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Russian Invasion of Ukraine Drives Up Cannabis Input Prices; Solvents and Packaging Are Hardest Hit

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Invasion has knock-on effect on global supply chains

 Global supply-chain woes – first triggered by the coronavirus pandemic in 2020 – have been exacerbated by Russia’s invasion of Ukraine, and the U.S. cannabis industry is expected to feel the added fallout for months.

Several ancillary company executives told MJBizDaily the problems are likely to continue this year, further forcing up costs and making it even more difficult for companies to secure key supplies such as specialty packaging, chemical solvents used in concentrate production and stainless steel.

“The two big pain points are going to be the solvents – the extraction piece, the consumables on that side – and packaging, because everyone wants a specialized brand,” predicted Liz Geisleman, co-founder of Canna Consortium, a group of 16 ancillary businesses that cater to plant-touching marijuana businesses.

Geisleman, who is also acting CEO of Rocky Mountain Reagents in Colorado, said Russia’s war on Ukraine has caused the global petroleum market to “go crazy.”

The war has not only resulted in a spike in gasoline prices – which has zapped cannabis delivery firms – but also has caused an increase in prices for substances such as corn and ethanol, which are major product exports from Ukraine to the U.S., Geisleman noted.

The ripple effects are hitting other natural resources, some of which have delayed cost increases because of the time it takes to refine fuels such as natural gas, propane and butane, she warned.

Solvent costs to skyrocket

“If (marijuana businesses are) using any kind of solvent, all of that is going to skyrocket in the next month or two, because it hasn’t hit the refineries yet,” Geisleman said.

“They’re going to see it in three to six months,” she said, adding that prices for “solvents for consumption in the concentrate market are the most unstable I’ve ever seen, in 25 years of working in chemical sales.”

And the situation could worsen, depending on whether China decides to support the Russian invasion and if the U.S. imposes additional sanctions on Chinese imports beyond the 25% tariff established during the Trump administration.

“All your plastic packaging, circuitry, controls … everything coming out of China is in question right now,” Geisleman said.

Domino effect ongoing

Even before the Russian invasion in February, the U.S. marijuana industry was feeling the coronavirus-induced global supply crunch: Companies faced labor shortages, rising prices for equipment and materials, shipping delays and more.

That has forced many companies to reassess and revamp procurement strategies as their margins dwindled.

Rocco Ianapollo, chief brand officer at Cannabis Kitchen Supplies, a Colorado-based distributor for cannabis retailers, manufacturers and growers, said the situation has created a global domino effect in which shortages in one industry have led to ongoing problems elsewhere.

And the cannabis industry has not been immune, he noted.

“Whatever has corrected itself is equally weighed down by things that haven’t corrected themselves,” Ianapollo said.

“We saw a lot of suppliers and vendors changing their accounting practices. People that extended terms all of a sudden stopped doing that, because they didn’t have the cash flow. That still persists today.”

Geisleman said that after the COVID-19 pandemic began in early 2020, it seemed like one major disruption after another popped up, including weather-related problems with oil refineries in Houston, governmental upheaval in countries such as Brazil and, now, the war in Ukraine.

“It all started there,” Geisleman said of the pandemic. “But it really exposed how vulnerable we are in every industry, dependent on things that don’t come from this country typically.”

She noted one of the latest shortages to cause a price spike is in stainless steel. That, in turn, has caused a 25% price increase for “anything in a can” that might be sold at grocery stores.

Bill Gorman, sales director for Botanical Extraction Huber USA, said shipping prices have skyrocketed for pretty much all international goods, because of the increase in fuel prices.

That is affecting every aspect of the supply chain, he said.

“Now, with gas prices, flights and cargo is getting just absolutely astronomical. Four X and going up,” Gorman said. “If you’re not having supply-chain issues, then you’re not selling or buying anything as a consumer on the commercial side.”

The shortages aren’t only on the supply side, either, he said. A major issue now is lack of labor, which has led to longer wait times for goods to be delivered.

“I’ve been waiting for two weeks for a shipping container that landed in North Carolina to get here,” Gorman said.

“We keep getting pushback, saying, ‘We don’t have the resources, we don’t have the manpower.’ And this is in Wilmington. It’s not a busy port, in comparison to California,” Gorman said.

“It’s not only the product itself. It’s the manpower to get that product to you.”

Preventative steps

Gorman advised others to implement what he calls “The three Ps: patience, patience and Plan B.”

An obvious step, he added, is to line up a secondary source for any materials that are vital to the core business, in case the primary source falls through.

“It could be two. It could be six,” Gorman said of the number of suppliers a given company should have at the ready. “If you don’t do that, then you just put all your eggs in one basket.”

Geisleman echoed that point, saying all companies must consider backup sources for all their materials.

“You have to get secondary sourcing for everything, especially when it comes to packaging, especially if you have something really specialized,” she said.

“Make sure you’re not dependent on just one company, one country, one product. Make sure you protect yourself and insulate yourself, because who the hell knows?

“The last two years have been a wild adventure.”

By John Schroyer, Chief Correspondent, MJ Biz Daily, first posted on 6 April 2022

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Labat and Leaf Botanicals Relationship Ends in Tears; N Cape Cannabis Producer Pulls Out of Deal with JSE Company

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Unresolvable issues around value and quality

Northern Cape organic cannabis grower Leaf Botanicals has pulled out of its share deal with JSE-listed Labat Africa and wants out. That’s emerged after Labat, which owns 80% of Leaf Botanicals, posted an announcement on SENS to its shareholders on 17 March 2022 that there was a “quality issue” behind the breakdown.

 

Both sides seemed equally unhappy with their year-long marriage, with Upington-based Leaf Botanicals pulling the plug because of financial disappointment, and Labat saying the flower was not good enough for its international customers. Labat has gone looking for production elsewhere, picking up 80% of Eastern Cape grow op, Sweetwaters for R10 m – for which it paid cash. Leaf Botanicals’ intentions going forward have not been made public.

 

The company said the “Leaf Botanicals acquisition was terminated due to Leaf Botanicals no longer wishing to pursue the transaction following the discovery that the product was not up to standard and the inability to find a suitable way forward. Following further discussions, the termination has been accepted by Labat.”

 

Van der Colff activated suspensive clause after sale value plummeted by 75%

Labat purchased 75% of Leaf Botanicals in May 2021 from award-winning farmer, Johannes van der Colff.

Labat paid R11,25 million for its equity in the SAHPRA-licensed facility and paid the Gog van der Colff Trust by way of 11 250 000 Labat shares, taking a bet that the Labat share price would go up. Well it didn’t. It is currently trading around 25c a share, which means the R11,25 m van der Colff was paid for giving up majority control of his operation is now worth a mere R2,8 m, 75% down on the value of the striking price.

Van der Colff’s got out the deal by activating a suspensive condition in the purchase agreement which allowed him to pull out if Labat was trading below R1.00/share for the 30 days before the first anniversary of the deal, which is imminent.  The issuing of his Labat shares is to be cancelled and those shares delisted.

 

Labat has endured a rocky ride so far, prospects are looking up

Labat has had a rocky ride as the mover with first advantage in the South African cannabis space. It paid for many of its acquisitions with Labat shares valued at R1.00/share. With the price languishing below 30c/share, those who accepted shares in return for giving up equity in their own businesses, have taken a haircut of 75% of the value of their shares.  Nonetheless Labat appears to have stabilized, and has again been out shopping

The post Labat and Leaf Botanicals Relationship Ends in Tears; N Cape Cannabis Producer Pulls Out of Deal with JSE Company appeared first on Cannabiz Africa.

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Gauteng Signs Township Act into Law; Calls for Entrepreneurs to Pitch Proposals to Industrialize Cannabis

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New Act aimed at empowering community trade

The Gauteng government has invited entrepreneurs to come forward with commercial proposals for the provincial cannabis industrialization programme. It published the invitation in the Government Gazette on 29 April 2022, the same day that Premier David Makhura ratified the Township Economic Development Act (TEDA), aimed at empowering townships and informal settlements.

 

Agriculture MEC Parks Tau, who is in charge of the province’s cannabis strategy says TEDA’s benefits include:

cutting red tape by introducing model standard bylaws, 
providing targeted tax incentives to unlock capital formation and job-creating investments, and 
providing targeted funding and targeted procurement whereby 40% of government procurement from the Gauteng provincial government comes from companies in the TEZs.

 

Tau: Vaal River Smart City will be SA’s first real cannabis hub

Writing in the Sunday Times on 1 May 2022, Tau said TEDA was “ a welcome legislation to unleash the potential of the township cannabis and hemp sectors that will be fully licensed in the full hemp value chain and acting as gateways for the industry. This will make Gauteng a “green gold” mecca, as announced by Makhura, with the establishment in the Vaal River Smart City area of the country’s first cannabis hub focusing on cultivation of cannabis primarily for medical use and application”.

Tau said the implementation of TEDA would be done in conjunction with the private sector and community organizations. “TEDA is a whole-of-society call to action to build better townships and informal settlements reeling from the negative effects of the Covid-19 health and economic pandemic, the July 2021 civil unrest and the complex spillovers from the Russia-Ukraine war” he wrote.  

“Moreover, this requires the introduction of a solidarity economy through, for instance, a service delivery co-production for municipalities where enterprises and organisations such as stokvels and mutual benefit societies provide their own communities with goods, services and knowledge that meets the local community’s needs”.

 

Gauteng wants to form partnerships with private sector

The Gauteng Department of Economic Development and the Department of Agriculture and Rural Development are championing cannabis reform as part of the province’s goal to create jobs and boost the economy by processing hemp and cannabis at an industrial scale.

 

Companies interested in partnering with the provincial government must take into consideration in their application that their proposals must include:

details of funding mechanisms, 
cannabis-driven carbon reduction, 
rehabilitation of compromised mining land, 
and the inclusion of communities as partners.

 

In return Gauteng says it will provide support for private sector partners by:

offering leases on state owned or controlled land;
providing rentals at special economic zones, industrial parks 
subsidies at private facilities;
financing partnerships, 
funding input and administrative costs 
facilitating collaborations with other state organs, aimed at removing barriers on projects.

 

Antony Moloto is the man riding point on the project. His contact details are below:

Email enquiries: Anthony.Moloto@gauteng.gov.za

Queries: Mr Anthony Moloto 

Phone: 011 240 2684/ 083 408 5493 

SUBMISSION REQUIREMENTS 

Upload a completed form here with CV’s, BBBEE certificate /affidavit, tax clearance certificate and proof of CIPC registration as well as a proposal. Application inclusive of attached documents must be no longer than 20 pages. Please complete the checklist at the end of the application form.

The post Gauteng Signs Township Act into Law; Calls for Entrepreneurs to Pitch Proposals to Industrialize Cannabis appeared first on Cannabiz Africa.

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Now Musk’s Bought Twitter, Could This End The Cannabis Social Media Ban?

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By Bruce Barcott, First Published in Leafly on 25 April 2022

 

Does this spell the end of cannabis prohibition on social media platforms?

Elon Musk has been an outspoken opponent of prohibition. Now he owns Twitter. 

What began as a fun what-if last week ended as a startling fait accompli this afternoon: Twitter has accepted Elon Musk’s $44 billion bid to buy the company. 

In the cannabis world, that deal could have profound ramifications. 

The Tesla founder has been famously outspoken about his belief in cannabis legalization. In late 2018, Musk lit up a joint on the Joe Rogan Experience, inhaled, and launched a million memes. 

In the summer of 2020, Musk added his voice to the chorus of those working to free America’s cannabis prisoners. 

“Selling weed literally went from major felony to essential business (open during pandemic) in much of America & yet many are still in prison,” he wrote. “Doesn’t make sense, isn’t right.” 

Musk isn’t so much an advocate as an ally. He’s not the guy who’s bankrolling state legalization campaigns; he’s the uber-bro with massive cultural influence who says, loudly: Prohibition is stupid!

 

And now he owns Twitter. At a purchase price of $54.20 per share. Ahem. 

Will that change things? 

 

What needs changing? 

Anyone who works in cannabis can tell you: Social media platforms do not play well with weed. The continued federal prohibition of marijuana makes the major platforms—Facebook, Instagram, YouTube, Twitter, TikTok—extremely nervous. They often express that trepidation by blocking posts, enacting shadow bans, or deleting entire accounts. 

 

It’s hard to find a cannabis company that hasn’t been blocked or banned from at least one social platform.

It’s hard to find a cannabis company that hasn’t been blocked or banned from at least one platform at one time or another. 

Often the bans feel capricious. A post that seems utterly harmless can get flagged for violating a platform’s terms of service, while an edgier post can shine on with no trouble at all. ‘What did we do wrong? is an anguished cry that nearly every cannabis social media manager has shouted to the heavens. 

These mysterious cannabis policies exist on a spectrum. On the far side of strictness sits TikTok, which allows no cannabis content whatsoever. Don’t even try. The Google-owned YouTube can be tricky, but it allows cannabis content within reason. Then there’s Instagram and Facebook, both owned by the parent company Meta. Because of the nature of the cannabis audience, Instagram is currently the most important and influential platform, and also the one that gives social media directors absolute fits when it comes to cannabis content. 

Jungle Boys, one of the nation’s top cannabis brands, gave a wink to that situation earlier today: 

 

Will Musk change Twitter’s cannabis rules?

The platform Musk just purchased has a reputation as being one of the most liberal in its treatment of cannabis. There’s upside and downside to that. 

The upside is that Twitter is the best fit, culturally and temperamentally, with Musk himself. His public persona is much closer to that of the swashbuckling libertarian Jack Dorsey (Twitter’s founder) than to the aggressively flavorless Meta leader Mark Zuckerberg. 

If anything, we should expect Twitter’s cannabis policies to relax even further under Elon Musk. Consider this tweet he put out upon the acceptance of his bid this afternoon: 

 

Better gatekeeping, or an ugly free-for-all?

Musk’s championing of free speech could make Twitter the most 420-friendly platform—but it could also turn the entire Twitterverse into an ugly free-for-all of political propaganda, unchecked conspiracy theories, and hate speech. 

One year from now Twitter could be the social platform most welcoming to cannabis companies and consumers. But will cannabis companies and consumers want to appear on Twitter one year from now? 

 

It’s not just his company, it’s his voice

Beyond the changes he might enact at Twitter, Musk could change the environment for cannabis simply by virtue of his new role in the social media universe. After hearing about Musk’s bid over the weekend, I reached out to Arend Richard, the founder of WeedTube. Richard has been one of the leading advocates for social media freedom and fairness when it comes to cannabis. He founded WeedTube back in 2018 after finding himself blocked by YouTube for an innocuous cannabis post. Four years later the 420-friendly WeedTube is thriving, readying an ambitious new update to their app expected to launch later this summer. 

“As a cannabis business owner and influencer, Twitter has been relatively easy to work with,” Richard told me. “But I want to get in touch with Elon, because we need him to help bring awareness to the situation with Meta” and their platforms. 

Richard is currently gathering signatures on a petition demanding that Instagram reform its community guidelines “to treat all legally operating cannabis businesses equally.” 

The heart of the grievance? Unequal enforcement, according to the petition: 

“Instagram continues to suspend and delete the pages of licensed and legal cannabis companies for violation of their vague and outdated policy prohibiting “attempts by individuals, manufacturers and retailers to purchase, sell or trade” marijuana. This policy is not enforced equally, with large multi-state corporations being allowed to promote their products and locations, while smaller, independent operators lose access to their Instagram pages, which are essential marketing tools in 2022.” 

 

Influence others by eating their lunch

Can Elon Musk demand a change in the policies of Instagram? Of course not. This is a situation where he could force a change, however, by simply opening his arms to cannabis companies and then gaining ground on Insta. 

The Meta-owned giant has nearly ten times as many active monthly users as Twitter. Instagram is younger, hotter, and more hip. If a Musk-over of Twitter can change that perception and eat into that lead, Instagram could be forced to reconsider its stodgy and outdated cannabis policies. And that could lead to a change in the other Meta properties as well. 

There are no guarantees, but it could work. Elon Musk alone couldn’t force GM and Ford to start making electric cars. The success of Tesla forced them to follow his lead or become obsolete. Let’s see what he can do with social media.

The post Now Musk’s Bought Twitter, Could This End The Cannabis Social Media Ban? appeared first on Cannabiz Africa.

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