The Future of Value Chain in the Cannabis Industry

In this blog post,we explore the technological possibilities of tracing Cannabis and circumventing the challenges faced by the industry, so as to leverage its potential for benevolent purposes.

Canada is the first G7 country to legalize cannabis nationwide. According to a report done by Deloitte, expected sales of cannabis in Canada will amount to $7.17billion in 2019-  inclusive of illegal, medicinal and recreational sales. Legal sales will amount to $4.34 billion, more than half of total sales. Canada has set an example and soon countries will start to follow in the same direction. The global Cannabis market is predicted to grow rapidly on a large scale. Following legalization, there were major issues regarding the supply chain. The enormous size of the country and huge inter-city distance points to a rising need for an efficient supply chain strategy. 

Consumers are still figuring out what it means to have a legalized cannabis industry. What kind of products they can buy? How can they trust the products they buy, and so on. While regulatory structures are evolving to ensure benign usage of cannabis such as for medicinal purposes, it will be some time before they mature as the industry itself is evolving fast. Also, too much regulation can stall the growth of the industry, so regulators have to strike a balance between control and fostering innovation. Therefore, technology solutions which can address multiple stakeholder concerns will be the ones that get adopted faster. Blockchain is one such technology which offers a solution that addresses multiple concerns.

Provenance of Product

According to a survey done by Deloitte, 50% of people surveyed said they would only buy cannabis products that have been tested for pesticides and other chemicals. Another survey done by Culinary Visions stated that only 45% of people trust the quality of products containing cannabis. There are numerous types of cannabis strains – each with different properties that lead to different product options and quality. Consumers want to be absolutely sure that they are getting what they paid for. They are more likely to buy products they can trust, or only from reputable sellers, and will pay higher prices for premium products.

Regulatory Compliance

Compliance in the Cannabis industry is applicable to each stage of the supply chain across many aspects. Collecting compliance data is a time consuming and difficult process when there are various parties involved in a supply chain. The federal government has set strict requirements and industry-wide standards and rules which the Cannabis industry has to comply with. Some of them are: types of cannabis products available for sale, packaging and labeling requirements, prohibitions on the use of certain ingredients, good production practices and tracking of cannabis from seed to sale. Although there are well defined compliance rules, the government is struggling for 100% legitimacy in this industry.

Illegal Producers​

The illegal market causes a huge problem as it offers an unregulated supply of Cannabis products at cheaper prices. This is mainly possible as Cannabis cultivators do not comply with the rule that prohibits the use of pesticides. Although testing is done, labs currently cannot identify the difference between a legal and illegal Cannabis product. Additionally, the origins of a Cannabis plant cannot be traced in a lab. Consumers are willing to pay 10% more for legal Cannabis products. Therefore, it is essential for Cannabis companies to provide full transparency and traceability to gain the trust of consumers. Unfortunately, testing labs are not standardized and there is nobody or organization regulating them. Essentially, the consumer has no idea if their products have been tested in a reputable lab.

Blockchain To The Rescue

Blockchain traceability provides a solution to situations where many parties are involved as it enables transparency in transactions across multiple stakeholders. With this technology, each transaction within the supply chain can be verified as every transaction is recorded on a distributed ledger following a consensus among all the stakeholders. It helps to build trust with the customer as they have access to  tamper-proof traceability information about Cannabis, such as.

Get Started On Your Cannabis Traceability Journey

By integrating blockchain traceability into the supply chain of Cannabis, all the above issues faced by customers can be addressed at one go.  Furthermore, companies can build stronger customer and brand loyalty by means of transparency in sharing Cannabis provenance information with their consumers. The industry as a whole can then provide accountability and enhanced trust which are crucial for its continued growth.