The Cannabis Supply Chain Explained

August 3, 2023
October 23, 2020
| Updated
August 3, 2023
By

The cannabis supply chain is made up of five stages:

  • Cultivation
  • Manufacturing
  • Distribution
  • Transportation
  • Retail.

For anyone looking to start a cannabis business or already operating one, it’s crucial to understand what the seed-to-sale process looks like.

In this article we’ll dive into an overview each step and the challenges connected to them.


the cannabis suppply chain for california showing the stages; cultivation, manufacturing, testing, deliver and retail.

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Track and Trace

Before we get into Cultivation though we should talk Track and Trace because it’s interwoven into all of the steps below.

The movement of cannabis products must, for compliance sake, be tracked and traced throughout the supply chain. All harvested batches need to be accounted for, making sure the finished product can be tied all the way back to its original plant.

This is where track and trace technology providers like Franwell are contracted by Metrc to enable tracking from seed to sale. Track and Trace systems can vary by state however cannabis technology companies authorized to connect with these track and trace systems help cannabis businesses manage their operations while reporting their data automatically to track and trace systems.

Cultivation

Like all other agricultural products – cannabis starts with farming, also known as growing or cultivating.

Historically, cannabis has been grown for three purposes:

  • Fibre – harvesting cannabis stalks, usually hemp variations being used for rope, textile, clothing, insulation and other commercial or industrial products.
  • Seeds – harvesting seeds from a female hemp plant for its oil and protein substance. Commonly used for medicinal purposes.
  • Drug-type cultivars – harvesting cultivated varieties for their psychoactive and therapeutic cannabinoids.

The cultivation process has 6 broad stages: germination, seeding, vegetative, pre-flowering, flowering and harvesting.


1. Germination

Germination is the first stage of growth for a Cannabis plant, where the seed sprouts and the root emerges, typically taking 12 hours – 8 days. To start the process the cannabis plant needs warmth, darkness and moisture. This leads to the activation of hormones that trigger the embryo within the seed to expand – the seed coat then cracks open and an embryonic root emerges.

A cannabis plant seedling sprouting above the ground.
A cannabis plant seedling sprouting above the ground.

2. Seeding

The seeding phase starts when two embryonic leaves (cotyledons) start appearing from the root, pushing away the remaining seed shell in search for light. This phase lasts 1- 4 weeks and is the most vulnerable period in the life cycle of the plant. It requires moderate humidity levels, medium to high light intensity and a good amount of soil moisture.



A young cannabis plant in its vegetative state.
A young cannabis plant in its vegetative state.

3. Vegetative

In this stage of the growth cycle the root system expands downwards, in search of more water and food. A strong root system is needed for a healthy floral development and the plant requires significant amounts of light and nutrition. This phase lasts 1-2 months indoors. When the sex of the plant starts to reveal itself, it’s an indication that the next stage begins.  


4. Pre-flowering

A flowering cannabis plant
A flowering cannabis plant

This stage is also known as “the stretch” and takes about one day to two weeks. For most plants though, it’s a period of 10-14 days after switching the light cycle to 12 hours of darkness.

There’s significant growth happening now, with the plant doubling or more in size. More branches and nodes are developed, and bracts/bracteoles (flowers) start to appear where the branches meet the stem.

5. Flowering

When the grower provides the plant with at least 10-12 hours of darkness, the flowering phase begins. This period varies from around 6 to 22 weeks depending on the type of plant. Pure indicas have a shorter flowering period than pure sativas.

The sex of the plant is now clearly revealed, and the male plant produces ball-like flowers, growing in a cluster called panicles. They need to be separated from the female plants to avoid pollination.

6. Harvesting

The process of harvesting can vary depending on what the cannabis plant is used for. Hemp grown for fibre is harvested before flowering, while cannabis grown for smoking or cannabis products is harvested when the trichrome have turned cloudy and 5-15 % of them are a reddish or brown amber in color.

Directly following harvesting comes the procedure of drying and curing the cannabis. Growers will either undertake this step themselves or pass the raw material on to a wholesaler. To avoid deterioration, the drying process should start immediately after harvesting. This is a crucial step since it affects the smell and flavor of the product. It also increases the potency and quality of smoke.

With cultivation and harvesting complete the next step in the process of Drying.

Drying

This step includes trimming the plant and slowly drying it, with the ideal temperature of 65-70°F and 50% humidity.

The cannabis branches are typically hung upside-down or placed on a rack to ensure even drying. It takes 3-7 days for the buds to dry completely in a dark room as sunlight at this stage in the process can lead to a suboptimal end result.

Cannabis drying rack
Cannabis drying rack

Curing

When curing cannabis the buds are placed in well-sealed jars and stored in a cool, dark and dry spot. During the first few days the jars need to be opened regularly to let moisture out and to provide oxygen. After about three weeks the cannabis should be ready.

Trimming

This is the final phase of cannabis harvesting whereby buds are trimmed and prepared for separation from each other by quality / grade and to be placed into jars. Trimming can be done by machines en masse or by particular individuals who are hired to hand trim, leading to higher quality but higher costs as well.

Manufacturing

Extraction

Extraction is the process where you create natural by-products from the cannabis plant. While the main goal is to collect the desirable compounds, there’s also fats and chlorophyll that extractors try to avoid.

During this process, producers are looking to extract the cannabinoids and terpenes from the cannabis plant – this is where you can find the aroma, flavor and effect of the final product. There are many methods for cannabis extraction but the two main methods for removing the cannabinoids: solvent or non-solvent extraction.

Solvent extraction methods

This is the most popular method and is used to make cannabis extracts like wax/budder, cannabis oils, shatter and and Butane Hash Oil (BHO). Most forms of extracts can be vaporized, dabbed or ingested.

Common solvents used in this process are alcohol, hydrocarbons, CO2, water and ethanol.

Non-solvent extraction methods

Non-solvent extraction, sometimes referred to as mechanical extraction, is a method without the use of chemicals – resulting in concentrates like kief, hash or rosin.

Charas is one of the easiest methods of hash production, where you hand-rub live cannabis flowers to remove the resin. Dry sifting or shaking is a method for producing kief, usually made by grinding  the plant and running it through a silk screen machine.

Light Manufacturing

Manufacturers of all types can engage in light manufacturing, which consists of packaging bulk flowers into eight jars, turning the flowers and shaking them into pre-rolls, breaking down buds into smalls, tops, mids, and  kief. Distributors are also able to carry out light manufacturing. There is a special Type P license in California that has the power to package or repackage cannabis products or label and relabel the container.

Infusion

Cannabis infusion is the process in which you infuse some sort of baked good or beverage or other consumable with distillate to make what are known as edibles. This method is becoming increasingly popular and expected to hit over $4B+ by 2022 according to a report by ArcView.

Unlike concentrates and extractions, infusions are made to be used in cooking and baking – not to be consumed on their own.

There is no “best method” for extracting cannabis and different methods have their pros and cons. Non-solvent extraction is generally considered safer, without the risks associated with using flammable solvents. Although solvent extraction boasts a higher purity for manufacturers in most cases.


Distribution

The distribution of cannabis is a complex system that is heavily regulated by the states. Quite often, the distributors are the ones dealing with the most compliance hurdles in the entire supply chain. Their role isn’t only to move products between wholesalers and retailers, although this may change in the future.

Depending on the state, distributors can be used in several different ways. They can ship or store products and also act as an external sales team for the wholesaler. Their job can also be to collect payments from retailers and move money on behalf of the wholesaler.

Common challenges of Distribution

There are certain challenges when it comes to distribution of cannabis  products. The flow of seed-to-sale is state-specific, meaning that growers, wholesalers and retailers face different hurdles depending on location.

First of all, the federal government has restrictions for vehicle size, meaning that any freight truck regulated by the U.S Department of transportation is prohibited from transporting marijuana products.

Growers and manufacturers must therefore find smaller freight organizations to work with. This can complicate transportation, as well as compromise safety and security and have a negative impact on the cost for consumers and distributors.

Secondly, federal distribution laws prohibit interstate transport of cannabis and therefore limiting the economic impact to each state alone. This means retailers are unable to establish a nation-wide distribution system, and ultimately it’s led to product shortages.

Strong arguments are being made that moving products across regions, from where they are best made to where there is high demand, is necessary for making the legal cannabis industry more sustainable and equal.

And lastly – adding to the complexity – intra-state transport is also heavily regulated with state body licensing, which can complicate the flow of the product from distributor to consumer.

Testing

Lab testing is an essential part of the legal cannabis industry. Every state has its own regulations around testing, but they all help to ensure that products are safe to consume and easy to dose. A cannabis product can only be distributed and sold once it has gone through lab testing and been approved.

Cannabis products are tested in an accredited lab using various methods; such as analytical chromatography, mass spectrometry and nuclear magnetic resonance spectrometry. The purpose of the tests are to look for contamination, pesticides, mold and mildew – to ensure that the products meet compliance. State regulatory bodies have a list of banned pesticides and products must be free of these in order to make it to the dispensary.

All products can also get additional tests to work out their cannabinoid and terpene profile, but these aren’t necessary for compliance. However, testing the potency of the product is important for accurate labeling.

Cannabis is tested in two stages within the supply chain. The first stage takes place before selling the harvest, where batches are assigned ID tags and sent in for lab testing.

Secondly, products that have been altered from the original flower must be tested again.

Most states need a sample of the product, for example an edible or a concentrate, which they’ll test on behalf of the entire batch made from the same harvest. These results will then be linked to that specific batch in the state’s seed to sale software.  

Quality Assurance

The final step before shipping cannabis to retailers is quality assurance. Distributors will then ensure that packaging looks correct, labeling meets the state’s guidelines and contains everything needed to be compliant. The requirements around labeling differ from state to state, but they typically consist of chemical information (THC, CBD levels), weight, serial number and specific dates (cultivation, testing, expiration, etc).

Storage

When distributors receive the products they place them in storage. During testing the storage needs to be a quarantine area, but once products have passed the tests they can be stored safely on shelves. Having a secure and safe protocol for storing cannabis products is imperative. Some edibles may require storing in low temperatures, in which case the distributors keep them in freezers.

 

Transportation

Once cannabis products have gone through testing and been approved, they’re ready to be delivered to the retailer as soon as a sales order is placed. However, there are strict regulations for delivering cannabis goods and distributors most hold specific licenses.

In California, Distributors with a type 13 license (transport-only distributors) are responsible for delivering cannabis between licensees, but may not transport any cannabis goods to retailers.

Only distributors with a type 11 licence are allowed to transport cannabis to retailers, as they must collect excise tax upon delivery. They are also responsible for remitting tax payment to the government within the appropriate time frame.

Retail

At the end of the supply chain are the retailers, commonly known as dispensaries, and the sale of the products. Consumers can only purchase cannabis products from a licensed retailer. Delivery groups, or non-storefront retailers, can also dispense cannabis products to patients/consumers but only by vehicle delivery.

Challenges and problems within retail

In much the same way as distribution has its challenges, so does the cannabis retail business. Common challenges for retailers are things like product sampling, product knowledge and compliance concerns.

Finding vendors can also be problematic for retailers as you can only buy from licensees in your own state. And for compliance sake, retailers must check licensing and lab testing of all brands they bring into their store.

The cannabis industry is overall heavily regulated, which means a slip up can have serious consequences for yourself and your business. Meanwhile, the black market for cannabis is still huge and operates without regulations – taking business away from legal cannabis.

Conclusion

There are still many intricacies within the cannabis supply chain, due to regulations and a fast-growing industry. Although this isn’t a perfect system and it has its own issues, these can be overcome by companies and people with the right knowledge and preparation.


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