The cannabis industry is going through boom-bust cycles, many businesses are losing money or barely scrape by. All that is set against an ever-growing market with sales growing 20-30% year over year. In this session we are analysing various factors exerting pressure on the industry, from taxes to testing costs, but also business strategies and operational decisions. This is all funded on extensive analysis of dataset from sales, business performance, production processes and public sources. The work from an interdisciplinary team of economists, data scientists and chemists cumulated in an in-depth analysis of the cannabis economy and guiding principles for industry-wide success.

1. © 2011-2023 by MJBiz, a division of Emerald X, LLC
Dr. Markus Roggen
Founder
Controlled Chemistry
Your Secret Sauce to Succeeding
as a
Cannabis Business:
A Data-Driven Approach

2. Content
• Why am I here?
• Close up on flower
• In-depth on pre-rolls
• Superficial financials
• Deep process learning
• Lunch!
© 2011-2023 by MJBiz, a division of Emerald X, LLC

3. The Secret Sauce of Business is Science
The Turducken of Cannabis Business
• Multiple layers / unique characteristics
• Going beneath the surface
• Complex assembly
• Integration for a greater whole
© 2011-2023 by MJBiz, a division of Emerald X, LLC

4. Happy Belated
Thanksgiving
© 2011-2023 by MJBiz, a division of Emerald X, LLC

5. Dr. Markus Roggen
• PhD in Chemistry
• Minors in Finance and Mathematics
• Imperial College, NTU Singapore, ETH Zürich, Scripps Research
• Founded and sold cannabis R&D company
• Build analytical and production facilities
© 2011-2023 by MJBiz, a division of Emerald X, LLC

6. Dr. Markus Roggen
A stereotype
• German
• Chemistry PhD
• Process optimization
• All about efficiency
• Loves math and science
• Bewildered by cannabis
© 2011-2023 by MJBiz, a division of Emerald X, LLC
NERD
GEEK
NERD

7. Teamwork
• Thomas Ford
• Dr. Hart Plommer
• University of British Columbia,
Vancouver
• Loyalist College, Belleville
• Fritsch: #4232
• Cambustion: #2622
• Abstrax Tech: #6311
• Agilent: #4218
• MJBiz Daily: #10039
• New Frontier
• Headset

8. The Fine Print
• A good Thanksgiving has Family
fighting over dinner
• The same data will be interpreted
differently by various groups
• Goal is to have a lively discussion
over lunch!
https://doi.org/10.1073/pnas.2203150119

9. The Layers of a
Turducken
© 2011-2023 by MJBiz, a division of Emerald X, LLC

10. Product Sales
• Drivers for Flower Sales
• Performance Metrics of Pre-Rolls
© 2011-2023 by MJBiz, a division of Emerald X, LLC

11. Flower Sales
© 2011-2023 by MJBiz, a division of Emerald X, LLC

12. Flower Sales
© 2011-2023 by MJBiz, a division of Emerald X, LLC

13. Flower Sales
© 2011-2023 by MJBiz, a division of Emerald X, LLC

14. Flower Sales
© 2011-2023 by MJBiz, a division of Emerald X, LLC https://doi.org/10.1371/journal.pone.0282396
https://www.cannabisbusinesstimes.com/article/why-current-thc-labeling-confusing-holding-industry-back-dr-markus-roggen/

15. %THC over Time
• Avg. %THC increase over time
• Demonstrating the market
pressure on this ‘quality’
10
15
20
25
30
35
2015 2016 2017 2018 2019 2020 2021 2022 2023
Average
%THC
CA, CO, OR, QC
CA QC CO OR

16. 10%
15%
20%
25%
30%
35%
Jan-20 Aug-20 Feb-21 Sep-21 Mar-22 Oct-22 May-23
Average
%THC
avg. %THC sold in CA
%THC over Time
• Avg. %THC increase over time
• Demonstrating the market
pressure on this ‘quality’
• Closer look at CA numbers

17. Flower Sales
• Look at Canadian flower offerings
• Scrapped data from webstores across Canada
• Correlation between %THC and Price
• But those are not sales!

18. Flower Sales
• USA flower sales
• Sales data for AZ, CA, MI
• Weak correlation between
%THC and Price
y = 65.085x + 17.184
R² = 0.0828
$0
$10
$20
$30
$40
$50
$60
$70
10% 15% 20% 25% 30% 35%
Price
$/8th
%THC

19. Averages conceal Insights
• Individual look at States
• Data from AZ, CA, MI
• Top 20 selling flowers
• 20 mid-Market flowers
• %THC and $ for each
© 2011-2023 by MJBiz, a division of Emerald X, LLC
Expectations:
• Top20: higher %THC and $
• Mid20: Lower %THC and $

20. Averages conceal Insights
• Arizona
Top20:
• 20% THC, $27
• No Correlation
Mid20:
• 22% THC, $37
• Strong Correlation
© 2011-2023 by MJBiz, a division of Emerald X, LLC $5
$15
$25
$35
$45
$55
$65
15% 20% 25% 30%
Avg
Price
8th AZ Top 20 Products
$5
$15
$25
$35
$45
$55
$65
15% 20% 25% 30%
Average
Price
8th
AZ Mid 20 Products

21. Averages conceal Insights
• California
Top20:
• 29% THC, $34
• Weak Correlation
Mid20:
• 28% THC, $36
• Correlation
© 2011-2023 by MJBiz, a division of Emerald X, LLC $5
$15
$25
$35
$45
$55
$65
15% 20% 25% 30%
Avg
Price
8th CA Top 20 Products
$5
$15
$25
$35
$45
$55
$65
15% 20% 25% 30%
Average
Price
8th
CA Mid 20 Products

22. Averages conceal Insights
• Michigan
Top20:
• 22% THC, $34
• No Correlation
Mid20:
• 22% THC, $29
• No Correlation
© 2011-2023 by MJBiz, a division of Emerald X, LLC $5
$15
$25
$35
$45
$55
$65
15% 20% 25% 30%
Avg
Price
8th MI Top 20 Products
$5
$15
$25
$35
$45
$55
$65
15% 20% 25% 30%
Average
Price
8th
MI Mid 20 Products

23. Detailed Averages give Insights
• AZ: Lowest %THC
• CA: Highest %THC and $
• MI: Discount $ for Mid20
15
20
25
30
35
AZ Top20 AZ Mid CA Top20 CA Mid MI Top20 MI Mid
%THC Price

24. Outliers give more Insights
• Minor Cannabinoids
• THCV sells at a premium
© 2011-2023 by MJBiz, a division of Emerald X, LLC $5
$15
$25
$35
$45
$55
$65
22% 27%
Avg
Price
8th
CA Top 20 Products
Durban Poison

25. Outliers give more Insights
• Minor Cannabinoids
• THCV sells at a premium
• Unknown Weed
• P90X (fitness workout???)
© 2011-2023 by MJBiz, a division of Emerald X, LLC $5
$15
$25
$35
$45
$55
$65
22% 27%
Average
Price
8th
CA Mid 20 Products
Real Sweat,
Not Mexican Sweat

26. Spice make the Meal

27. Aroma drives Experience
• Cannabinoids
• Terpenes
• Aroma compounds
JUST THC

28. Aroma drives Experience
• Avg Aroma score
shifts sweeter
• CA: largest shift
• MI: sweetest Top20
Arizona
California
Michigan
Top20 Mid20

29. The Performance of
String Beans
© 2011-2023 by MJBiz, a division of Emerald X, LLC

30. Pre-Rolls are lighting up
• Headset’s report on Pre-Rolls
• “Massive success”
© 2011-2023 by MJBiz, a division of Emerald X, LLC

31. Pre-Rolls are lighting up
• Headset’s report on Pre-Rolls
• “Massive success”
• 3rd in USA, 2cd in CAN
© 2011-2023 by MJBiz, a division of Emerald X, LLC

32. Pre-Rolls are lighting up
• Headset’s report on Pre-Rolls
• “Massive success”
• 3rd in USA, 2cd in CAN
• Overachievers:
• ‘Connoisseur / Infused’
• Mixed Strain
© 2011-2023 by MJBiz, a division of Emerald X, LLC

33. © 2011-2023 by MJBiz, a division of Emerald X, LLC
Meet
Karl

34. https://www.cannabissciencetech.com/view/does-size-matter-for-
performance-a-study-of-how-particle-size-influences-joint-smoking
Effect of Particle Size on THC Delivery
• Fine grind: More THC per puff
• Coarse grind: More THC per Pro-Roll
• Highest delivery at end of a joint’s lifecycle
0
10
20
30
40
50
60
THC/puff (mg*20) THC/joint (mg) Puff count
THC 1-mm THC 5-mm

35. Infused: Same but Different
• Infused Pre-Rolls deliver
• M0re THC (~3x)
© 2011-2023 by MJBiz, a division of Emerald X, LLC
https://www.cannabissciencetech.com/view/does-size-matter-for-
performance-a-study-of-how-particle-size-influences-joint-smoking
0
200
400
600
800
1000
1 g Regular Pre-
Rolls
1 g Kief Coated Pre-
Rolls
1 g Distillate
Infused Pre-Rolls
THC
(µg/mL)
THC in Aerosol

36. 0
1
2
3
4
5
6
7
1 g Regular Pre-Rolls 1 g Kief Coated Pre-
Rolls
1 g Distillate Infused
Pre-Rolls
THC
(µg/mL)
THC per Puff
Infused: Same but Different
• Infused Pre-Rolls deliver
• M0re THC (~3x)
• But not on a per-puff basis!
© 2011-2023 by MJBiz, a division of Emerald X, LLC
https://www.cannabissciencetech.com/view/does-size-matter-for-
performance-a-study-of-how-particle-size-influences-joint-smoking

37. 0
500
1000
1500
2000
2500
3000
3500
4000
4500
1 g Regular Pre-
Rolls
1 g Kief Coated
Pre-Rolls
1 g Distillate
Infused Pre-
Rolls
Terpenes
(µg)
Menthol
(+)-Valencene
α-Humulene
(-)-trans-Caryophyllene
Terpineol (mixture of isomers)
(1R)-endo-(+)-Fenchyl alcohol
(+)-Linalool
(R)-(+)-Limonene
β-myrcene
β-Pinene
Camphene
Sabinene
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1 g Regular Pre-
Rolls
1 g Kief Coated
Pre-Rolls
1 g Distillate
Infused Pre-
Rolls
Terpenes
(µg)
Men
(+)-V
α-Hu
(-)-tr
Terp
(1R)-
(+)-L
(R)-(
β-my
β-Pin
Cam
Sabin
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1 g Regular Pre-
Rolls
1 g Kief Coated
Pre-Rolls
1 g Distillate
Infused Pre-
Rolls
Terpenes
(µg)
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1 g Regular Pre-
Rolls
1 g Kief Coated
Pre-Rolls
1 g Distillate
Infused Pre-
Rolls
Terpenes
(µg)
Menthol
(+)-Valencene
α-Humulene
(-)-trans-Caryophyl
Terpineol (mixture
(1R)-endo-(+)-Fenc
(+)-Linalool
(R)-(+)-Limonene
β-myrcene
β-Pinene
Camphene
Sabinene
Infused: Same but Different
• Infused Pre-Rolls deliver
• M0re THC (~3x)
• More Terpenes (>4x)
• More flavor
• Different flavor
© 2011-2023 by MJBiz, a division of Emerald X, LLC
https://www.cannabissciencetech.com/view/does-size-matter-for-
performance-a-study-of-how-particle-size-influences-joint-smoking

38. Better Products for Consumer
• Dog Walker: Small particle
• Sharing: Large particle
• Modulate aroma through blending and infusion
• Educate consumer about performance
© 2011-2023 by MJBiz, a division of Emerald X, LLC

39. Cranberry Sauce
Financial Engineering
vs.
Process Engineering
© 2011-2023 by MJBiz, a division of Emerald X, LLC

40. Cannabis Bingo
© 2011-2023 by MJBiz, a division of Emerald X, LLC
• Size of Global Cannabis Industry: $51bil
• Size of USA Cannabis Industry: $34bil
• Year over Year Growth: 13%
• YoY for California: 3%
• 280E Costs in the USA: $1.8bil
• Exercise Tax in Canada: >10% operating costs
• Legal to Illicit Sales Ratio: 67% legal (Canada)
www.statista.com

41. COGS Conundrum
• Canopy Growth
• Sales: $121 mil
• COGS: $102 mil
• Cost Margin: 85%
© 2011-2023 by MJBiz, a division of Emerald X, LLC

42. COGS Conundrum
© 2011-2023 by MJBiz, a division of Emerald X, LLC
CAN
Cannabis
USA
Cannabis CPG Pharma
Avg. Cost
Margin
68% 51% 30% 26%

43. AI for Extraction
• No time or money for experiments
• Multi-Factor optimization problem
• Extraction costs
• Yield: +10%
• Throughput: +100%
• Quality: improved
• Waste: -50%
https://chemrxiv.org/engage/chemrxiv/article-details/64ea83d2dd1a73847f9656fc

44. Heavy Math Analytics
• Testing is expensive: $136/lbs.
• How to reduce costs?
• Pooled Testing for Heavy Metal Analysis
• 54.1% less tests (CA)
• In-Process Analysis with IR
• Test costs below $1
https://doi.org/10.1371/journal.pone.0232041
https://doi.org/10.1093/jaoacint/qsac140
https://www.agilent.com/cs/library/whitepaper/public/whitepaper-cannabis-cary-
630-ir-5994-4167EN-agilent.pdf

45. Thanksgiving Meal
Summary
© 2011-2023 by MJBiz, a division of Emerald X, LLC

46. What we learned
• Consumer decisions are driven by more than just THC
• Multiple factors, from many areas
• Marketing
• Culture
• Chemistry
• Production
• Cannabis is multifaceted, so is its production
• Cannabis is not CPG or Pharma or Vice; it is all of it!
© 2011-2023 by MJBiz, a division of Emerald X, LLC

47. Questions?
• I have some!
Dr. Markus Roggen
markus@complexbiotech.com
© 2011-2023 by MJBiz, a division of Emerald X, LLC