Navigating the Transition: Professionals Switching To The Cannabis Industry
In recent years, the cannabis industry has emerged as one of the fastest-growing sectors worldwide. With the increasing legalization of medical and recreational marijuana, professionals from diverse fields are eyeing this burgeoning industry as a promising career path. However, transitioning into the cannabis sector is not without its challenges. Understanding the nuances of this unique industry is crucial for success. This blog post explores the journey of professionals transitioning into the cannabis industry and highlights the key aspects they need to grasp to thrive.
Regulatory Landscape
Understanding Compliance and Legal Frameworks:
The cannabis industry is heavily regulated, with laws varying significantly across states and countries. Professionals from other industries must familiarize themselves with the complex legal landscape, including:
Licensing Requirements: Different regions have distinct licensing processes for cultivation, distribution, and retail. Understanding these requirements is essential for legal operation. There be varying levels of complexity and nuance from state to state. For instance, some states license cultivation space by the square feet of allowable area for cultivation and some states issue licenses for a specific plant count.
Compliance Standards: Regular audits, inventory tracking, and adherence to safety standards are mandatory. Knowledge of compliance software and procedures can be beneficial. This is another area that changes state to state, many states use METRC as their seed-to-sale tracking software but some states require operators to use other software platforms.
Regulatory Changes: The cannabis industry is in a state of flux, with laws and regulations frequently changing. Staying updated on legislative developments is crucial.
Product Knowledge
Cannabis Cultivation and Processing:
Professionals entering the cannabis industry need to develop a solid understanding of the plant itself and the processes involved in bringing products to market (Strategic Leaf's current educational courses focus on this aspect from a decision-maker perspective as opposed to a how-to course):
Cannabis Strains and Their Effects: Knowledge of different strains, their properties, and their effects on consumers is vital. This includes an understanding of THC, CBD, and other cannabinoids.
Cultivation Techniques: Basic knowledge of growing conditions, pest control, and harvesting methods is important for those involved in production.
Extraction and Manufacturing: Understanding various extraction methods (e.g., CO2, hydrocarbon, ethanol, solventless) and product types (e.g., edibles, vapes, infused prerolls) helps in quality control and product development.
Consumer Education and Engagement
Marketing and Branding in a Stigmatized Market:
Marketing cannabis products presents unique challenges due to lingering social stigmas and stringent advertising regulations:
Brand Positioning: Crafting a brand identity that resonates with both new and experienced consumers while adhering to advertising restrictions. These two groups of consumers can be very different from each other and thus you may choose branding that speaks to one or the other.
Educational Content: Providing consumers with reliable information about product usage, benefits, and safety to build trust and loyalty. Especially when it comes to new consumers.
Community Engagement: Engaging with the community through events, social media (good luck on this one, many companies have backup accounts because most social platforms are not cannabis friendly), and customer service to create a positive brand image and address misconceptions about cannabis.
Operational Challenges
Supply Chain and Inventory Management:
Managing operations in the cannabis industry requires adapting to industry-specific challenges:
Inventory Tracking: Implementing robust inventory management systems to track products from seed to sale, ensuring compliance and reducing loss. There are many ERP softwares that integrate with the state mandated seed-to-sale tracking softwares, and these platforms are very useful for managing inventory, managing operations, and maintaining compliance.
Supply Chain Logistics: Navigating the unique supply chain requirements, including secure transportation, sourcing clean quality product with accurate COAs, packaging with unique requirements, and storage solutions for cannabis products.
Quality Assurance: Establishing quality control protocols to maintain product consistency and safety, crucial for consumer trust and regulatory compliance.
Financial Acumen
Navigating the Financial Complexities:
The financial aspects of the cannabis industry can be particularly challenging:
Banking Restrictions: Many financial institutions are hesitant to work with cannabis businesses due to federal regulations. Professionals must explore alternative banking solutions and manage cash flow effectively. Some credit unions and local banks will work with cannabis companies.
Taxation Issues: Understanding the specific tax regulations, such as Section 280E of the IRS Code in the U.S., which disallows standard business deductions for cannabis companies. This one is a tough pill to swallow for the cannabis industry and really puts a stranglehold on margins and available cash, and can cause problems when it's time to pay Uncle Sam. This is without a doubt a barrier to growth within the cannabis industry.
Investment Strategies: Attracting investors and managing funding can be complicated by the industry's legal status. Building solid business plans and demonstrating compliance can help in securing investment. Private money tends to be the driving force in cannabis, and investors want to see a business plan based on real world data and a realistic valuation. (Strategic Leaf builds pro formas based on real world data and experience in the field).
Culture
Legacy Cannabis and Startup Chaos:
The cannabis industry is unique in that it has a legacy culture from it's underground roots, and for now most companies are start ups trying to make it in a new market:
Legacy Culture: The cannabis industry in the US has been an underground market since the 60s when it was being flown in from other countries such as Colombia. Domestic production was scattered in clandestine operations but heavily focused in California. There are many "legacy operators" who have transitioned (maybe only with one foot in) into the legal industry, and they tend to do business a little differently. Many lack the professionalism and business skills that those coming from the corporate world are accustomed to. This can create challenges in B2B relationships or in companies where legacy and corporate culture clashes.
Start up life: Start ups are not for the faint of heart! Being a new industry, nearly every cannabis business is a start up. This means many companies are still fighting tooth-and-nail for their place in the market. Often times these businesses are somewhat bootstrapped which can require employees to wear MANY hats and for resources to be spread thin. Many cannabis companies are building the plane as they fly it, and this can be very chaotic and stressful. Those of us who have been in the industry for a long time have definitely lived with this reality.
New Industry: Being a new industry filled with start up businesses means that not every business is going to make it. 45% of all businesses fail within their first 5 years, and that's for businesses in normal industries that don't deal with the same red-tape and unique issues that the cannabis industry does. This can mean that you may end up working at a sinking ship and may be required to find a new job and move more than once or twice in your cannabis career.
Ethical Considerations
Promoting Responsible Use and Social Equity:
The cannabis industry is closely scrutinized for its ethical practices:
Responsible Marketing: Ensuring that marketing efforts do not target minors and promote responsible consumption. This can be difficult as what is considered "responsible" is subjective and some lawmakers can take things a bit far with this. There's also the issue of not being able to use some traditional marketing channels such as TV, Meta ads, TikTok, etc.
Social Equity Programs: Supporting initiatives that address the historical injustices related to cannabis prohibition, such as providing opportunities for communities disproportionately affected by the War on Drugs.
Sustainability Practices: Implementing eco-friendly practices in cultivation and production to minimize the environmental impact of cannabis operations. Depending on the methods of cultivation and manufacturing used, these processes can consume a lot of electricity, water, solvents, plastic consumables, etc.
Conclusion
Transitioning into the cannabis industry offers exciting opportunities but requires a comprehensive understanding of its unique challenges. Professionals must equip themselves with knowledge of regulatory requirements, product specifics, consumer engagement strategies, operational logistics, financial complexities, industry culture, and ethical considerations. By doing so, they can navigate the intricacies of the cannabis sector and contribute to its responsible and sustainable growth. The journey may be complex, and sometimes a little crazy, but for those willing to learn and adapt, the cannabis industry holds significant potential for career progression, innovation and success.