Views: 8 Author: Site Editor Publish Time: 2018-02-06 Origin: Site
It’s a 21st century gold rush. People are leaving home, relocating, and changing careers. They’re leaving jobs in finance, marketing, farming, crop science, and a variety of other perfectly respectable fields. You hear about them abandoning cushy paychecks at Google, Microsoft, Pepsi, and American Express. Some even come from serving in the military.
They’ve all joined the throngs trying to make it big in a brand-new enterprise: growing, processing, packaging, and retailing recreational marijuana. It’s a new industry emerging right before our very eyes and, predictably enough, it’s struggling to establish something resembling equilibrium.
That struggle grew considerably more complicated with the January 5 decision by Attorney General Jeff Sessions to lift an Obama-era policy of leniency that kept federal authorities from looking into marijuana sales in states where the drug is legal. All stakeholders in the burgeoning movement to legalize marijuana are watching closely to see what will happen now that Sessions has left it up to federal prosecutors to decide what to do in cases where state rules contradict federal drug law.
Even before the Sessions announcement, the cannabis industry was fraught with risks and complications. Ever-changing local and regional regulations threaten continued success, or at least place a lot of burdens on young companies. Testing each batch, placing individual barcodes on each sellable product to be scanned at point of sale for track and trace, and affixing child warning labels—these are just a few of the tasks on their to-do lists.
It’s an industry filled with contradictions. Package design, for example, is sophisticated, rivaling anything at the CPG level, and retail outlets resemble the lobby at the Bellagio in Vegas. But production, processing, packaging, and labeling are not so flashy, relying for the most part on labor-intensive manual and semi-automatic processes. Most see the need for expansion, automation, best practices, and standards.
And all agree the time is right now. There is an unprecedented interest in machinery and what it might be able to do. There’s no future in a dozen young workers sitting on the floor trimming, weighing, bagging, sealing, and labeling by hand. And you are one of the lucky employers if, week to week, you have the same dozen workers. HR duties like interviewing, hiring, background checks, and training are a nightmare. Some operations have a permanent “help wanted” sign up.
Most report it’s hard to keep up with product demand. Having focused the first few years on growing a crop, the emphasis now is on harvesting, trimming, processing, and packaging. Operational efficiency and scalability are badly needed.
Rarely before has one product been identified to have so many uses or come in so many packaging formats, including glass and plastic jars, rigid tubes, decorative tins, cartons, flexible pouches, bottles, etc. And look at the ways cannabis can be delivered: smokable flower, oils for vape pens, infusion into foods like candy, chocolate, mints, cookies, brownies, soda pop, teas, and sugars. There are fast-growing market segments like tinctures, shatter, and wax, not to mention talk of cannabis-dissolving mouth strips and cannabis-infused wine. There’s also CBD oil, applied topically for one’s skin and joints or taken orally for help with seizures, PTSD, cancer, and other maladies.
States that have gone recreational are Alaska, California, Colorado, Oregon, Nevada, Washington State, Maine, and Massachusetts. Early reaction suggests that they’ll fight Attorney General Sessions tooth and nail on the changes he seeks to implement. There’s plenty at stake when you consider that some 30,000 jobs have been created in Washington State alone. And then there’s all that cannabis-generated revenue now streaming into state coffers.
Now that California has legalized recreational marijuana, there are predictions of up to 10,000 retail establishments offering more than 500 SKUs. Many of the operators are trying to build a model they can replicate and roll out as more states vote yes on legal recreational use. Meanwhile, whispers about Big Tobacco, Big Pharma, and mainstream Consumer Packaged goods companies getting involved are heard with increasing frequency.
So where does packaging fit in? The short answer is everywhere. Growers and marketers are showing an insatiable interest in automation, though in most cases “semi-automation” would be more accurate at this stage. Harvesting and trimming operations are automating as well.
Materials are being explored just as aggressively, as are packaging formats. Material science will play an especially crucial role as new cannabis products just emerging from development call for complex structures capable of providing moisture and gas barrier. Strips for oral delivery is just one example of these new products now coming out of R&D.
Worth noting, too, is how the cannabis industry supports myriad related businesses such as third-party logistics, security lighting, video and alarms, indoor grow lighting, irrigation, extracting equipment, chemicals, etc. The list goes on and on.
Two areas worth watching are contract packaging and equipment leasing. While growers are raking in the cash, much is slipping through their fingers. Ridiculously high taxes leave little behind, especially after high labor cost. It might make sense for contract packagers to specialize here and remove capital equipment costs from the grower side. We did not hear of any examples of cannabis contract packaging, but that doesn’t mean it isn’t going on already. No one we talked to knew of any contracts, however. Maybe it will be Contract Manufacturing Operations (CMOs) already serving the pharma market who bring contract packaging to the cannabis business.
Equipment leasing is another possibility. It would allow smaller and medium-sized players to get automated. There are some OEMs, including PMMI companies, that have leasing arrangements in the cannabis industry already, but the practice is not yet widespread.
In this fragmented market, it’s quite possible that regional preferences may vary. Colorado, for instance, might go for contract packaging while Washington becomes an equipment leasing state. The point is that retailers, growers, and processors now have options. Savvy material and equipment suppliers see the growth and may ultimately design machines to address cannabis-specific packaging challenges, according to PMMI Business Intelligence (see accompanying sidebar).
Rest assured that as this gold rush continues to pick up steam, as volumes and numbers of SKUs and demographic constituents multiply, smart business practices will bring order and profitability to what now resembles the Wild West. In the meantime, we present here a slightly fragmented and necessarily busy snapshot of the cannabis scene as it exists today. Just remember our warning: By the time you finish reading this, everything may have changed.