Market Overview

The Nine Foundational Pillars Of Cannabis Markets

Share:
The Nine Foundational Pillars Of Cannabis Markets

By New Frontier Data staff

Worldwide, there are now more than 50 countries which are operating some form of legalized cannabis program, whether for hemp, CBD, medical cannabis, or adult-use cannabis. While each faces its own respective challenges for deploying a well-regulated system, it is becoming an increasingly common practice, and thus demanding incrementally more international cooperation. As regulated markets are proving to yield many more successes than failures, New Frontier Data has identified some commonalities, described as nine foundational pillars for a successfully regulated market.

Policy makers and regulators who fail to recognize or fully appreciate the why-and-hows for establishing the fundamental elements can not only slow down the development or maturation of a legal cannabis market, but ultimately lead to unintended consequences and undesired results, defeating the very purposes of reform and legalization in the first place.

Scientific discoveries, inventions, and innovation are generated through economic activity both market-based and freely provided.

Flows of those types have currency through person-to-person exchange, or through access to formal or codified knowledge, as is the raison d'etre for the International Cannabis Alliance (InterCann Alliance, or ICA), scheduled to convene on April 2 in Berlin.

The ICA was born through shared effort to advance the conversation around the global cannabis market, sharing unbiased and vetted information to educate those now participating in this global phenomenon.

While observing and studying the evolution of dozens of new markets around the world, New Frontier Data joined with other established and respected international firms (Vicente Sederberg, Hoban Law Group, Steep Hill Labs, Simplifya, TheraCann, Mountain Medicine, and Lift) to identify and develop the ICA's list of 9 Foundational Pillars which are required of any new cannabis market.

The ICA partners will present European national leaders with regional socioeconomic studies to help identify regional patterns, and to continue fostering open communication and fact-based discussion as regional cannabis dynamics emerge simultaneously.

Key to such an enterprise are being able to leverage expertise and insight to grow the industry. Knowledge transfer of technical expertise can be acquired by bringing in industrial experts to train local stakeholders.

Many countries across the region are opening access to medical cannabis through highly regulated industries. Recognizing the significant potential opportunities presented by a regulated industry, cannabis businesses within and outside the region are aggressively pursuing import and export opportunities.

Establishing domestic or international ownership requirements can ensure that licensed businesses have local senior leadership, and that EU member states are among the industry vanguard. The approach has been adopted in markets from Colorado to Jamaica.

The 9 Foundational Pillars for establishing the stable and healthy development of a new legal cannabis market anywhere include:

Policy

When looking at various market differences (whether in Canada, Uruguay, or the United States), it is clear that populist- or government-driven policy ultimately drives the establishment of a given market. Depending whether the impetus toward common goals stems from generating revenue, addressing a medical crisis, or curbing crime, the initial policy objectives are critical to shaping how that nation drafts regulation, weighs taxes, and crafts requirements for lab testing, cultivation, processing, and distribution.

Regulation

Regulation defines the blueprint for execution and oversight, codifying how to sequence and pace (e.g., by importance and priority) any subsequent foundational steps toward establishing a regulated cannabis market in support of said intended goal or policy — particularly taxation.

A hemp or CBD market should be run like that for most any other business: The more that rules governing hemp or cannabis industry diverge from those of other mainstream sectors, the more difficult it will be for businesses to succeed. Complex and divergent rules are barriers to entry, and make it more challenging for even seasoned business operators to comply.

It is impossible to predict every development in the cannabis, hemp or CBD industries, due to the number of social, political, and market forces shaping the market's growth and performance. Europe should develop regulations which allow for agile adaptation in the face of market realities. Regulatory changes should be communicated well in advance, so that stakeholders may adapt. Focus enforcement on the illicit market over the regulated market: Do not punish good actors, but aggressively pursue bad ones. Parallel to launching regulated markets, European state regulators should be seen to enforce the rules.

Taxation

Whether looking to address a crime or medical problem, decisions will need to be made about the source of revenue in support of those efforts. For example, Uruguay, as a government-run national program, began by subsidizing the market, whereas markets like those in the U.S. run much more like free markets. Avoid copying and pasting rules from other markets. What works well in one market may not work well (if at all) in another. For example, cultivation regulations that account for the French climate may not apply to Italy or other hemp producing states. Maintain low barriers to entry to maximise stakeholder participation. Diverse participation will be key to maximising impacts while delivering value to the greatest number of stakeholders.

Compliance

Standardise systems and adopt common policies across member states. Regulating hemp/CBD/cannabis will require a multi-agency effort to oversee policymaking, regulation development, oversight, and enforcement in areas including, but in no way limited to: Agriculture, Land use, Water rights, Commerce, International trade, Public health, Consumer protection, and Business taxation. Be cognisant of the cost of compliance as cost transference will drive consumers to alternative options. New Frontier Data has found that the costs of compliance can accrue quickly so be mindful of requirements placed on businesses.

Compliance regarding informational analysis and reporting remains nascent in the U.S., and nonexistent in many new markets across Latin America and even Europe. In most cases, compliance standards mark where government intervention ends, yet they ought to be given more importance. Compliance and reporting should be at the at the core of any national cannabis policy, without which the specific socioeconomic, legal, and public health impacts can neither be measured nor achieved.

Lab Testing

While we have only recently fully experienced how important lab testing is, (for example, more than 75% of California's pre-legalization flower having tested positive for fungus and pesticides), cannabis testing is the only means to ensure product quality and medical efficacy. Depending on the national production target, the permitted product forms (e.g., flower versus extracts and edibles), and the tax structure, the costs and breadth of lab testing may differ. However, regardless of how they are implemented, testing and minimum quality standards are a key differentiator between legal and illicit markets.

Data & Reporting

Establish a data-centric market with robust reporting requirements. As a new industry, data about legal cannabis-based products will be critical for understanding the rapidly evolving marketplace. There are numerous areas in which data will inform decision-making, including cultivation, wholesale and retail pricing, sales trends, tax revenues, employment and impacts on health care. Consideration must be given for data collection and reporting requirements.

Cultivation

Standard operating procedures regarding cultivation are keys to effective operation of the market once established. Fortunately, nations like Canada and Australia (and to some degree several U.S. states), have paved the way to understanding how best to manage and set up such vital operational infrastructures.  That said, national differences should be expected depending on climate, land mass, and whether produced cannabis is intended for adult use versus medicinal use, or export trade versus domestic consumption.

Extraction And Processing

Extraction and processing techniques are used to separate cannabis components and remove them from the plant matrix. Various methods are used to divide cannabis plant material into parts or extracts which contain various chemicals: Extraction is used to isolate specific desirable compounds — cannabis contains at least 113 recognized cannabinoids including cannabidiol (CBD) and tetrahydrocannabinol (THC).

Education

Actively educate and inform stakeholders. Overcommunicate with the public. Processors producing for the international market — must be stringent enough to afford the government close oversight to enable the effective regulation and taxation of the industry. Data drives informed decisions, good policy, and strategic growth, making it vital to Europe's strategies moving forward.

Want to learn more about the cannabis market in Europe?

Apply to the InterCannAlliance Europe Symposium to connect with executives, government officials and other early shapers in the region.

The post The Nine Foundational Pillars of Cannabis Markets appeared first on New Frontier Data.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Image Sourced from Pixabay

Posted-In: Biotech Cannabis Government News Regulations Emerging Markets Emerging Market ETFs Futures Best of Benzinga

 

Related Articles

View Comments and Join the Discussion!

Cannabis Movers

Sign up for our secret cannabis newsletter!
Never miss out on the breaking news in the Cannabis Industry!