Growing up in California it is easy to underestimate the size and economical impact of our state. We have an economy in the top 10 in the world with a population of nearly 40 million people. Currently, we can account for 13.2 million cannabis plants annually. Some have predicted that number could be as high as 17 million.
If every plant is able to produce 1.5 pounds a year that is over 25 million pounds of cannabis in California alone. When you digest those numbers as an entrepreneur, numerous opportunities come to mind. Whether it is concentrates, topicals, edibles or even cooking oil the sky is the limit.
Getting back to the 25 million pounds of cannabis getting cultivated every year, with so much being produced how do you know how to source your cannabis?
Should you buy indoor or greenhouse? Are sativa or indica cannabis strains going to be more ideal for your infused products? Is the cannabis plant’s terpene profile important to your concentrates branding?
On our journey to source raw cannabis for a friends edibles brand that produces a full line of baked goods, we went through these challenges firsthand and felt sharing that experience could help fellow entrepreneurs facing the same challenges. We will share our process for answering the following questions:
- How do I know which strain to buy?
- Should I buy, flower, shake or trim?
- Where should I source my cannabis inventory?
For our edible line, our brand identity positioned us as a wholesome company, the whole-food effect. As a result, we used quality raw cannabis and needed to be specific about which cannabis terpene profiles we used in the edibles. We set the 35-50 year old’s that worked 9-5 as our target group. For our target demographics, edibles were more ideal than going outside every few hours and worrying about how they smelled when they came back in. In addition, they had a higher annual salary increasing the likelihood of them paying the higher price.
Which Cannabis Strains Work Best for Your Infused Products?
Since we were targeting a specific affect, the strains we used for our edibles played a role in the customer’s experience. The traditional method of focusing on whether it was a Sativa or Indica and their known effects has developed. As technology has evolved we are able to better understand the cannabis plants terpene profile. Terpenes are essential oils that are capable of producing different effects. Each plant belongs to a certain terpene profile.
Some strains share terpene profiles so you could use different strains in your cannabis infused products. An example could be Girl Scout Cookies, it’s terpene profile is Humulene. The Humulene cannabis terpene is suggested as an aid for anti-inflammation and/or suppressing appetite. Sour Diesel, also falls under the Humulene profile allowing for substitution during the production process.
Considering the cost reduction, it made sense for us to use Sour Diesel and brand the edible by its terpene profile. Using the terpene profile was aligned with our identity of being modern and forward thinking.
For other cannabis producers, the strain names can be more important in the buying decisions of their consumers. The reality is some names are catchy and can influence your consumers decision, think of Obama OG, Khalifa Kush, Cookies or Sugarland. Many dispensary owners have shared how one strain will outsell a higher quality strain just because of its name. Consumers subconscious influences their impulsive decisions when buying consumer products. I.e. Nike vs Fila, Apple vs HP, etc.
Under the medical market it is probably safe to say strain names will not matter at all. We never saw tylenol called Candyland or prescriptions for Northern Lights.
Something worth considering for the medical market, is the THC vs CBD question. In our situation, we created an edible brand for the Adult Use market. Therefore, CBD was not that important for meeting our goals. The Humulene profile provided the affects we needed.
Depending on your particular needs cbd-rich strains are vital to the customer experience. Producers manufacturing cannabis oils for the medical market could be focused on CBD rich strains also. Finding the right sources can be really beneficial. Once you understand your customer preferences, you can create long term agreements with suppliers and get better pricing in the long run.
Being able to identify what our requirements were streamlined the process. As we have progressed in the cannabis industry, the terpene oils have opened up new opportunities. In our situation we used it as a marketing tactic while reducing our costs for sourcing. When searching for the cannabis strains, understanding their attributes and terpene profile could be the difference maker you needed.
To make your life easier, we went ahead and put together a checklist you could use when sourcing your inventory.
Should I Buy Flower, Shake or Trim for Production?
Now that we knew which strains are needed, we were able to move on to the next step of deciding between flower, shake or trim. For years, the industry has seen brands use shake and trim as their main ingredient because of the cost and how consumers have requested flowers for so long.
But that tradition has been slowly going down over the past couple years. Reason being edibles and concentrates have dominated the market in recent years and grown in popularity. More and more consumers are wanting high quality concentrates or edibles. As a business, it comes down to your end goals when considering whether to buy flower, trim or shake.
With producing concentrates such as wax, shatter or full melt hash, using flower is a near must. If you are focused on quality using trim or shake could leave one of your consumers with a bad taste. An added bonus of using the flower vs trim/shake is the increased level of cannabinoids and THC. When your use trim or shake there are less trichomes present and the THC levels are lower as a result.
While we are supporters of using quality flowers and valuing customer experience, that is not always the case with every cannabis manufacturer. Trim and shake will continue to be used because their are so many different infused products that can be created using cannabis. An example could be producers making CBD or THC drinks. With liquid products, the raw cannabis used is less important. The liquid production process alters the cannabis and you can never taste it in the final product unlike with baked goods or other edibles.
It seems as the market continues to grow, the price of wholesale cannabis will continue to go down and the industry will be using flower more often than trim or shake for production without thinking twice.
For our cannabis edibles we felt the higher price point allowed us to pay more in exchange for the added product value. It was aligned with one of our mission principles by placing Customer Experience first. We choose this principle because technology has opened up numerous customer feedback channels. It was important to be aware of how our customers experienced the products.
In closing this part of the journey, we have realized that going into the process with your requirements known ahead of time can make a real difference in the end result and success of your company. We realized each form of the raw plant serves a purpose and our goal should be to use it all and avoid disposable products which will only improve the supply chain.
Where Should You Source Raw Cannabis for Production?
The last step for us was looking toward the few contacts we had for Sour Diesel, Girl Scout Cookies and other cannabis strains that contain the Humulene terpenes. As expected the popularity of Girl Scout Cookies has numerous cultivators producing it.
Our team figured growing relationships with different cultivators, distributors or looking at some of the online marketplaces could be a starting point.
First, we attended a few different cannabis trade shows that had a surplus of cultivators and producers. The benefits of this path included:
- The variety of cannabis cultivators at one place with samples.
- The ability touch and see the cannabis in person.
- Getting to directly meet the people in charge.
Some of the cons were the:
- Poor place to do business–too many people at the ones we attended.
- Limited time to network and view the different products considering these events are only a day or two at most.
- Distance to some of the event locations.
We were able to get a lot of business cards but following up with cultivators is not as easy as you would think.
Next, we explored some of the different cannabis distribution sources in California. Each one had different products from various producers in the industry including the small scale cultivators, commercial cultivators and boutique cultivators. It would of been nice to see more of the boutique cultivators just being a fan of the rare strains you do not see available all the time.
We noticed cannabis distributors focused more on the finished cannabis product (edibles, pre-packaged flowers, tinctures, edibles, topicals, etc) rather than the raw flower and crude oil, which made sense since most of their customers are dispensaries. Also their markup made pricing higher than the trade shows.
The third option, online marketplaces seemed most interesting. As a result of technology, marketplaces made connecting cultivators and producers more efficient. Some of the benefits included:
- The pricing on the digital marketplaces was lower.
- A variety of options including rare strains that were hard to find.
- Reduced the resources needed to manage inventory.
Compared to the other options, marketplaces seemed more efficient but some of the cons were:
- Sellers did not always update their inventory
- Not able to see or touch the cannabis as you would in person.
As a former member of the wholesale auto industry where we were buying hundreds of automobiles online, it seemed there was a need for a quality score in the cannabis market. An objective score that allowed buyers to know what they were purchasing.
With autos we knew we were buying a car that was rated 1 out of 5 and that was fine for that particular project. This quality score could bring transparency to the wholesale cannabis market and make buying decisions a lot easier for users of marketplaces.
Eventually we found a contact through the distributor we reached out to. He had a business partner who grew Sour Diesel at his greenhouse cultivation facility and had large quantity he was looking to move considering his next harvest had begun and wanted to reduce his sunk costs. The product was drier then we would have liked but beside that it was loaded with THC and we were able get it 20% below our budget. So it was a win win for us.
Lessons Learned from Sourcing Cannabis for our Business
As a new business in this emerging industry, sourcing raw cannabis for our edible brand was a great experience that taught us a lot about the different options. We got to better understand how distributors work, the pros and cons of each source and the difference in terpene profiles which seem to be the future of cannabis.
When identifying what and where to source your product from there are multiple factors to consider. Just to recap, some of the different factors included were:
- Customer Preferences
- Indoor vs Outdoor Cannabis
- THC vs CBD values
- Terpene profiles-how they affect the customer experience
The Industry is growing and some of the growing pains are evident. The one we noticed as most impactful was the lack of transparency. Testing is a crucial part of the cannabis supply chain and the states that get it right will see complete visibility in their local industries. Even with the testing, the plant has an opportunity to grow mold and bacterials. So inventory storage is an equally important matter for those storing the cannabis for extended period of times.
On a final note, remember to create a list of requirements so when you go out to actually source the inventory you do not get sidetracked with all the different options. Whether it is attending an event or checking on your phone the options can be limitless.