Selling and Moving Cannabis – The New Paradigm
Local cannabis cultivators, manufacturers, and supply chain logistics businesses are adapting. We spoke with licensed cultivation business Mattole Valley Sungrown Owner-Operator Dylan Mattole, local cannabis distribution company Altum Mind’s Director of Communications Kristin Blue, and Director of Farmer Relations Laura Wright to learn how.
Metrc on the Mind
All of California’s licensed cannabis businesses are now required to track-and-trace commercial activity from seed-to-sale through an online platform called Metrc. Until recently, some licensees were squeaking by outside of Metrc, but the state’s regulating agencies pushed everyone to get online with it at the beginning of this year.Every significant step in the cultivation process requires documentation in Metrc, including planting, harvesting, processing, and the movement of goods. Cultivators have to apply Metrc “plant tags” to plants and “package tags” to containers of flower, leaf and seeds, manufacturers have to apply package tags to bulk containers of oil, and distributors have to apply package tags to bulk shipments of product bound for retail destinations. Then, the cultivator will add a significant and regular amount of time on a computer in order to properly track all of these tags.
To gain insight into how much administrative work is involved in this new paradigm, consider this hypothetical and simplified version how the movement of cannabis goods from one business to another could go down:
Imagine a licensed cultivator needs to send 50 pounds of leaf (trim not sunleaf) downstream to a manufacturing company that makes vape cartridges. The cultivation business must first have the 50 pounds of leaf in its Metrc inventory, meaning the 50 pounds have to be assigned a unique identifier (UID), an alphanumeric code that is assigned and tracked through the Metrc platform with an associated blue plastic tag that is physically affixed to the pounds.
The cultivator is responsible for initiating a transfer of this UID to the manufacturing company in the Metrc platform, an action that results in the generation of a compliant shipping manifest (the paperwork that accompanies the shipment of pounds). The process of initiating the transfer requires the cultivator to enter business details into the platform for all of the parties involved in the transaction — the cultivator, the manufacturer and the distributor that will move the pounds, plus the approximate arrival and departure times, as well as driver and vehicle information.
The driver carries the shipping manifest while transporting the 50 pounds, and upon arrival at the manufacturing facility, presents the manifest and the pounds to the manufacturer. If the pounds are acceptable, the manufacturer signs the manifest. At that point, on the computer side, the manufacturing company receives the UID into its Metrc inventory. Now the manufacturer owns the 50 pounds and can process it, tracking all subsequent changes in the disposition of the pounds through Metrc.
There are many ways cannabis goods move through the supply chain; that’s merely one hypothetical (which doesn’t even get into how money could be exchanged or the remitting of taxes). Nurseries move clones and seeds to cultivators; cultivators move goods like fresh frozen plants and pounds of leaf and flower to manufacturers; manufacturers and distributors move processed goods to other manufacturers and distributors or retailers; and goods are moved to-and-from testing laboratories too. All of this movement is tracked through Metrc.
A crucial element in the above hypothetical scenario is, in order to move the 50 pounds of leaf, the cultivator needs to have properly accounted for the 50 pounds in Metrc and the cultivator needs a computer, internet access and a working printer to produce the shipping manifest. (Not to mention all of the required cannabis business license, driver and vehicle details.) The originating licensee has to prepare and provide the paperwork in advance of moving goods.
The Distro Connection
Altum Mind is headquartered in Arcata’s Cannabis Innovation Zone along West End Road. The company (Humboldt Partner Group) actually holds three licenses: a Type 11 distributor license through the Bureau of Cannabis Control, a processor license through CalCannabis and a Type 7 volatile manufacturing license through the California Department of Public Health. (Altum Mind is not manufacturing cannabis goods at this time.) [Please note Altum Mind has been an advertiser on this website.]
With its distributor license, Altum Mind can transport between licensees of all types (cultivators, retailers, manufacturers, other distributors, nurseries and labs). The company’s focus is wholesale distribution, meaning it primarily moves and stores goods at or near the start of the supply chain — bulk leaf, flower, and extract. At times, Altum Mind does solely function as third-party transportation support; in other words, if a business needs to move cannabis goods, Altum Mind can serve as the wheels.
Given that distribution companies are almost always the connecting factor in business-to-business transactions where goods are exchanged, the Altum Mind staff often works closely with cultivators and other licensees on Metrc processes and the more complicated new considerations around moving cannabis goods.
The company’s Metrc specialist on staff frequently coaches cultivators through the process of initiating transfers and generating shipping manifests. Altum Mind will even print manifests on behalf of cultivators, provided the manifests are emailed to Altum Mind in advance of scheduled pick ups. “A lot of our farmers don’t have printers,” Wright says, which is “a quick way to hit a wall.” Furthermore, internet connections in the hills can be spotty, exacerbating the stress around preparing and printing paperwork.
“Cultivating is already a full time job,” Blue explains, “and then you add this administrative aspect to it for somebody that is used to having their hands in dirt, not on a keyboard.” Metrc-related holdups happen all the time, she says. Oftentimes transactions are delayed when a source licensee either needs to finish tagging goods before a transfer or is straight up waiting for Metrc tags to arrive in the mail.
Every Plant Gets a Tag
Let’s back up to the genesis of all the cannabis in the supply chain, to where the weed starts. Mattole Valley Sungrown is a family-run farm out near Honeydew, on the west side of Southern Humboldt County. Owner-Operator Dylan Mattole has a 10,000 square foot licensed cultivation space. For the first run of the season, he is cultivating Orange Creamsicle, Mike Larry OG, and Jack Herer.
By law, every single mature cannabis plant in this cultivation space is required to have a UID and the corresponding blue plastic UID tag must remain with each plant until the plant is either harvested, disposed of or destroyed. The tags are printed with the business name, license number and the UIDs.
Earlier in the spring, when the farm received its physical inventory of clones from licensed nurseries, corresponding Metrc transfers placed the clones in the farm’s Metrc inventory. Mattole works with a consultant who handles the computer-side of the farm’s account, and when the clones were ready to be planted in the beds, the consultant assigned UIDs to every single plant.
Mattole and his employee physically applied the corresponding tags to the plants when placing them in the beds. Mattole says that applying the tags to each plant this spring did not add much time to his general process, “but our operation is not very complicated. We’ve got three strains, six beds, and every bed is only one strain.”
Furthermore, Mattole “stacked functions” by actually using the Metrc tags to secure the plants to their bamboo stakes. “We don’t use any trellising, anywhere on the farm, which is totally nuts because we’re also growing out in the wind and the rain.” The plants get tough though, he says, and can handle the elements with support from their single stakes.
Since the Metrc process is unavoidable, Mattole gave a lot of thought to finding the most efficient way to apply the tags. “We have to deal with Metrc,” he remarks, “so I just started nerding out, figuring out how we can make it easier.”
Come harvest time, the total wet weight of every single plant by its UID is required to be recorded in Metrc. “We’ll come in at the end, pull the stake and the tag will stay on [the plant],” Mattole says, adding that it will be easy to record weights since the tags will still be attached. “Then we’ll take the tags off, they get saved for six months and then thrown in the landfill.”
Here’s the rub: That plant-by-plant fine detail is lost at the harvest stage, as the wet weights of any given group of plants get combined into what’s called a “Harvest Batch.” Eventually (and sometimes immediately), Metrc “packages” are pulled from the harvest batch and sent downstream, where the packages could be cleaned up pounds and associated leaf, the entire group of whole dried plants or bucked down flower.
“This whole bed will be dried and it will become ‘N’ amount of weight,” Mattole says, as he gestures to the nearest hoop house. The plant material from that bed will then go to the processing facility essentially as one big package. “They take over the Metrc from there,” he says, “and I don’t have to think about it anymore.”
Wholesale Storage and the Trust Factor
In addition to the myriad ways Altum Mind handles cannabis goods with its processing and distribution licenses, the company regularly takes on bulk leaf or flower which it subsequently moves down the supply chain to other distributors or manufacturers in need.
With trim and biomass, Altum Mind often makes direct purchases with explicit terms or up front payment to cultivators, but the company takes flower into its custody (sometimes processing it too) before money is exchanged or terms are determined. (Think of higher grade product here, like nugs (fine quality buds) that are sold as 1/8ths.) Fees for processing are negotiated with cultivators, and are sometimes offset by the money brought in from buyers.
Blue and Wright clarify that regardless of whether or not money is exchanged or payment terms are set up front, when goods are transferred into Altum Mind’s Metrc inventory, Altum Mind owns the material and is therefore liable for it. “It’s covered under our insurance,” Wright affirms.
“The white market is something people are having challenges with because of the trust required,” she continues. Cultivators used to hold and secure their products, but this dynamic has shifted with distributors like Altum Mind holding and showcasing flower to buyers, facilitating sales with money exchanged only after desirable terms are reached on all sides. “It’s rare that we purchase flower from a farmer before we have a sale,” Wright clarifies, “because the flower market keeps changing.”
“We are as black and white as we can be,” Blue adds. “We have full purchase and sales agreements… It’s all written down in contracts, with timelines in case there are any rejections. But it’s not a one-size fits all. It’s different for every single transaction — the amount of money involved changes. The timeframes change. But the baseline is always there,” she says. “We will pay you, and it’s pretty cut and dry as far as, ‘We got you a deal. You like it. We like it. It’s done.’”
If a buyer makes an offer on a product, Altum Mind brings the terms of the offer back to the cultivator and “the farmer has first right of refusal,” Wright says. Altum Mind will facilitate negotiations, if desired by the cultivator. “The deal either goes through or it doesn’t,” Wright says.
This season, Mattole is sending his flower to Northern Emeralds for processing, and “they’re just processing,” he says. “They trim it, and I still have control over who buys it.” That gives him the leeway to try to make deals, if he wants to.
Networking is Paramount
Given the nature of its business, Altum Mind network goes across the state, Blue says, which enables its team to forecast market changes and to acquire bulk goods that will move in a timely fashion. The company works with a lot of other distributors, and it’s common for other businesses to turn them on to potential sales opportunities.
Altum Mind is part of trade associations too, like the Cannabis Distributors Association, the Humboldt County Growers Alliance and the International Cannabis Farmers Alliance. “Everybody just connects each other — the networking game is strong in cannabis,” Blue continues. It’s about maintaining robust business relationships.
But how does a rural cultivator establish the necessary connections to establish productive and reliable sales outlets? Wright emphasizes the need for cultivators to persevere. Not every relationship is a good fit, and it can take multiple tries to find a relationship that works.
“There are a lot of distributors out here and we all have slightly different business models,” Blue says. It can be really challenging, she admits, especially since cannabis is a high dollar, heavily regulated and perishable product. “You need to have strong, trusting relationships.”
Both Wright and Blue encourage cultivators to reach out to different companies and to ask questions. “You don’t know what’s possible,” Blue says, “until you see how people are willing to work with you.”
Mattole says this is something he’s had to learn, and at this stage in the game, he finds it is essential to be proactive. (“We’re ordering clones in the fall and arranging trimming in winter for the next season,” he says.) He does have some long standing relationships, citing Bear Extraction House as a company that he’s worked with for years. But Mattole Valley Sungrown is not exclusive to any one processing, manufacturing, or distribution company.
“My advice to cultivators is to go in and meet the people that you’re going to be working with,” Mattole adds. “Talk to them, and don’t have a bunch of expectations about how a deal should be or what it is. Just have open dialogue and build relationships.”
Coronavirus ConsiderationsThe statewide shelter in place order came down in mid-March. After an initial uptick in cannabis sales, the market is reportedly slowing, with some sectors faring better than others. An April 27 Marijuana Business Daily “California Marijuana Notebook” report says retail delivery is up, but sales overall have trended down since March 22.
Mattole Valley Sungrown isn’t feeling the impacts of coronavirus so much, as the farm is way out in Honeydew and there is no traffic, but Mattole points out that processing facilities will basically be working at half capacity this season.
“Everybody’s capacity is hurt because of COVID,” he says. Trimmers will have to be spaced six feet apart, whereas normally they’re chair-to-chair. As a result, everybody is running half crews pretty much across the board. To add to the capacity crunch, he adds, more and more people are getting on board with getting product trimmed off site. “This year is going to be really busy. We’re working on having everything pre-arranged.”
Blue recently provided an update on Altum Mind’s operations via email:
“There have been some changes implemented within our business that reflect the current state of the globe… Aside from changes we have made internally, we have made temporary adjustments to utilize technology to reduce the amount of foot traffic in our facility, which in turn is reducing potential exposure.”
Most local distribution and manufacturing companies are comfortable traveling on dirt roads in the hills and with speaking the language of rural cultivators, but cultivators sometimes have to do some legwork to find a distribution company or manufacturer that will take their product on and deliver a reasonable amount of money for it.
More and more local licensed cultivators will likely find themselves working the phone, working ahead to reserve space at processing facilities, order clones and to find potential buyers or sales representation for their crops, not to mention stocking up on Metrc tags and paper for their printers and dealing with regular inspections.
The market could see some more avenues for product opening up, with some municipalities reportedly considering allowing cannabis businesses in order to stimulate local economies; however, many established businesses are reeling after a string of lootings and acts of vandalism affected more than 40 cannabis companies during the nationwide protests held over the past week.
This is a dynamic time, full of opportunity and risk. Wright and Blue encourage cultivators to “keep doing what you’re doing, because it’s working.” Even so, local cannabis business people clearly have to adapt to track-and-trace and changing supply chain dynamics, in addition to staying the course with producing the high quality of cannabis that Humboldt is famous for.
NOTE: Altum Mind is an advertiser on this website.