Washington State Archives - Green Market Report

StaffFebruary 8, 2023


The Daily Hit is a recap of the top financial news stories for February 8, 2023.

On the Site

Scotts Miracle Gro Sues TerrAscend, Jason Wild Over Etain Acquisition

The acquisition of New York medical cannabis operator Etain by Riv Capital is entering another messy chapter. Scotts Miracle-Gro (NYSE: SMG), owner of the hydroponic company Hawthorne, has filed a lawsuit against Jason Wild and TerrAscend (OTC: TRSSF) claiming they ruined its $175 million investment. Read more here.

Washington State Cannabis Residency Requirement Upheld by Federal Court

In a break from a national trend, a federal judge in Washington state upheld the state’s residency requirement for cannabis business ownership and ruled that the U.S. Constitution’s dormant commerce clause doesn’t apply because marijuana is still federally illegal. Read more here.

Biggest Cannabis Grower in Louisiana to Double Capacity

Good Day Farm, which is a partner with Louisiana State University and one of only two cannabis farmers in the state, is increasing its canopy size by 40,000 square feet within an already immense 225,000-square-foot facility in the town of Ruston. Read more here.

Capital Crunch Sparks Crowdfunding Campaigns

Capital has dried up in the cannabis industry, but companies still need investors and their money. This is sparking a renewed interest in crowdfunding. Companies are also finding that many platforms allow for debt deals versus straightforward equity deals. Read more here.

In Other News

Drippy Enterprises

Drippy Enterprises Inc., a cannabis-infused beverage company, aims to raise up to $1 million for the purpose of growing its cannabis-infused soda lines, expanding distribution channels, and increasing product inventories to meet the growing demand for cannabis beverages. Read more here.

EGF Theramed Health Corp.

EGF Theramed Health Corp. (CSE: TMED) (OTC Pink: EVAHF) (FSE: AUH) signed a nonbinding letter of intent to acquire its first cannabis dispensary, a single store on Vancouver Island in British Columbia. EGF Theramed noted in the announcement that it believes the market has become increasingly favorable to acquire assets from distressed single store operators favoring scaled centralized operations. Read more here.

Item 9 Labs

Phoenix-based Item 9 Labs Corp. (OTCQX: INLB), a vertically integrated U.S. cannabis franchisor and operator, shared that its premium cannabis brand, Item 9 Labs, recorded a 30% year-over-year increase in units sold in January 2023, compared to January 2022. Read more here.

Adam JacksonAugust 11, 2022


As talks revolving around the federal legalization of cannabis splinter in Congress, the question of whether the nascent industry can eat beverage alcohol’s margins remains a growing one.

In a report, titled, “Is Cannabis a Threat to Alcohol Sales?” BDSA Consumer Insights contends that while the crop is as popular as ever, any real breakthrough of consumer participation in adult-use and medical markets remains stymied in D.C. – casualties of political animosity and procedural acrobatics aimed at slowing progress.

Consumption Is High

“In just a few short years, attitudes towards cannabis across the country have shifted rapidly, with the share of those who have “bought-in” to cannabis consumption skyrocketing while fewer and fewer report not being open to consuming cannabis,” the report said.

BDS Analytics data showed that this past Spring, 51% of Americans in adult-use states claim to have consumed cannabis in the past six months, up 15% from Spring 2020. At the same time, the share who claim to be rejecters (non-consumers who are not open to consuming in the future) fell from 31% in Spring 2020 to just 23% in Spring 2022.

Overall consumer participation is lower in medical markets, yet BDS Analytics data suggest that consumer participation is growing at a similar rate.

The share of those who report past six-month consumption ballooned from just 26% to 41% between Spring 2020 and Spring 2022 – as the share of rejecters fell from 34% to 28% over that same period.

These realities have left many companies considering what they can learn from the alcohol industry — or how they can partner — as it continues to languish within its own prohibition.

“When we look deeper into the data, we see a cannabis consumer base that is knowledgeable, open to trying new product formats, and willing to experiment with incorporating cannabis consumption into more occasions throughout their lives,” the report said.

Stacking up to Big Alc

While consumer usage rates are starting to near beverage alcohol levels, experts generally agree that significant cannibalization of alcohol by cannabis would likely only occur over the course of at least another generation.

“While the trend toward alcohol’s displacement by cannabis is a durable one, especially among young adults, it is likely going to be a generational one, rather than one manifested in the next few years,” BDS Analytics Andy Seeger said. “Furthermore, it is expected that growing social acceptance will both increase substitutability and strengthen public preferences for cannabis over alcohol, though not completely dissuade cannabis consumers from drinking.”

Together, U.S. legal and illicit sales have been estimated to be $97 billion in 2021 – edging out against $87 million in spirit sales. Demand for cannabis in the U.S. now exceeds what the nation annually spends on spirits – and roughly matching what it spends on beer – according to a report by New Frontier Data.

Two-thirds of cannabis consumers surveyed by New Frontier said that they drink alcohol at least once per month, but 61% say that given a choice, they prefer cannabis.

Additionally, one-third of respondents said that they would like to quit drinking alcohol altogether, “though it is likely that the significant difference in social acceptability between alcohol and cannabis makes it more difficult to stop drinking entirely,” New Frontier wrote.

In another study, Colorado households – compared to all other states that did not legalize recreational cannabis – showed a 13% average monthly decrease in purchases of all alcoholic products combined and a 6% decrease in wine, according to a July 2021 report published in the Journal of Cannabis Research.

However, complicating the idea that cannabis will hurt alcohol sales, researchers’ findings showed that Washington saw an increase in spirits purchased while Oregon showed a significant decrease in monthly spirits purchased when compared to all other states without legalized recreational cannabis.

The conclusion was that the results “suggest that alcohol and cannabis are not clearly substituted nor complements to one another.”

“Future studies should examine additional states as more time passes and more post-legalization data becomes available, use cannabis purchase data and consider additional methods for control selection in quasi-experimental studies,” it said.

Shifting the culture (through regulatory action)

While the nature of cannabis consumption typically resides within the home, finding margins outside of those living spaces has been an ongoing challenge that has frustrated entrepreneurs in the industry.

Those who consume are consuming more often as consumers are pairing cannabis with alcohol and a variety of activities, BDS Analytics said in its report – though the lack of a three-tier system and on-premise regulation prevents cannabis companies from creating social hubs with experiences tied to their product.

“There is very, very little on-premise spending right now, which does add the margin,” Seeger said. “And that’s one of the things that the market, in general, is fighting right now – is a way to find margin. Those kinds of occasions would do that. That’s certainly what we see in beverage alcohol.”

According to BDS Analytics, the share of consumers in adult-use markets who report pairing cannabis with spirits or liquor rose from 12% in Spring 2018 to 22% in Spring 2022, while the share who report cannabis with cocktails doubled to a total of 20% in Spring 2022.

Pairing Up

Additionally, BDS Analytics found that consumers are increasingly pairing cannabis with activities not typically associated with cannabis.

The share of consumers in adult-use markets claiming that they pair cannabis with fine dining rose from 14% in Spring 2020 to 25% in Spring 2022, while the share of those who report using cannabis while exercising rose from 18% in Spring 2020 to 26% in Spring 2022.

“While these increases may not seem shocking to savvy industry insiders, they demonstrate that the use occasions for cannabis are incredibly varied,” the report said. “They also show opportunity for brands that can produce product with form factors and targeted formulations that speak to these varied need states and use occasions.”

Innovations in rapid-onset technology help push cannabis-infused, non-alcoholic beverage products to create a standard beverage serving of Delta-9 THC, such as Keith Villa’s non-alcoholic, cannabis-infused, Belgian-style ale — Ceria Brewing Co. — which sold out in Colorado dispensaries four hours after it’s release; or corona importer Constellation Brands multi-billion dollar investments in Canopy Growth.

Alcohol Meets Cannabis

More recently, distributing partnerships between cannabis companies and the alcohol industry are sprouting.

Fresh Hemp Foods, a part of Tilray’s Wellness (NASDAQ: TLRY) division, signed a distribution agreement on Wednesday with Southern Glazer’s Wine & Spirits — one of the nation’s largest distributors of wine and spirits.

The pact will provide Tilray Wellness with direct access to the alcohol distributor’s network, “reaching consumers everywhere from local bars and restaurants to independent and national grocery chains and convenience stores.”

“This agreement helps Tilray uniquely position itself to enter the multi-billion-dollar adult beverage category with a non-alcoholic, CBD beverage alternative, for consumers who want to relax and unwind,” said Tilray Wellness and Fresh Hemp Foods president Jared Simon.

The agreement allows Tilray to develop a U.S. CBD beverage portfolio within retail channels, “which will transition the category out of the fringe and into the mainstream,” the company said.

“Cannatourism” and the brewery model

Currently, marketing cannabis products toward specific experiential outcomes are limited without a legal framework.

Despite that, the industry has found creative ways to circumvent some of these limitations — even finding parallels with the brewery model.

Operators can establish deeper relationships with customers as people travel to and within states where cannabis is legal to visit the farms where the product is grown, similar to visiting wineries — also known as “cannatourism”.

“It’s a really big opportunity for states that have legalized cannabis to capitalize on that, not just for their own residents but also for tourists that might travel particularly for that,” said Christina Sava, an attorney at Troutman Pepper.

Other services help people find “Bud and Breakfast” spots — onsite consumption lounges in adult-use states such as a 420-friendly bed and breakfast type hotel.

“We kind of take it for granted that you can consume alcohol in entertainment venues and at bars and at restaurants,” Sava said, “but there really aren’t that many sanctioned spaces outside the home to try cannabis and share cannabis with your friends. I think this is an area that is ripe for evolution and will continue to grow.”

Debra BorchardtOctober 31, 2017


Washington State’s marijuana program is a hot mess and the state only has itself to blame. The state monitors its legalized marijuana program by tracking the marijuana from seed to sale. Every single plant is tagged from its point of conception to its final use and sale through a sophisticated software program. The program is used by every license holder and covers thousands of transactions daily.

One of the reasons for such an onerous tracking system is that marijuana is still federally illegal. States have been allowed to operate marijuana programs that have been legalized at a state level so long as they abide by guidelines listed in a document from the Department of Justice called the Cole Memorandum. The goal of the memo was to make sure legal marijuana did not make its way into the black market or in the hands of children.

The state is changing vendors and the transition has gone very badly forcing businesses to manually keep track of the marijuana plants until the new vendor can take over. The problem is that anti-marijuana forces could point to this debacle as vindication that legalized marijuana is a bad idea because it can’t be properly monitored.

 BioTrackTHC was contracted in 2013 to monitor the program with its seed-to-sale tracking, and by all accounts, it seemed to be working just fine. Then the state decided to open the program up to a public bid to see if there might be a better vendor for a better price. This isn’t such a bad idea because states should always try to see if they can save their taxpayers money and always seek to improve programs. However, the execution went horribly wrong.

In June the state selected Franwell’s METRC system to replace BioTrackTHC. However, when Franwell came to the table to begin the negotiations of planning the program takeover, talks quickly broke down. On June 9, Franwell walked away from the contract and never spoke publicly about it. One inside source said that basically, the state wanted more than they were willing to pay for from Franwell. Then the state tried to throw Franwell and the cannabis businesses under the bus by saying that Franwell wanted to charge too much money for RFID tags that the businesses didn’t want. Thereby deflecting attention away from its poorly managed transition.

Another theory from a blog PA Marijuana Medical Watch suggested that the state made demands on Franwell that weren’t in the original Request For Proposal (RFP) causing them to walk away. This blogger believes the state decided to pick MJ Freeway’s Leaf Data Systems, a seed-to-sale software company because it is getting advice from the advocacy groups National Cannabis Industry Association and Marijuana Policy Project, both investors in MJ Freeway.

Whatever the reason, Franwell walked away from a lucrative contract with the state of Washington in nine days. The state then chose MJ Freeway, which has had its own share of troubles this past year. The company has suffered hack attacks, alleged security breaches (which the company denies) and systems failures. It desperately needed a win this year. However, by winning the contract, it was also put in the position of trying to take over a multi-million dollar system with over 1,700 participants in a matter of months. No easy task for any software company. MJ Freeway issued a video response regarding the situation and trying to address market concerns.

MJ Freeway insisted that its software problems were resolved in a matter of hours and that customers were back online quickly. They also point out in the video that the task they are taking on is very complicated and takes more time than what the state had allotted.

It’s a huge program with thousands of transactions every day and hundreds of businesses involved,” said Jeff Gonring, Director of Market and Communications for BioTrack. “This is not a simple transfer of data.”

MJ Freeway was set to take over from BioTrackTHC on October 31 but now isn’t expected to take over until January 2018. The state’s Liquor and Cannabis Board has come up with a contingency plan for November 1. It’s message to the businesses, “You must keep a record of all required activity associated with your business. If you have a third-party, commercial software provider consider contacting them to review your coverage. Some software systems may capture traceability transactions for later reporting which may minimize your manual reporting requirements.” In other words, sharpen those pencils for your spreadsheets. Not only do these businesses have onerous rules and regulations they have to abide by, they now have to manually track this information and then two months later transfer it to a new program.

“The whole situation is still pretty dynamic between the Washington State Liquor and Cannabis Board, many of traceability platforms active in the state and other marijuana licensees, new information seems to be coming through on an almost hourly basis,” said Mindon Win Special Operations Coordinator at BotanicaSeattle. “The marijuana industry here in Washington is banding together to come up with solutions that keep us in compliance and able to continue doing business.”

So, what about BioTrackTHC in all of this mess? The company was set to terminate its contract on October 31, but in early October the state began talking to BioTrackTHC to extend the contract. “Events occurred that brought up a potential security concern,” said Jeff Gonring, Director of Market and Communications for BioTrack. “We need resolution on that security concern before entering into an extension.” Gonring is referring to an email that was sent to Washington licensees last month from someone claiming to have sensitive data that seems to be proven as accurate.

We are concerned about the breach. We are currently in a co-mingled state and we need assurances from the LCB that it has been remedied. We can’t expose our system to that,” said Gonring. “There is enough smoke to give us concern there is fire.” BioTrackTHC is so concerned the company issued a public letter to the Washington State LCB. At this stage, BioTrach THC hasn’t officially agreed to the extension, nor has it declined.

The security breach that Gonring believes happened is outlined in the public letter. He noted that BioTrack began a data dump in August to MJ Freeway in order to assist in the transfer of vendors. Then in September, the licensees received emails saying that a hacker had gotten sensitive data from the Washington dispensaries and wanted to sell it. The data seemed to be real and the emails weren’t seen as an idle threat. BioTrack seems to suggest that the timing is not a coincidence.

In the meantime, the state has sent out spreadsheets to business owners.  The opportunity for human error is enormous. There are almost 20,000 pounds of marijuana that are produced each month in the state that must be tracked and traced. There were 3.8 million pounds of extracts produced in August in the state that must be accounted for and the state logged $1.3 million in sales for the fiscal year 2017.

The business owners seem to be the one group left out of this equation. They are at the mercy of the state and its mismanagement of the tracking system. “I don’t want to speak for everyone but we hope people recognize that marijuana businesses are invested in compliance with the state and it’s in everyone’s best interest to demonstrate our ability to run a regulated and monitored cannabis market under these circumstances,” said Win. 

It gives anti-marijuana forces fuel for their fire to claim that legalized marijuana can’t be properly monitored. They will argue that over the next two months, marijuana can end up on the black market because it can’t be properly tracked and traced. They could be right.

Washington State’s debacle could hurt the legalization efforts if this proves to be true, especially ahead of the holiday season which is when sales rise. The entire situation could have been either avoided by remaining with a program that worked without any hiccups or at least giving a vendor enough tie to properly prepare for a transfer of services. In the end, the problem must be owned by the state for creating this self-inflicted wound.

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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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