Supply Chain Now Episode 412

The ‘This Week in Business History’ Series on Supply Chain Now shares some of the most relevant business and global supply chain events from years past. It will shine a light on some of the most significant leaders, companies, innovations, and even lessons learned from our collective business history.

In this episode of ‘This Week in Business History,’ Supply Chain Now Host Scott Luton shares some background on one of the largest growing industries in the U.S.: the $12.4 Billion cannabis industry.

On August 2nd, 1937, President Franklin D. Roosevelt signed The Marijuana Tax Act of 1937 into law. Prior to this, cannabis products had been commonly sold throughout the country, and in some states they are again today, but since the federal government has made no change in its stance on cannabis, some unique considerations still govern businesses in this industry:

· A prohibition on cross-state sales and supply chains, from “seed to sale”

· The division of cannabis regulation between medical and recreational use

· The role that technology is playing in the innovation and growth of this industry

Speaker 1 (00:11):

[inaudible]

Scott Luton (00:12):

Good morning, Scott Luton here with you on this edition of this week in business history. Welcome to today’s show on this program, which is part of the supply chain. Now family of programming. We take a look back at the upcoming week, and then we share some of the most relevant events and milestones from years past, of course, mostly business focused with a little dab global supply chain. And occasionally we might just throw in a good story outside of our primary realm. So I invite you to join me on this. Look back in history to identify some of the most significant leaders, companies, innovations, and perhaps lessons learned in our collective business journey. Now let’s dive in to this week in business history.

Scott Luton (01:16):

Hello, and thanks for joining us on this week in business history. I’m your host Scott Luton. And today we are focused on the week of July 27th, but Hey, let’s pause for one quick programming note this week in business history, we’ll be moving over into its own channel next week. So to continue to get this weekly podcast, you’ll need to search for this week in business history, wherever you get your podcasts and click to subscribe. And for that, we are greatly appreciative. Thanks so much for listening. Now back to the week of July 27th in business history today, we’re going to dive into one of the busiest sectors in global business cannabis. And if you think you know everything about cannabis, think again, stay tuned and join me. As we learn a lot more about what has become a $12.4 billion industry in the United States alone. That’s what we’ll focus on today.

Scott Luton (02:14):

On this week in business history, powered by our team here at supply chain. Now on August 2nd, 1937, Franklin D Roosevelt signed into law. The marijuana tax act of 1937 prior to this becoming the law of the land here in the United States, cannabis products were commonly sold throughout the country. Of course, they were regulated in many States in 1905, the United States department of agriculture listed 29 States that each had laws regulating cannabis in some way, shape or form. During this period in American history, there was not a hardened opposition to the usage of cannabis. In fact, even the American medical association one, or to protect the ability of physicians to prescribe cannabis amongst other things. This was all set to change in the 1930s, and certainly with passage of the marijuana tax act of 1937, that act was drafted by one Harry J Anslinger. Let’s learn more about what some call the first leader in the U S war on drugs, Anslinger, his family immigrated to the United States in 1881.

Scott Luton (03:31):

His father Robert had been born in Bern, Switzerland. His mother Rosa was from Germany. The Pennsylvania railroad would bring the Anslinger family to Altoona Pennsylvania. In fact, Altoona had been founded by the Pennsylvania railroad to serve as a rail yard and maintenance hub. Harry J Anslinger was born now tuna in 1892 at 14. Harry would begin working with his father, Robert at the railroad. And by the time Harry was in his mid twenties, Harry J Anslinger was making quite a name for himself. In fact, due to his investigation, Anslinger helped the Pennsylvania railroad avoid a $50,000 fraudulent claim. Big money back then his investigative skills were getting noticed the enforcement of prohibition amongst other things would fuel the next portion of his career. Working for a variety of police organizations, Anslinger would travel internationally to battle illegal trafficking activities. In 1930, Harry J Anslinger would be named the first commissioner of the federal Bureau of narcotics, a role he’d keep for 32 years.

Scott Luton (04:50):

And it was this role where Anslinger would begin his long and largely effective campaign against all things cannabis, but also in 1930, he would marry the niece of Andrew Mellon, who was the secretary of the U S treasury at the time Andrew Mellon was also one of the wealthiest individuals in the country. Back then. What’s interesting about Harry Jay and Anslinger and cannabis is this prior to being named commissioner of the federal Bureau of narcotics Anslinger was on record downplaying the threat posed by cannabis, but that position would significantly change as just seven years into the role. Anslinger would use an assortment of propaganda, Washington relationships and politics to get the marijuana tax act of 1937 passed and signed by MTR. Anslinger is 180 degree shift on cannabis is rather inarguable, but other components related to his shift and actions is more arguable and a bit murky.

Scott Luton (06:00):

Some have claimed that Anslinger, his position was changed by his new relationship to Andrew Mellon. In a nutshell, hemp was gaining in popularity as a cheaper alternative to paper pulp. So naturally anyone was significant temper holdings like Andrew Mellon would see him and the greater cannabis industry as competition. Others have claimed there was a connection between Andrew Mellon and DuPont, which had introduced nylon to the world, which also competed with him. There are a variety of theories as to what motivated and slander still some would claim that Anslinger needed a new mission in his position at the federal Bureau of narcotics, a new conflict that would help give him ammunition to realize his ambitions for power and notoriety. But what is fact is Anslinger is assault on all things, cannabis related, starting in 1930, he would say, quote, if the hideous monster Frankenstein came face to face with the monster marijuana, he would drop dead of fright in quote, Anslinger would leverage sometimes xenophobic, propaganda, questionable news stories, and Washington relationships, and much more to turn the tide of political and popular opinion to get the marijuana tax act of 1937 passed.

Scott Luton (07:24):

So how did that change the U S cannabis industry? Well, let’s turn to how the U S customs and border protection agency phrases it quote in principle, their marijuana tax act of 1937 stopped only the use of the plant as a recreational drug in practice though industrial hint was caught up in antidote legislation, making hemp importation and commercial production in this country, less economical, scientific research and medical testing of marijuana. Also virtually disappeared by 1970 marijuana was classified and restricted on par with narcotics and new tighter laws were enacted in quote, clearly the policy hamstrung the entire cannabis industry for decades. Harry J Anslinger would serve as commissioner of the federal Bureau of narcotics until 1962, seven years after Anslinger slit stepped down, the United States, Congress would replace the marijuana tax act of 1937 after Timothy Leary won a court case versus the U S in the Supreme court.

Scott Luton (08:32):

The controlled substances act has been the law of the land here in the U S since 1970. And under this legislation, cannabis has been effectively banned at the federal level. So given all of these restrictions and regulations, just how has the cannabis industry grown to a $12.4 billion industry in the U S or it can’t do it justice in the time we have here in a nutshell I’d point to four things, one evolving public opinion in general, as it relates to cannabis, no cannabis products, too, more and more commonly accepted usage of cannabis products for medicinal purposes, three federal measures and policy embracing medical and industrial use of cannabis. And for state driven acceptance of cannabis and cannabis products beginning with California in 1996, 33 States in Washington, D C have all legalized medical marijuana for that matter. At least 10 States have legalized recreational marijuana.

Scott Luton (09:39):

Our neighbor to the North Canada legalized recreational marijuana Countrywide in 2018, amazingly, despite the mix of regulatory environments and policies here in the U S according to data from BDSA, the cannabis industry here is poised to reach $33.9 billion in 2025. Let’s spend some time uncovering what makes up the cannabis industry. You can break down the cannabis industry into four large buckets, recreational marijuana, and depending on what data you look at, that’s about a $3 billion market in and of itself medical marijuana, approximately a $5 billion market right now, CBD, which stands for cannabidiol. Say that three times fast cannabidiol, an estimated $200 million market for CBD and finally hump, which is estimated to be about an $820 million market. Once simple clarification, two plants are critical to the cannabis industry, the marijuana plant for obvious reasons, and its cousin, the hemp plant, which provides both CBD and the valuable hemp fibers, what might not.

Scott Luton (10:56):

So be interesting to look at would be the cannabis supply chain, which is commonly referred to in industry as seed to sale. Keep in mind in the current environment here in the U S there’s one big factor that governs cannabis, supply chains, cannabis products can only be sold and consumed within the state where the original plant was grown. That is a pretty big restriction. Isn’t it? As you might imagine, each state has its own licensing and enforcement mint infrastructure. So let’s look at a generalized version of a cannabis supply chain. First, you have farms that focus on growing quality seeds, either indoors or outdoors. In some States, these activities may be called growing or cultivating. Secondly, the growers will then send the harvest flowers to a processor and here they’ll trim and dry and cure the plants. The next step, which may be done by the same processor or a second processor in that step is the finishing process that transforms a raw material into the final product itself.

Scott Luton (12:02):

Perhaps a final product will be buds or maybe edibles, such as chocolate spake goods, beverage, mixes, candy, et cetera, all products must be tested for potency. And that data is reported to the appropriate local authority. And for that matter, all nodes in any particular cannabis supply chain must be licensed. So, okay, the final products are then shipped to distributors and the distributors will then ship them out as needed to dispensaries, retail outlets, et cetera. Finally, let’s look at some ways that technology is playing a big part in the cannabis industry, CRM technology, and we all love our acronyms that’s customer relationship management has proliferated far and wide lately, and it’s no different in the cannabis industry. We’ve got companies like Baker offering customized CRM platforms specifically for the industry. Baker is now part of tilt holdings, a vertically integrated infrastructure and tech platform specifically serving the cannabis industry, although it has no shortage of challenges, depending on the geographic market home delivery of cannabis products is a burgeoning industry.

Scott Luton (13:12):

Take ease. For example, spelt E a Z E they’ve made over 5 million deliveries to 600,000 registered customers in recent years across their California based footprint. And how about CDOT an automated home grow device that helps make it easy for consumers to grow and enjoy their preferred cannabis products and home. It’s all self contained and it allows for you to plant the seed and not deal with it again until it’s ready for harvest. Speaking of the cannabis industry and technology, we should give a shout out to a friend of the show. Colton Griffin is founder and CEO of flourish software, a technology firm in the cannabis industry that has been growing dramatically over the past few years, flourish software offers a platform that tracks product from the proverbial seed to sale, helping clients to optimize all key activities, including purchasing inventory management, uh, cultivation tracking, order fulfillment, et cetera.

Scott Luton (14:12):

And the organization is working in a variety of States across the country. One last thought they look ahead for the cannabis industry, despite a variety of unique hurdles. There’s a lot like about growth in the years to come. In fact, the industry has attracted a wide variety of investors. Constellation brands, owner of Corona has invested heavily in the sector as has the Altria group owner of Marlboro cigarettes. That’s just the tip of the iceberg. According to Veridian capital advisors, cannabis companies raise over $116 billion in capital in 2019. So there’s clearly a ton of bonafide interest in growing the industry and what would also be added tailwinds, some industry analysts project, a slew of additional States here in the U S that will be easing restrictions. In fact, we’ve seen recent strides here in Georgia. One huge development that keep your own here in the, in the United States banking reform, the cannabis industry is hindered in large part due to an uncertain banking environment.

Scott Luton (15:19):

Big banks are largely reluctant to get involved in the cannabis industry because of the somewhat ambiguous legal status that the industry finds itself in the us house of representatives has passed legislation and titled the safe banking act that would address some of these concerns. However, the Senate has not passed similar legislation as of late July, 2022. We’ll see how that goes in the months ahead. Overall, there seems to be a ton of upside and room to grow for the thriving cannabis industry enough, you would think to make Harry J Anslinger turn in his grave. That wraps up our look at the week ahead from a business history standpoint, the growing cannabis industry, including legislation that held the industry back for decades really stood out to us. But what do you think there were certainly no shortage of big stories during the week of July 27th in business history.

Scott Luton (16:19):

What stands out to you? Tell us, shoot us a note to Amanda at supply chain. Now radio.com or join our supply chain. Now insider’s group own LinkedIn and share your feedback and perspective there. We’re here to listen. I hope you’ve enjoyed our latest edition of this week in business history focused on the week of July 27th. Own that note, check us out and check out a wide variety of industry thought leadership at supply chain. Now radio.com Fondas and subscribe. Wherever you get your podcasts from, Hey, friendly reminder, you can now find this week in business history, wherever you get your podcasts from based on all the feedback we’ve received. Our team here at supply chain now chose to create its own channel search for it. Wherever you get your regular podcast from on behalf of the entire team here at this week in business history and supply chain. Now this is Scott Luton wishing all of our listeners, nothing but the best do good gift forward and be the chain just needed on that note. We’ll see. Next time here on this week in business history. Thanks everybody.

 

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Scott W. Luton is the founder & CEO of Supply Chain Now. He has worked extensively in the end-to-end Supply Chain industry for more than 15 years, appearing in publications such as The Wall Street Journal, Dice and Quality Progress Magazine. Scott was named a 2019 Pro to Know in Supply Chain by Supply & Demand Executive and a 2019 “Top 15 Supply Chain & Logistics Experts to Follow” by RateLinx. He founded the 2019 Atlanta Supply Chain Awards and also served on the 2018 Georgia Logistics Summit Executive Committee. He is a certified Lean Six Sigma Green Belt and holds the APICS Certified Supply Chain Professional (CSCP) credential. A Veteran of the United States Air Force, Scott volunteers on the Business Pillar for VETLANTA and has served on the boards for APICS Atlanta and the Georgia Manufacturing Alliance. Follow Scott Luton on Twitter at @ScottWLuton and learn more about Supply Chain Now here: https://supplychainnow.com/

 

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