Cannabis industry spawns plenty of ancillary companies

By Dwain Hebda

As 2018 came to a close, you couldn’t look anywhere in the financial news without seeing a glowing prediction about the bright future of cannabis in the new year. Some of the predictions, such as the sustained explosion of CBD (cannabidiol) products, are already coming true while some of the bolder calls, like the outright legalization of pot in the United States, remain to be seen. But with medical marijuana sales in Arkansas expected to begin as early as mid-May, change is, surely, on the way.

Arkansas’ cannabis-related industry is no different than in any other state, a rapidly-growing marketplace that’s spawning companies dealing in cannabis and industrial hemp in ways both overt (dispensaries, growing operations, CBD marketers) and less visible (marketing, financial services).

Here’s a sketch of three such companies riding the industry’s first big wave into uncharted waters.

TREE OF LIFE SEEDS

Jason Martin and Brian Madar were made to be business partners. Both had spent substantial time in corporate America, yet both maintained an active entrepreneurial streak. Looking at the cannabis industry, it wasn’t hard for the longtime friends to recognize the hockey-stick growth projections and get excited about the glowing commercial possibilities.

There was, however, one overriding problem.

“We didn’t fit the customer profile,” Madar, says with a grin. “I want to clarify that we were not cannabis consumers.”

Determined there was a business to be had here, the pair dove into three years of unrelenting research, trying to decipher the ins and outs of growing, processing and selling cannabis from every conceivable angle, including what part of the behemoth to tackle first.

What eventually grew out of the duo’s frequent trips to Colorado, where growing and selling cannabis was legal, was a focus on CBD, an oil derived from industrial hemp that’s used in products ranging from balms for achy muscles to calming pet treats. Unlike its cousin cannabis, grown for medical (or recreational) marijuana, industrial hemp is bred to tone down the THC, which is the chemical in the plant that provides the high. CBD products are, therefore, non-hallucinogenic.

“Someone approached us who had already started developing genetics,” Martin says. “He ran large growing operations for legal businesses in Colorado, but they were all marijuana-based. Everybody was breeding up THC, and he looked at the opportunity to breed [THC] down to comply with industrial hemp. The lightbulb came on.”

The pair liked the idea and ran with it via Tree of Life Seeds of which Martin is CEO and Madar is COO. The company is a genetic engineer of new strains of industrial hemp and a manufacturer and marketer of CBD products.

The company’s timing was impeccable: The 2014 U. S. Farm Bill included language that defined industrial hemp as having a maximum THC content of 0.3 percent, thereby delineating it from cannabis. More importantly, industrial hemp was now as legal as any other row crop, though subject to a bit more regulation than your average soybean (but not as much as cannabis).

This new designation is allowing Tree of Life to bring its grower community back home, thereby supporting the local agriculture economy.

“To be able to bring it back home to Arkansas was always our goal,” Madar says. “We’re from Arkansas, grew up here, and we always wanted to bring this opportunity to the local people, the Arkansas farmers here.”

Meanwhile, Walgreens and CVS recently announced it would carry CBD products, which underscores the enormous opportunities for manufacturers like Tree of Life Seeds as well as the speed with which the industry is growing.

“You write a business plan, you put it out there and then at some point in time – three months, six months, whatever – you have to modify that plan,” Martin says. “In this business, you can get left behind very, very quickly.”

BUD AGENCY

Some products stand out as a model of marketing wizardry; whoever figured out a way to position molded cheese as a luxury blue jumps to mind. Also high on that list would have to be giving marijuana an image makeover, given its snarled lines of state legality, federal illegality and the picture that many people still have that’s less of a billion-dollar agricultural entity and more about a 1970s Cheech & Chong retrospective.

It is here that Elizabeth Michael thrives as one-half of the partnership that launched Bud Agency, the other being stalwart agency head Martin Thoma.

“Education is key with any industry, especially with this new industry that is burdened by so much bias,” she says. “It is really important for us, as the industry, to put out these wellness messages as cannabis for medicinal purposes.

“The more we educate, the more we can hope that our regulators and legislators and other people that are involved in making restrictions and laws around the cannabis industry are not only conducive to business but put the best product in a patient’s hands.”

On the face of it, Bud Agency functions like any other marketing firm, but the comparisons end there. From marketing to advertising to government affairs, the agency’s work walks an incredibly complex web of parallel and often contradictory regulations, far more than in most other industries.

“What is particularly challenging about the cannabis industry is the levels of regulation,” Michael says. “Not only is it federally illegal, but on the state level we’ve got various degrees of legality with a set of regulations for advertising and promotion for the industry.”

What’s more, the very channels by which the Bud Agency plies its stock and trade are often segmented due to the nature of their client’s business.

“Different media companies and in particular, digital companies, have regulated and restricted the cannabis industry’s ability to advertise,” Michael says. “Ads on Google, Facebook and Instagram ads are virtually impossible, but there are creative ways around their restrictions. I have successfully placed cannabis-related ads with Google and Facebook. And there are a number of different ad networks that don’t want to touch the cannabis industry. It’s hard to navigate and make sure that you are abiding by everyone’s rules.”

In an ironic twist, her firm has continued to grow precisely because companies are desperate for expertise to navigate such stringent and restrictive guidelines. The company’s client base started with ancillary companies serving the cannabis market, and it is steadily gaining ground toward front line growers and dispensaries both as they emerge in Arkansas and in states where the industry is more established.

“Our sights are set on the cannabis industry as a whole, not necessarily just on the Arkansas cannabis industry,” Michael says.

Native Green Wellness Center

It wasn’t long ago Walter Koon voted against legalizing medical marijuana in Arkansas. Now he and his daughter, Kattie Hansen, are putting the finishing touches on what they’re billing as the largest dispensary in the state.

The difference between then and now was research and a desire to help give patients a first-class experience from start to finish.

“My main focus is to serve those who are really looking to use this alternative form for their health,” Hansen says. “[Customers] can really tailor and talk with us, talk with our people on staff, talk with their doctors and work out what works best for their bodies.

“We realize that there are stigmas and things that we have to surpass as a whole. Going into it, I got an understanding that to change the stigma and to change stereotypes, we all have to learn and grow together.”

Native Green covers nearly 11,000 square feet and will offer a wide selection of medical marijuana in multiple ingestible forms. Hansen says this is another way the company strives to match the right product to the right patient.

“A majority of people really have no clue where to start,” she says. “They don’t know the difference between strains; they don’t know how they affect your body differently. So it starts with our dispensary agents talking with them, educating them through their journey. And we really think of it as a journey.

“That’s why I believe in having this in forms other than a smokable form because there are so many people that don’t want to smoke and they don’t have the ability to inhale. It’s so important to us that we have a variety of products, be it pills, a certain kind of edibles, tinctures, lotions. They can start slow, start low on their dosage of whatever product they decide they’re comfortable with trying and go from there.”

Native Green Wellness is working toward a summertime opening and an initial employee headcount of around 20. With the impending opening, it’s been a whirlwind of activity for Hansen, so much so a realization of the enormity of the venture only occasionally pushes ahead of her massive to-do list. When it does, however, it stops her in her tracks.

“It’s really overwhelming for me, to be honest,” she says. “Not only was I like ‘Wow, this is my new industry,’ but with that came a huge sense of responsibility for me personally to really contribute to this industry and spread education.

“Everything that has been a part of this business, for myself and my family, we’ve never taken any part of it lightly. We went through everything thinking about how does this affect us, how does this affect the community? I feel a huge personal responsibility to better the community from it.”

The Arkansas Medical Marijuana Commission released its list of the state’s first 32 cannabis dispensaries. The commission divided the state into eight regions with four dispensaries per zone.

Zone 1 – Northwest Arkansas

• Acanza Health Group

2733 N. McConnell Ave., Fayetteville

• Valentine Holdings

3390 MLK Blvd., Fayetteville

• Arkansas Medicinal Source Patient Center

406 Razorback Dr., Bentonville

• The Releaf Center

9400 McNelly Rd., Bentonville

Zone 2 – North Central Arkansas

• Fiddler’s Green

418 N. Bayou Dr., Mountain View

• Plant Family Therapeutics

5172 Hwy. 62 East, Mountain Home

• Arkansas Natural Products

931 Hwy. 65 North, Clinton

• Big Fish of Central Arkansas

1400 Heber Springs Rd. North, Heber Springs

Zone 3 – Northeast Arkansas

• THC RX, Inc.

3700 I-40 Frontage Rd. East,

West Memphis

• Delta Cannabis Co.

1151 E. Service Rd., West Memphis

• Comprehensive Care Group

201 & 203 N. Ok St., West Memphis

• NEA Full Spectrum Medicine

480 Hwy. 49, Rector

Zone 4 – West Central Arkansas North

• Fort Cannabis Co.

3904 Ayers Rd., Ft. Smith

• River Valley Dispensary

23788 W. Hwy. 28, Bluffton

• 420RX

3506 S. Arkansas Ave., Russellville

• Johnson County Dispensary

Corner of Pittsburg & County Pivot 2658

Zone 5 – Central Arkansas

• Harvest

3740 Prince St., Conway

• Grassroots OPCO

705 E. Second St., Ward

• Natural State Wellness Dispensary

11201 Stagecoach Rd., Little Rock

• Natural Relief Dispensary

3107 E. Kiehl Ave., Sherwood

Zone 6 – West Central Arkansas South

• Doctor’s Orders RX

4893/4897 Malvern Ave., Hot Springs

• Green Springs Medical

309 Seneca St., Hot Springs

• Native Green Wellness Center

26225 Hwy. 167, Hensley

• Natural State Medical Group

1402 Airport Rd., Hot Springs

Zone 7 – Southeast Arkansas

• Pain Free RX

Pine Bluff

• Delta Cultivators

5144 Hwy. 44, Helena

• Pine Bluff Agriceuticals

108 Grinder Field Ladd Rd., Pine Bluff

• Arkansas Patient Services Co.

179 Industrial Park Dr., Warren

Zone 8 – Southwest Arkansas

• Noah’s Ark

El Dorado

• Bloom Medicinals

410 Realtor Rd., Texarkana

• RX Med

Hines Blvd., Prescott

• Arkadelphia Dispensary

188 Valley Street, Arkadelphia