Turning Compliance Into Commerce: Can Metrc Data Actually Help Cannabis Businesses Grow?

Cannabis seed-to-sale tracking systems were established to help ensure accountability and prevent diversion from the regulated market. By following every cannabis plant and product through the supply chain to its final retail sale, regulators would have insight into any goods that leave the regulated market.

Many operators see compliance with these seed-to-sale tracking systems as a burden with little payoff. Despite their efforts to comply with systems such as Metrc, the industry standard with contracts in 29 regulated U.S. markets, diversion is still rampant. A visit to an illicit dispensary in many states where cannabis is prohibited (and some, such as New York, where it’s legal) is likely to yield products from California that appear to be from licensed brands. Instead of working as it’s supposed to, many see Metrc as compliance theater.

Despite Metrc’s shortcomings, however, some industry experts believe the system still has potential value. Metrc data is a treasure trove of supply chain and sales data waiting to be utilized. But to do so, operators and regulators will have to cooperate.

Industry Voices at IgniteIt’s Market Spotlight: California

That was the premise for one of the many discussion panels at IgniteIt’s Market Spotlight: California, held recently in Anaheim. Gary Santo, the CEO of substrates and nutrients manufacturer and distributor Rx Green Technologies, moderated the discussion between a panel of industry experts, including:

Hirsch Jain, Founder, Ananda Strategies

Brad Lim-Senesac, CMO, Genuine Marketing Group

Scott Vasterling, CEO, Humboldt Family Farms

Lauren Fontein, Founder, The Artist Tree

Early in the discussion, Jain addressed some of the foundational problems with compliance obligations in cannabis, arguing that Metrc not only doesn’t work as intended, but it can make difficulties for businesses worse.

“Metrc epitomizes a larger challenge when it comes to cannabis compliance, where operators are saddled with compliance obligations that are intended to serve a certain purpose, but by virtue of the burden they place on licensed operators, not only do they not serve that purpose, but perversely, they end up worsening the problems that they are intended to solve,” Jain told the panel.

Beyond Compliance: Finding Value in Metrc’s Hidden Data

Vasterling described the Metrc experience for many small cannabis farmers, the very beginning of the cannabis supply chain. For those who only use Metrc as a compliance obligation, the time and effort spent can seem wasted. The trick, he said, is to use the data entered into Metrc to inform farm operations.

“Compliance with Metrc and some of the regulations are probably our biggest liability as small farms,” Vasterling explained, adding, “So I think that the being able to use a system like Metrc on the first mile side to help farmers actually understand what their actual yields are—from a business perspective—is something that we have been able to ingrain with our farming partners.”

The discussion then turned to retail, with Fontein noting the challenges dispensaries face complying with Metrc. Shortcomings in the system mean its data and the company’s POS system sometimes don’t match, requiring an inventory audit and data corrections. Despite operators’ considerable efforts to stay compliant, however, diversion continues.

“Metrc is sort of this metaphor for a lot of the problems or shortfalls with the regulated cannabis industry in California,” said Fontein. “It imposes these huge burdens on legal operators while not really fulfilling its purpose of preventing illicit activity or diversion.”

Fontein also acknowledged that Metrc could potentially be used to help analyze sales trends and other data. But that functionality doesn’t exist yet. As a result, Artist Tree has had to develop its own software systems to synthesize and analyze inventory and sales data.

Turning Data Into Growth: The Future of Cannabis Tracking Systems

Santo expressed the need for state regulators to make Metrc data more transparent, adding that some jurisdictions have made strides in data access, while others could be more forthcoming.

“If you can integrate it, break down the silos on this. Just make it wide open,” said Santo. “Some states do it better than others. [In] some states, you can find out so much information about what’s being grown, what the yields are, and things like that. They get close, but no state really does it the way it could, and the way we see it in other industries.”

With greater transparency and integration with Metrc, Lim-Senesac argued, it could evolve from a mere compliance tool into a system that gives operators the data they need to grow their businesses and maximize sales.

“We want to turn compliance into commerce, right? Because if you have all these safeguards, it’s for what? It’s to help you sell that product,” said Lim-Senesac. “At the end of the day, it’s not to penalize you, it’s to support you and help you.”

IgniteIt’s Market Spotlight events offer insight into the cannabis industry in regulated markets nationwide. Join the conversation at IgniteIt’s next event, the Cannabis Capital & Policy Summit, in Washington, D.C., on November 17.