Cannabis Aid Detroit: Growing pains in Michigan

By Anne Schultz
Published: December 30, 2019 | Last updated: March 10, 2020 07:30:38

Key Takeaways

Michigan is enduring its share of legalization frustrations and uncertainties, explains Anne Schultz, who discussed the state of the industry in The Mitten with experts at Detroit’s second annual Cannabis-Aid. Standardized testing, the black market, and who is eligible for various programs are just some of the challenges being tackled before cannabis can be considered mainstream.

In early October, Cannabis-Aid held its second annual two-day Michigan Commercial Cannabis Conference and Expo in Detroit at the TFC Center where attendees could experience a little bit of everything the industry has to offer from vendor exhibits, educational seminar tracks in leadership, hemp and marijuana, to being able to experience and consume products inside of the Enlighten mobile lounge.

There are massive opportunities in Michigan as it currently has an Industrial Hemp-Ag pilot program along with the Medical Marijuana Facilities Licensing, Medical Marijuana (caregiver/patient), adult-use (recreational), and Social Equity Adult-Use Programs. Some estimates predict Michigan could generate $1.7 billion in annual sales once the adult-use program matures. However, 40 per cent of the municipalities that approved the recreational ballot last November have banned recreational retail sales while others are either working through ordinances or holding off. It will be interesting to see how things unfold and affect the projections and growth of the adult-use market.

The recently added Social Equity Program is a result of the Michigan Regulation and Taxation of Marijuana Act (2018), which required the Michigan Regulatory Agency (MRA) to create “a plan to promote and encourage participation in the marijuana industry by people from communities that have been disproportionately impacted by marijuana prohibition and enforcement and to positively impact those communities.” Qualified majority holding applicants must be a resident of one of the designated communities for the past five years to receive 25 per cent off application fees. Additional 25 per cent savings are offered with residency requirements along with a marijuana-related conviction and/or another 10 per cent if registered as primary caregivers for at least two years between 2008 and 2017.

The program is a start but has a long way to go. During the Social Justice and Equity panel discussion, Margeaux Bruner, lobbyist and compliance consultant for Perpetual Harvest Sustainable Solutions, was quick to point out the Social Equity Program (SEP) addressed the licensing component, but not everything else that goes along with it. Bonita Money, founder of National Diversity and Inclusion Cannabis Alliance (NDICA), added, “You can’t roll out a program that doesn’t have any support or resources for applicants.”

Requirements for SEPs vary across the county. In Los Angeles, in addition to having to meet an ownership percentage, residency requirements in designated zip codes, or prior cannabis-related arrest or conviction requirements — applicants must be low income ($45,644 or less gross or total income in 2017 or 2018). How will existing low-income candidates produce the capital to fund everything else that comes after the licensing process? “So, what they have done is set up these applicants to be left as prey to these predatory investors who have no intentions of truly supporting but to exploit and take advantage of the people who are genuinely trying to something good,” added Money. The NDICA fosters industry leadership, technical expertise, and other resources and services for eligible applicants and licensees established under Los Angeles Municipal Code (LAMC) Section 104.20.

As the cannabis industry continues to grow and mature, business owners and investors are looking beyond the numbers and recognizing there is more to success than just being profitable. Business operation processes and compliance impact quality, safety, and sustainability. In August, the Michigan Regulatory Agency suspended Walled Lake-based Iron Laboratories for allegedly “violating testing and reporting results for pesticides, microbials, and THC content.” Later in October, the lab entered into a settlement agreement, paying out $100,000 in fines. Good lab data is critical for the industry’s success. “Standardization and integrity in lab testing are parallel. That is something we have always prided ourselves on and continue working on every single day,” says Ben Rosman, co-founder of PSI Labs in Ann Arbor. Rosman was joined by head extractor, Derek Norma of Humble Bee; George Sadler, president and co-founder of Platinum Vape, and Joe Neller, chief government affairs officer and co-founder of Green Peak Innovations for a quality and safety panel discussion led by former director of the Michigan Department of Licensing and Regulatory Affairs, Shelly Edgerton. Looking at what other industries already have in place in terms of standard operation procedures, compliance, and quality control, Neller shared how Green Peak Innovations took a proactive approach. “We tried to design a facility that really mitigated any risk of failing. (We’re) not just testing to pass to get product in the market. When the federal status of things changes, we are ready to go. The process is already in place.” From using food-grade safe, antimicrobial and anti-bacterial surfaces that are adhering to strict bio-security measures, it seems the Dimondale-based company has implemented Current Good Manufacturing Practice (CGMP) regulations that are enforced by the FDA.

However, without having a unified set of compliance standardizations in the cannabis industry, things like product safety and proficiency tests from labs can get a little complicated. “There’s really nothing to gauge against. So, what happens when one licensed lab tests the same products as another licensed lab and they get different results? Who is right?” asked Rosman. Inter-laboratory testing, or even inter-state testing, were mentioned as possibilities for the time being, but having standardization within the state would be helpful.

Even with all the efforts that go towards regulating licensed businesses, it is clear participants in the legal market are furious that there is not enough being done about the illicit market. With all the costs involved in license applications alone, along with taxes and high capital requirements, it makes it nearly impossible to compete against the underground businesses who are not abiding by the same rules.

“Our industry will be... rocked by scandals like the vape pen situation (and) we will face deep-pocketed opposition to national cannabis law reform. We are strong enough to overcome all adversity because we’ve already had to do it,” says Rick Thompson from the Michigan Cannabis Business Development Group. Messages of encouragement and support flowed throughout the conference from people who have experienced both success and failures in the industry to those who have just started or are about to start their venture into the legal market. Chief revenue officer of Kush Supply Co, Jason Vegotsky, told listeners in his keynote, “with the playbook changing every three to six months, you have to be ready to pivot. You have to be able to change your strategy. You have to do whatever it takes to get the job done.”

With all the progress that has been made in 2019, the people that make up this industry in Michigan and across the country will continue to push forward with their efforts and work to fight for the “mainstream status enjoyed by other industries.”