Behind the Scenes of the Cannabis Industry

With the recent boom of the cannabis industry, many consumers and entrepreneurs have begun to wonder about possibilities within the business. Watching the explosion of Cannabis stocks like Tilray, Inc. (TLRY), Canopy Growth Corp. (CGC), and Cronos Group Inc. (CRON) is peaking new interest in the industry and leading to further investment.

It’s no surprise given the cannabis market is expected to reach a market value of $13.6 billion through 2019, marking a 32% increase over 2018 totals of just $10.3 billion, according to data from New Frontier.

All of this growing interest means opportunity for the savvy investor or entrepreneur. Sometimes however, before making the leap into a new business venture it pays to take a look behind the scenes.

Here’s a little look at the Cannabis industry, from seed to sale, in 2019:

At the Nursery

At the nursery today we will be following Adam the assistant cultivator on a tour of this newly constructed Tilray facility in a secret location near the U.S-Canada border.

Source: Tilray

 

Tilray is one of the largest cannabis producers in the world, so this tour will give you a solid idea of how the best of the best in the industry operate.

As we walk through the security guarded doors of the facility the group enters into a locker room and Adam instructs everyone to put on full hazmat suits.

The cannabis industry is serious about quality and cleanliness. That’s in part due to the stringent regulations put on cannabis producers that include random inspections from METRC, a cannabis regulation enforcer.

Due to these continual inspections many cannabis producers and sellers hire companies like Green Check as cannabis compliance providers, assuring their facilities are always up to code and ready for inspection.

As we step out of the locker room in our hazmat suits, we can see this place looks a lot more like a lab than some clandestine cannabis grow operation. Real investors, with deep pockets, looking for real returns are quite clearly involved here.

Walking through a white hall with giant, locked doors on either side, Adam turns to one of the doors, gesturing for the group to enter.

Upon entering, adam informs the group this room is one of twenty temperature, light and humidity controlled rooms that can produce thousands of pounds of cannabis annually. Of course what you really notice first in this room is the pungent odor.

Then, a bright and cheery woman dressed in a similar hazmat suit to the one we are wearing, pops her head up from between a row of maturing cannabis plants.

Source: Tilray

 

She explains, her name is Annie and that she is the head cultivator of the facility. Annie then begins to dissect the various stages of Cannabis production.

She explains how the company uses ‘mother plants’ to create clones with desired genetics, then they move the clones to the vegetative stage room(which is the room we are in now), and then finally to another room with different temperatures, daylight hours, humidity, etc. for flowering, and finally a cold, dark room for drying before trimming and storage.

The complexity of the whole process is astounding, and so are the tools being used. I expected to see the shovels and hedge clippers, but what is surprising is the facilities more advanced, modern tools. Cannabis grow operations utilize industry specific Enterprise Resource Planning software to help them forecast, plan, track, and register each plant as it goes through the production process.

After visiting the impressive grow room, Adam takes us back out into the white hallway and we walk down to the end and open a door that looks like it could be used as a bank vault.

Inside is the trimming room. Here there are a number of young men and women all dressed in hazmat suits standing in what looks like a lab. However, instead of having petri dishes in front of them, they have piles of cannabis which they are trimming away from the stems so it can be sold or made into extracts.

Tilray processing facility

Source: Tilray

 

After making our way out of the Trim room, Adam escorts the group back down the hall to another door that could have been a great bank vault.

Inside is a lab that I would expect to see at a University or high tech research facility.

Adam, introduces the group to Maria, the Lab’s head scientist.

Maria tells us she was actually recruited from MIT’s laboratory to come work for Tilray. This is common in the industry. Scientists with high level degrees in botany, chemistry, etc. are now a requirement for cannabis labs.

Maria explains that her job is to analyze the product for purity, then her team carries out the extraction process. This is where cannabidiol (CBD) and tetrahydrocannabinol (THC) are pulled from the cannabis plants and made into tinctures, oils, sprays, and various other forms of product for sale.

Tilray making extractions

Source: Tilray

 

Much of the product remains in its original flower form, but almost 35% of total production is made into extracts at this facility.

The whole production facility is far more modern, and far less fly by night than is commonly expected of the Cannabis industry, but this extraction lab is truly state-of-the-art.

Then, we leave the extract and purity lab and Adam takes us down the hall to the real vault. This room contains all the product ready for shipment held in the lab. Millions of dollars of product all in one small room like this is impressive and illustrates the growing power of the industry.

Here, once again, we see the use of modern software and technology in tracking each specific cannabis strain and substance through the production and delivery processes, then finally to the final point of sale.

Distribution

After visiting the vault, Adam takes us out back to the distribution center. This is where Carl the distribution manager is hard at work on his computer. Once again using a cannabis ERP system to help track operations.

Carl informs the group that large facilities like this one only sell to other smaller distributors or retailers(aka B2B), rather than selling the product themselves. Business to business sales are tracked within the ERP software and deliveries are automatically scheduled and sent out to driver’s who come in and complete the job.

Now, we are done with the first part of our facility tour, so we say goodbye to Adam and get in the car to head to a local dispensary.

At the Dispensary

Upon arrival at the local dispensary we are greeted by a security guard, once again, who asks for our ID’s. This is a state with legalized cannabis so if you’re 21, you can enter.

Inside, we meet Amy the budtender.

She explains that business has been booming of late so she doesn’t have long to stay and talk.

It’s no surprise given the fact that 2018 was the first year where legal recreational cannabis sales revenue was higher than medical cannabis revenue, and illicit cannabis nationwide were down 11% YoY.

Recreational sales are booming and Amy says she couldn’t do it without her point of sale (POS) system, which is specifically designed for dispensaries and enables users to easily manage and fulfill patient and recreational orders.

Amy quickly takes us through the buying process of the average consumer. Her job as a budtender is to explain the effects, tastes, smells, etc. of the product and keep people coming back for more with great customer service.

The entire sale process takes just minutes and is as easy as buying a bottle of Jack Daniels’.

There it is, seed to sale, behind the scenes of the cannabis industry. If you’re an entrepreneur or investor looking to take the plunge into this burgeoning industry then I hope this tour puts some of your cannabis concerns to bed.

The cannabis industry is here to stay, the legal market has a Compound Annual Growth Rate (CAGR) of over 16%, and things are just getting started. The smart money is with cannabis going forward. Where will you be?

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