Ensuring the Future of the Cannabis Supply Chain
Guest post by Nick Hofmeister, C0-Founder and CFO of Front Range Biosciences™
Demand for cannabis has exploded around the world, with the industry experiencing 27% compound annual growth rate, according to BDS Analytics. What was once a plant grown only to fulfill a niche black market has now taken center stage as the world’s newest mass scale commodity crop, used in recreational products, medicine, food, and fiber. As a result, cultivators have rapidly emerged in many geographies to fulfill this demand, blending traditional growing techniques with modern agricultural practices.
However, the cannabis supply chain of today is not yet designed and built to support the booming demand. While traditional cultivation practices have worked decently well on a smaller scale in the cannabis industry, we will need to embrace scientific and modern agricultural practices to ensure a steady flow of clean, consistent product at agricultural scale.
The growing pains being experienced by the cannabis supply chain are not new. In fact, other industries have faced and solved exact same issues as they’ve attempted to scale. The closest and most relevant example is the plant-derived nutraceutical industry, which had a similar explosion of demand and subsequent growing pains. Because nutraceutical products are primarily used as health supplements, it was critical to ensure quality and consistent ingredients were going into the finished product. The industry developed supply chains that focused on consistent, true-to-type plants that produced a predictable product. According to a recent report, the global nutraceutical industry market is projected to rise to $278.96 billion by 2021, an increase in demand that would be impossible to fulfill without a clean and consistent supply chain.
When looking at the cannabis supply chain, production starts with rooted cuttings that cultivators use to produce raw cannabis flower. When done correctly, a cannabis grow can flourish. When done poorly, disease, pesticides, and phenotype variations can destroy an industry.
Pathogens and pests are omnipresent in cannabis. Virtually all of the cannabis plants we have encountered have been infested with pests such as mites, aphids, and thrips, along with systemic fungal and bacterial infections. These pathogens and pests can wipe out an entire crop and regularly cause losses and yield reduction. The improper use of pesticides can result in recalls and liability risk. Variations in the production of cannabis flower due to genetic instability and plant performance create highly unpredictable results in consumer products, reducing efficacy, confidence, and brand value. Traditional cannabis cultivating techniques amplify these problems as grows scale from square feet to acres, which ultimately wastes capital deployed by cultivators and their investors.
To ensure a strong and healthy foundation for the cannabis supply chain, the industry needs a supply of clean and consistent plant starts that are disease-free, pesticide-free, and true-to-type.
Averting California’s Impending Supply Crunch
California provides an excellent example as to why it is necessary to invest in a clean and consistent start to a cannabis supply chain.
Starting on July 1, 2018, California will implement strict pesticide and solvent testing requirements, which have the potential to create a bottleneck and shortage of clean, approved cannabis. Cultivators who are proactive in responding to these regulations will have the upper hand in California’s stricter market, being able to provide a consistent, uninterrupted flow of product that will likely be priced at a premium during the transitional time.
In most other agricultural commodity crops that are propagated using cloning, the preferred method to reduce these risks at scale is to implement a tissue culture program. Tissue culture enables a cultivator to start plants for each growth cycle in a sterile environment before acclimatizing them in an indoor or outdoor grow. This program checks all three boxes of being pesticide-free, disease-free, and true-to-type to limit costly variations and risks for the cultivator.
For cannabis to scale to its full potential, growers will need to run increasingly efficient operations. By investing in a healthy first stage of the cannabis supply chain and ensuring a strong foundation, cultivators will save themselves (and their investors) time and money, while establishing themselves as major players to fulfill the world’s ever-expanding cannabis demand.
About the author:
Nick Hofmeister is the Founder and CFO of Front Range Biosciences™. Previously, he was the VP of Strategy for Divergent Technologies, which uses 3D metal printing to create light weight, environmentally friendly, flexible complex structures like car chassis. Mr. Hofmeister was a Founder and Director of Operations at Triton Algae Innovations, a biotechnology licensing company, and the Chief of Staff for Sapphire Energy. Prior to Sapphire, Mr. Hofmeister was a management consultant at Bain & Company focused on private equity and a program manager at Microsoft. Mr. Hofmeister has founded 5 technology startups and raised more than $270 million from public and private sources. He has a BS from Northwestern University and an MBA from the Massachusetts Institute of Technology.
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