EXCLUSIVE: How To Lower The Cost Of Cannabis Quality And Save 30% Of Your Top-Line Revenue

Cannabis companies of all sizes are struggling to increase their profit margins and to make that happen, they're implementing different strategies. Lowering prices and premiumizing products are among the alternatives to create value. In addition, cannabis companies might look at risk mitigation as an alternative to achieve higher quality and prevent losses.

How can cannabis companies ensure higher quality with a sustainable ROI? Or, how cannabis companies can achieve premiumization at a lower cost?

A quality management system (QMS) might help. QMS are popular in many industries. Automobiles, planes, medical devices and cannabis companies are no different when it comes to quality assurance. Likewise, electronic QMS are software tools that offer cannabis companies an automated means to record and manage all business-critical information, mitigate risk, ensure quality standards and comply with a myriad of regulations.

Good Costs, Poor Costs

The cannabis industry can be viewed as an amalgamation of regulatory elements of pharma, agriculture, consumer packaged goods, food and beverage. However, there are nuances. Regulations can take many shapes and “that's where companies like C15 come in,” Sean Samuel, VP of Sales and Marketing told Benzinga in an exclusive interview. 

C15 delivers a life sciences-based electronic Quality Management System platform to raise quality, compliance and safety standards. 

“We are considered a risk mitigation tool. We're solving the cost of quality which it's not the cost of goods sold. Typically will not show up on a P&L statement. However, these are massive costs that typically represent anywhere between 25 to 35% of your top-line revenue. The cost of quality can be broken down into good costs and bad costs,” Samuel said.

“The good costs are things like, a risk management procedure, validation, internal audits, table stakes when it comes to quality management. The poor costs are where the cost of quality can skyrocket. Any time a batch doesn't get released because there's been mold contamination. Costs that aren't tangible to a lot of C-suites in the cannabis space.”

Disaster Prevention

According to Samuel, good costs can be seen as an opportunity. Any time there are customer returns, complaints, there's damage to the brand reputation, these are foregone sales that companies could have had. Without mentioning a recall. That can be an absolute disaster.

While executives from cannabis companies spend hours thinking about how to create value for stakeholders, a 2-micron mold spore can destroy everything in one harvest.

Samuel explained that resorting to a system such as C15’s can significantly decrease the chances of unfortunate events like that. For a graphic description, he provided an example.

“The sixth largest licensed producer in Canada lost their license because they were doing non-compliant things and they had very poor record-keeping. They got delisted from the Toronto Stock Exchange,” Samuel said. “We are talking shareholder value destruction to the tune of like tens of millions, all because of record keeping. It's not a cost that you can just reduce your expenses on. If not managed properly, the cost of quality can represent millions,” Samuel added, referring to quality management, as a “core task to kill a mess.”

Integrate Everything

From inventory, which is typically what an enterprise resource planning system (ERP) would address, to environmental controls, C15 can monitor and evaluate everything.

Over 300 open applications enable software to communicate to cover the entire supply chain and ensure that protocols and regulations are met.

“Our system comes preloaded with validated audit workflows for supplier qualification, external audits, and internal audits. When the supplier is approved, the system sends a message to the production team, so they know they can purchase from them,’” Samuel said. “You can put that supplier on hold.”

"Our system is effectively the blueprint for production as well as the remedial actions for when things go wrong in the production process. We connect the whole facility.” 

Proven Efficiency

To expand to international markets, C15 has gone through the EU GMP validation process from top to bottom. The company has customers in eight different countries, including New Zealand, Australia and Uruguay. And some of them are in emerging international EU GMP markets, such as the United Kingdom.

In addition, the firm partnered with publicly-traded $25 billion company Veeva Systems Inc. VEEV, operating in the biotech sector. Bayer BAYRY, Pfizer PFE, Merck & Co. MRK, GSK GSK, Unilever plc UL, and Kraft Heinz KHC are among its clientele.

Samuel noted that global cannabis companies, MSOs, and larger single-state operators are gravitating towards C15 seeking an alternative to navigating different regulations, with one single software system.

And provided an example of how C15 is currently working with cannabis MSO Curaleaf CURLF.

“Through our system, Curaleaf harmonizes certain processes and procedures across its national footprint while customizing others. We can tailor document approval workflows for different states. Employees can see certain SOPs, and training material, whereas the C-suite can see everything across the operation,” Samuel explained.

Training and Retail

Cannabis companies can have anywhere between 500 to 1000 Standard Operational Procedures and they might make revisions to half of them over an annual basis. Every time companies make changes to an SOP, they need to retrain the impacted staff so they know they're using the latest and greatest procedures. And that's a ton of training.

Thus, C15 evolved its training above and beyond just SOP compliance training, and it now comes with what Samuel calls “a full-blown training management solution” that allows companies to develop a role-based curriculum.

“You may have a generic curriculum that deploys that applies to all employees, and then a role-specific curriculum that can be any training requirements you want. Training requirements could be SOPs, they could be videos, they could be PowerPoint scoring files, quite literally, anything. We've rolled out this training solution that trickles down, from production to retail stores,” Samuel said.

‘J.D. Power, have you heard of that?’

“We aggregate a lot of production data, deviation data, complaint data… that is kind of like the next chapter of our company, we're very much looking at how to market this data.

“We're providing our customers with annual report cards. So based on an anonymous aggregate customer curve, looking at all our customer data, and how they can be leveraging the system,” Samuel continued.

“J.D. Power, have you heard of that? They offer a sort of quality curve for the automotive industry. J.D. survey customers and tell automobile companies how they sit on the broader quality curve. We're going to tell customers, here's where you can use the system. Here's where you're underutilizing the system,” Samuel concluded.

Photo: Janon Stock on Shutterstock, photo Courtesy of Sean Samuel VP Sales & Marketing - C15 Solutions, Inc.