By Adrian Clarke, Chief Commercial Officer at Tenacious Labs

2021 is proving to be been a momentous one for the cannabis industry. Around the world, significant steps have been taken to mature the industry through productive commercial regulation. 

From Luxembourg – which has become the first country in Europe to allow consumers to grow their own cannabis plants – looming adult-use legalisation in Germany and further regulation in North America, several important milestones have been hit this year.

But perhaps the most significant development has been legislation in New York. 

Earlier this year, Governor Andrew Cuomo legalised recreational cannabis, and charged New York’s Cannabis Control Board and Office of Cannabis Management, a body which the State Assembly describes as an ‘independent entity within the Division of Alcoholic Beverage Control’, with regulating and taxing the industry.

Seismic Shift For The Industry

The legislation – named the Marijuana Regulation & Taxation Act (MRTA) – has created a comprehensive regulatory structure to oversee the licensing, cultivation, production, distribution, sale and taxation of medical, adult-use and cannabinoid hemp within the state.

Notably, the law outlines the distribution of receipts from tax revenues raised by cannabis cultivation and its products, with 40% going to the Community Grants Reinvestment Fund, 40% to education, and 20% to the Drug Treatment and Public Education Fund.  

In doing this, New York has not only created a safe and fair environment for businesses, but established a framework that genuinely supports its citizens within its communities.

I believe what we are witnessing is the start of seismic shift for the industry and one that legislators in other countries should take stock of.

In Europe, we are already beginning to see the start of an emerging and flourishing CBD industry, regulated by the Food Standards Agency Novel Food initiative. In the British Isles, Jersey is working on making the industry accessible to investors and consumers alike.

Jersey’s Cannabis Services Advisory Board – of which Tenacious Labs is Chair – is working to promote best practices around product development and point of sale in the style of the Portman Group, a model body for the alcohol industry in the UK. 

For an island with less than 100,000 inhabitants, which is already showing signs that is could become a market known for its cannabis provenance, such a move would be significant. 

One Jersey government official estimates that the initial tax income from CBD products alone could be £30m per year, excluding the positive knock-on effect on other industries.

Lessons To Be Learnt From Drinks Industry

However, despite this, progress in Europe still lags behind the US, particularly New York. It should therefore seek to learn lessons from across the pond, replicating New York’s community-first approach and links to the Division of Alcoholic Beverage Control. 

I believe that the cannabis industry should combine this with the ways in which the alcohol industry – and particularly spirits – has transformed itself to ensure that the market reaches its value creation potential. 

Today, the spirits industry is one that creates significant value, generating over $450bn in revenue. However, in the 100 years since prohibition ended in the 1930s, it has faced serious challenges – challenges that the cannabis Industry faces today.

At the moment, too many Cannabis operators are trying to carve out monopolies in a market that has yet to exist. 

Until consumers have a base understanding of what good looks like in terms of quality of products and consumption habits, the industry will never achieve its full potential. 

Otherwise, what reference point will they have to differentiate between one set of products over another reliably? This is something the alcohol industry understood very well.

First, the post-prohibition alcohol industry had to align the interests of all stakeholders to ensure that it would remain legal for the long term. 

To do this, it introduced its own regulatory and quality control measures, most notably establishing a universal standard of dose and marketing practices, which would come to be upheld by the modern-day industry’s trade bodies; such as the Scotch Whisky association (SWA) and the aforementioned Portman Group.

The key innovation of the alcohol industry was the introduction of ABV (alcohol by volume) as it aligned the interests of the stakeholder groups that needed to work together to make the industry what it is today. 

THC Content Benchmark

In establishing ABV, governments received a tax target that incentivised them to regulate further and in effect maximise their return on investment in the form of tax revenues. It encouraged producers to standardise the amount of alcohol in their various products, which most importantly, gave consumers a reference with which to reliably regulate their alcohol intake.

Admittedly, there are additional complications with cannabinoids having both recreational and medical applications, not to mention there being are over 100 cannabinoids to regulate.

Nevertheless, the cannabis industry would benefit significantly from the introduction of a standardised consumption measure of the ‘psychoactive’ component THC as it would bring much needed clarity and structure to the onboarding of this potentially hugely beneficial and lucrative industry.

The key point is, there is no need to reinvent the wheel. Regulators should take a page out of the New York State playbook and lift what they can from the alcohol industry. 

If Europe can align the interests of all its currently disparate stakeholders by creating a similar framework there is no telling how fast this industry can grow.