopt recreational markets, cannabis stores are looking more and more like traditional retail boutiques for clothing, jewelry or makeup. Aside from the security and strict age qualification processes, most cannabis retail looks a lot like traditional retail. The COVID pandemic introduced two new variants to the in-store experience of cannabis retail: (i) curbside delivery outside the shop and (ii) less common, but drive-through service alongside.
In medical marijuana markets, cannabis retail delivery predominated. In many states, like California, it is the predominant means of cannabis sales, both legal and illegal. Many think of delivery services as the “sleeping giant” of cannabis because there is such high demand for discrete sales of cannabis. As the stigma left over from the Drug Wars evaporates, more and more customers will be comfortable stepping into retail store-front; however, between the discretion of delivery and the cultural shift toward home delivery during the COVID pandemic, delivery will be a strong feature of the retail landscape for quite some time to come.