What is Cannabis Co Location?

What is Cannabis Co Location?

Welcome to the next installation of our practical guide on the pros and cons, and timing of each method to maximize your entry into cannabis the ~legal~ way. Today, we’re focusing on cannabis co location. 

Wikipedia defines colocation as “the placement of several entities in a single location.” 

In fact, a Type S License is actually one form of colocation, since every entity that comes into our facility at MyGN is their own separate licensed entity working under one roof. In essence, you can think of it as an incubator. If we’re excluding MyGN, the issue with cannabis incubators today is that right now they don’t have the ability to provide a license and production spaces. 

There are 3 types of cannabis colocation:

  1. Buying a cannabis colocation license from a flipper
  2. Type S License (MyGN Model) 
  3. Working under someone else’s license

In this article, we’ll only focus on (1) buying a colocation license from a flipper.  

To read about the MyGN model, read The MyGN Type S License

Working under someone else’s license? We just don’t suggest it. Unless you have an incredibly good friend, these deals are complicated, high risk, and you have zero control now or in the future. Even if you have an incredibly good friend, coming under someone else’s license is like having roommates that are constantly asking to use your stuff every day and if one roommate messes up – everyone gets kicked out and sued. It’s also technically not even colocation since you are not a separate entity on paper.  

What is Buying a Cannabis Co Location License from a Flipper? 

As cannabis evolves, flippers flop along. A whole industry has evolved where “flippers” buy green-zoned land, divide it, then gets each space pre-approved for licenses using connections and money. Once pre-approved, they “flip” each divided space for profit to the highest bidder. 

This type of colocation is in essence a more expensive version of getting your own Type S License. The key difference is that in most cases, you will have to finish the licensing process, buildout, and equipment. 

Is Buying a Cannabis Co Location License from a Flipper Good for Entrepreneurs, Startups, and Small Business?

Generally, NO. 

Think of it this way. You pay $500K to purchase a license that you also need to build out, buy equipment, finish licensing, etc. before being able to produce your first product. 

The best time for flipping a cannabis colocation license is:

  1. AFTER you already have your Type S License; and/or
  2. Are ready to scale up your existing brand; or
  3. If you have a ton of money. 

How can I get a Buy a Cannabis Co Location License from a Flipper?

Step 1: Look on cannabis real-estate sites, generally you will find a few places that seem to have multiple licenses for sale with one address.  

Step 2: Negotiate the purchase of your license, do the legal paperwork to transfer company ownership that has license approval. 

Step 3: Finish build-out and equipment purchases to finalize licensing. 

Step 4: Produce and sell your product. 

What are the Cons of Buying a Cannabis Co Location License from a Flipper? 

A quick reminder, this is buying a cannabis colocation license from a flipper – not getting a Type S License. 

Expensive

Buying a license is expensive. The reason being is that most people when they are selling are doing so to “flip” the license. Just like when people “flip” houses, someone else buys low and sells to you high. 

Finalize Buildout

In flipping a cannabis colocation deal - you need to finish building it out. This costs time and money. 

Potential Equity, Profit-Share, Etc. 

In flipping a cannabis colocation deal, terms will vary. Some facilities will take equity of your company, require you to work for them, and/or take a portion of your revenue every month. Very few, if any, are like MyGN that provide a complete support network without taking equity or a share of your revenue. 

Potential Burn Rate  

You might have to pay money every month even if you are not producing yet as you finalize your licensing, buildout, and wait for equipment.

What are the Benefits of Flipping a Cannabis Co Location License?   

  • License ownership 

Of course, the biggest value is being able to own your own license which provides control and freedom. Just like getting your Type S License or applying for own cannabis license, having a license equates to control over your destiny. 

  • Faster Ramp-Up Times 

While slower than a Type S License since you have to build out and buy equipment, this is much faster than applying for your own license from scratch although it could still take months to finalize the license. 

  • Potentially, Community 

When built with intention, cannabis colocation provides a community to bounce ideas off of and learn from others mistakes. Usually, these licenses are all put next to each other so you’ll have other companies to talk to and learn – if they want to collaborate with you.

What are Costs to Consider When Buying a Cannabis Co Location License? 

Cannabis Co Location License Cost

Status of Cannabis co location license

Are you buying:

  1. An existing, production-ready cannabis colocation license; OR
  2. A pre-approved cannabis colocation license without any buildout; 

Depending on what you’re getting, this will determine how much additional work you need to do, how much it will cost, and more. 

Cannabis co location license purchase price

Evaluate the license you are purchasing SEPARATE from everything else. The average value for an approved cannabis license used to be several million dollars. Today, the price ranges from $250,000 to $1,000,000 or higher for the license alone. This is not including equipment, buildout, and other assets. 

Some factors to consider when valuing the colocation license purchase price are:

  1. Land vs License Price – are you buying land with a license? Or just buying the license tied to the land? 
  2. Location – are you buying in the desert or in a strategic area like Santa Ana? This matters for your distribution 
  3. Neighborhood – are you buying in a place where crime and theft are common? Or a safer area where police will come by quickly?
  4. Cost for transfer – how much will it cost for someone to perform the transfer? Are there any restrictions you should be concerned about? 

There are a lot of factors to consider when purchasing your colocation license when someone is flipping the license since usually their primary concern is how to turn a quick profit.  

Cannabis co location license build-out

Imagine if you bought a blank warehouse with approved “plans” for $500,000 in construction costs. Even though it is “pre-approved” you still need to pay to finish the buildout and get the final license in hand. Depending on how complete the build out is, this can get very expensive. Tack on your build-out costs to the license purchase price. 

Cannabis co location license equipment purchases

When flipping a cannabis colocation license, the flipper is looking to attract the greatest number of buyers – so they leave it to the final buyer to modify the space to suit their needs. For example, the needs of a gummy manufacturer packaging products into tins is vastly different than an infused pre-roll manufacturer packaging into tubes. 

Additional Cannabis Co Location Deal Terms  

In flipping a cannabis colocation deal, terms will vary. We’ve identified three main versions:

  1. The Straight Flip: it’s exactly how it sounds; you’ll pay for a pre-approved licensed location and have to finish building it. It’s clean, but expensive.
  2. The Equity Trade: Some facilities will take up to 49% equity in your company but provide a lower license purchase price. 
  3. The Big Brother: You’ll buy and own the license at a discount but pay monthly rent and a percentage of your product sales. This is common in cultivation colocation licenses. 

Make sure to understand the impact that this will have as you try to grow and scale your business. These terms can have long term impacts for your business. 

What’s the Cost to buy a Cannabis Co Location License from a Flipper?

Be prepared to pay at a minimum $250,000 to $1,000,000+.  

Cost to Buy a Cannabis Co Location License from a Flipper

The price range varies so much because there’s a lot of different ways that people flip a cannabis colocation license. Generally – if you want to pay less cash up front, you’ll need to give away more equity and pay more on the back end. 

An example that we have seen is that someone bought a cannabis cultivation license for $250,000, but they had to buy all the grow equipment and lights, pay a monthly rent of $20,000 and 10% of any product sales above a certain amount. 

When should I consider Buying a Cannabis Co location License from a Flipper? 

Buying a cannabis colocation license from a flipper is great when: 

  1. have an existing cannabis license so you don’t “need” the license;
  2. You have product sales in licensed dispensaries to give you leverage in negotiations; or
  3. You just have a lot of money 

If you aren’t at that stage, wait for it…

Then get a Type S license! 

We hope this was educational and informative, if you have any questions or want to inquire about getting your own cannabis license, contact us!

Go Green the Way You Want, we do the Rest. 

If you haven’t read them yet, we recommend to read more about other ways cannapreneurs enter the industry:

  1. The Top 5 Ways to Start Your Cannabis Business 
  2. Part 1: The MyGN Type S License
  3. Part 2: The Traditional Route to get a Cannabis License
  4. Part 3: What is Cannabis Contract Manufacturing? 
  5. Part 4: What is Cannabis White Labeling?
  6. Part 5: What is Cannabis Co Location

The Top 5 Ways on How to Start a Weed Business

Welcome to our educational series on how to start a weed business. This is a practical guide on the most common ways that people consider when launching their weed brand, entering the weed industry, etc.


We’ll provide a high-level overview of the top 4 considerations weed businesses consider in starting their own weed business and brand. If you want to learn more, you can do a deep dive into each route here:

Reframing How to Start a Weed Business

To reframe your perspective, you should think first about what path is best suited for your particular situation at the current time.

While it is incredibly important to understand how the big operators managed to scale their business, and make millions and billions of dollars – the story of their beginnings is usually overlooked.

Having $100,000 vs $1,000,000 vs $100,000,000 provides a very different framework to work with. How to start a weed business with the money you have right now in today’s industry is the better question to ask yourself.

What are the 5 Ways on How to Start a Weed Business

With this perspective in mind, if you have done any research on how to start a weed business, you have probably discovered these options:

  1. Type S Shared-Weed Manufacturing
  2. Applying for your own weed license (the “Traditional Weed License”)
  3. Weed co-location
  4. Weed contract manufacturing
  5. Weed white labeling

The first option is a secret advantage which optimizes the power of shared-economy. People who have really done their homework discover the Type S weed manufacturing license and immediately realize it is far superior when starting a weed business.

How do I Start a Weed Business with a
Traditional Weed License?

This is the hardest path in getting a weed license in the entire industry.

Minimum Starting Capital: $1,000,000+ to start your weed business, usually a lot more.

Time to Receive License: 12 to 24+ months

Time Until Production: 13 to 25+ months

Personal Time Expenditure for Licensing: 100% involvement. You will need to roll up your sleeves and be ready to dive into every aspect for licensing and coordinate your own team of lawyers, architects, general contractors, sub-contractors, city inspection, state licensing, and more.

Benefits: As the most expensive path, it also yieldsthe highestrewards - complete control over your production, ability to scale according to your facility capacity, freedom to do anything your specific weed manufacturing license can do.

Pitfalls: In general, getting a traditional weed license is the most expensive, time consuming, and longest burn until you can produce a product. It also comes with the biggest risks– the what ifs. What if you don’t get your license? What if your product needs adjustments and doesn’t do well? What if you can’t cover your overhead? How many months can you survive for?

For an in-depth understanding of licensing for this route, read The Traditional Route to get a Cannabis License.

How do I Start a Weed Business with Weed Co-Location?

This is similar to getting your own Type S weed manufacturing license, except a lot more expensive.

Minimum Starting Capital: $1,000,000+ to start your weed business, usually a lot more.

Time to Receive License:6+ Months

Time Until Production: 6+ Months

Personal Time Expenditure for Licensing: 100% involvement. Usually, you are buying a pre-existing license which you will need to “complete build-out” and pass final inspections and licensing.

Benefits:While expensive, it does give the same freedom as getting a traditional license with about 50% of the work and more security then applying from scratch.

Pitfalls:The same operational concerns with owning your own license. A few added considerations are what if you want to make changes? What if purchasing the license isn’t as easy what the other party says? What if the deal falls through?

For an in-depth understanding of licensing for this route, read What is Weed Co-Location?

How do I Start a Weed Business with Weed White Labeling?

Like the Type S weed manufacturing license, this is also a very fast way to launch a weed product.  

Minimum Starting Capital: $200,000+ for production and a lot more on marketing and sales. 

Time to Receive License: You will not get a license.

Time Until Production: 2+ Months 

Personal Time Expenditure for Licensing: Not applicable 

Benefits: Time and speed. With white labeling, you are asking another company to use their current formulations to produce their existing products with a blank “white label” – then put your brand onto the label. Also, you generally don’t need to worry about production. 

Pitfalls: Like the traditional license, you do have to consider the same issues operationally but you will not have to apply for a license. Additional considerations are that you have to worry about your white label partner too. Again, the what ifs. What if they discontinue the line and ask for more money (because they can)? Also, because you don’t have a license – you are always reliant on someone else for any new product line, distribution, or sales. The biggest issue is you are literally trying to sell a pre-existing product under your brand – which means you have to out-market your competitors.  

For an in-depth understanding of this route, read “What Is Cannabis White Labeling”  

Cannabis Co-Manufacturing

How do I Start a Weed Business with Weed Co-Manufacturing?

This is a good way to grow or expand in the weed industry for existing businesses. 

Minimum Starting Capital: $250,000+ for production, formulation, and a lot more on marketing and sales.

Time to Receive License: You will not get a license.

Time Until Production: 3-6+ Months 

Personal Time Expenditure for Licensing: Not applicable.

Benefits: Speed and your own product formulation. With weed co-manufacturing, you are asking another company to use your own formulation to create a weed product. Like white labeling, you don’t produce yourself. 

Pitfalls: The same issues as white labeling. Additional considerations will be – can someone produce your formulation to your standard? Is there a risk of intellectual property theft? 

For an in-depth understanding of this route, read “What is Cannabis Co-Manufacturing?” 

How do I Start a Weed Business with a Type S Weed Manufacturing License?

This is the best way to start a weed business and/or expand into the California weed market. 

Minimum Starting Capital: $50,000 for licensing, the remainder for production, marketing, and sales.

Time to Receive License: 2 months

Time Until Production: 2.5 months 

Personal Time Expenditure for Licensing: Minimal with My Green Network, we prepare, submit, and get your licenses for you. 

Benefits: Cost, control, speed, license ownership. Basically, the combined benefits of traditional licensing, the convenience of co-location, the speed of white labeling, while keeping full control. Also, at My Green Network we guarantee the Type S Weed manufacturing license to any qualified weed business owner, provide flexible memberships, fully equipped spaces for production, and state-wide weed distribution.

Pitfalls: You’ll face the same challenges as owning your weed license on a smaller scale. If you do start earning $1,000,000 a year in revenue – you will need to get another Type S License or buy your own traditional license. 

For an in-depth understanding of this route, read “What is a Type S License?”

What is the Current State of California’s Weed Industry?

It’s important to note that as of 2022, California’s weed industry is currently in a pivotal state of evolution. If you’ve spoken to a lot of people, you might hear “oh the California market is saturated” or “isn’t it hard to succeed in the California industry?”

That’s because of a few factors.

  1. First, these people are looking for low-hanging fruit – they want to invest in a basic product like flower, a gummy, or something standard to make a return. These are not people looking at the evolution of the weed industry.
  2. Secondly, the incorrect assumption by most people is that only the first 4 ways on how to start your weed business exist – traditional license, co-location, white labeling, or manufacturing. 
  3. Thirdly, the Type S weed Manufacturing License is a hidden gem. It is basically unheard of that it is possible to get a California weed manufacturing license for less than $50,000.

Yes, it is true that flower brands are a dime a dozen. That the latest “cool” innovation in pre-rolls is a 0.35g dog-walker, that every gummy tastes the same – just with different weed infusions. However, because of the fact the California market is “stagnant”, we’re in an incredibly opportune time for unique and interesting products to hit the market and completely blow people’s minds. 

Weed infused moon cakes, baklava, or dulce de leche? THC infused skin-care products? What about THC infused binaca sprays or take-home cookie mixes? Weed infused gift sets?  

Right now, California’s weed market is primed for the weed consumer to start wanting higher quality, cultural weed products, or convenience and novelty weed products. The fact that the consumer is tired of the same products in today’s market means niche and quality products will soon come to market and start dominating and taking market share.

Which Route is Best to Start Your Weed Business?

While these questions are relevant to all businesses – remember how we reframed our perspective. 

If you have $100,000, $1,000,000, or $100,000,000 your path should reflect what is the most effective for your specific need right now to lay the foundation for your future. 

When thinking of any route, you should consider not just the licensing time frame, but also operations, marketing, sales, and how long you can keep your business running with your remaining cash in California’s weed industry today.  

For purposes of comparison. We’ll make the following assumptions about available capital. 

  1. Small Business/Entrepreneurs - $100,000 
  2. Mid-Size Company - $1,000,000
  3. Enterprise - $100,000,000
Start Up Business Comparisons

If you have $100,000 or less than $1,000,000, the Type S License is the best license for you.  The Type S license is particularly important for small business and weed entrepreneurs as it provides a unique opportunity to launch new, unique weed products and gain market share efficiently with less risk. 

If you have $1,000,000+ and looking to create first weed product you should probably test the market and reduce your risk by launching with a Type S license. Otherwise, you can use one of the other 3 routes but getting a traditional license is very risky. 

If you have $100,000,000+, the world is your oyster. Using a white labeler to create your first product line in California may not be the most effective use of your funds. You might want to consider getting your own license first either as a Type S or a traditional license or use a co manufacturer. 

What is the Best Route for New Businesses on How to Start a Weed Business?

It is clear that the Type S Weed Manufacturing License is the best option for these types of businesses. It provides the most control, the least risk, the lowest cost, and in the fastest, most effective route possible. 

If you fit into this category, it just makes sense. It’s why we say “start smart”. After all – why would you pay $1,000,000 for the same benefits you could pay less than $50,000 for?

If you are interested in learning more about how to start your weed business with a type-s license, please contact a community curator today. 

What is Cannabis White Labeling?

What is Cannabis White Labeling

Thinking about Cannabis White Label? Read This. 

Welcome to the next installation of our educational series on how to enter the cannabis industry where we provide a practical guide on the pros and cons, and timing of each method to maximize your entry into cannabis the ~legal~ way.

Today, we take a look at “cannabis white-labeling.”

What is Cannabis White Label?

Cannabis White LabelCannabis white labeling is generally a means for brands to expand or grow their business in the legal cannabis space. Unlike with the MyGN’s Type S License or traditional cannabis licensing, you will not own your own cannabis license throughout this process.

There are many similarities between cannabis contract manufacturing and cannabis white labeling.

An important distinction to note with white label cannabis is that another company will create their own product with a blank “white label” – then slapping your brand onto the label. This means you are not using your own product formulation.

Amazon is a prime example. See what we did there? 😉 You search one type of object and there are millions of copies out there, just with a different logo. In that instance, it’s likely to have been produced by the same manufacturer, just a different logo.

Is White Label Cannabis Good for Entrepreneurs, Startups, and Small Business?

NO.

Google it, we dare you. The first thing that pops up in response to “what are the cons of white labeling products” should say “not suitable for smaller brands.” This runs true across the board in other industries and is especially true for the licensed cannabis industry.

The best time for white labeling is:

⦁ AFTER you already have your own cannabis license.
⦁ HAVE an existing, established brand; and
⦁ HAVE a ton of money to pick and choose products you wish to brand as your own.

Is Cannabis White Label Legal in California?

Like cannabis contract manufacturing, cannabis white labeling is legal only for already licensed operators.

This is another reason why white labeling should really only be an option for you after you get your own license.

Per the DCC Regulations, Section 15001(b), “Commercial cannabis activity shall only be conducted between licensees.”

If you don’t own the license, it is illegal for you to receive profits from the sale of the cannabis goods because you can’t perform commercial cannabis activity with a non-licensee.

How can I get a Cannabis White Label Product in California without a License?

Step 1: Find a licensed California cannabis white label company that is willing to take the risk to create your product for you as an unlicensed cannabis business with the product that you want to create.

Step 2: Get quoted a price for use of the cannabis white labeler’s intellectual property, resources, cannabis licenses, etc. This is usually per unit, per month, per deal, or can be any number of potential contracts. At the end of the day, you will be fully reliant on them.

Step 3: Ensure that production quality is up to your standards. Remember – you are not a licensed operator so the cannabis white labeler will be doing all the work.

Step 4: Wait for them to produce, package, and assemble your product properly.

Step 5: Sell your product. You will need to negotiate with your cannabis white label partner on how to get samples and product to your sales outlets. You also need to ensure you can legally tell licensees that you are producing legally and can use the cannabis white label company’s license number.

What are the Cons of White Label Cannabis?

There are quite a few here, here are some of the biggest cons for cannabis white labeling.

You do not own the cannabis license

You are fully reliant in a white label deal on the licensee – there is zero control over production, distribution, etc.

One Manufacturer, Shared-Liability

The risk here is less than a contract manufacturing deal because usually – the cannabis white labeling company is using its own formulation, products, etc. However, if for example – one of the other clients of the cannabis white labeling company is upset that their product is being produced late, sues the cannabis white label company, etc. this can delay or even cripple your business.

Inflexible Operations

In a cannabis white label deal – you are required to follow the cannabis white labeling company’s pace – not your own. If they don’t meet your deadlines – you’re out of luck.

Zero Control

In a cannabis white label deal, you literally have zero control and minimal input on your product. You are literally paying someone else to create their product and slap your label on it – so you don’t really get a say.

Ultra-Aggressive Competition

In a cannabis white label deal, you are putting your label on a product that already exists on the market. So, the only competitive advantage you have is if your branding is better. If you’re ready to go head-to-head against ultra-capitalized companies with hundreds of millions of dollars – white labeling would be good for you.

What are the Benefits of Cannabis White Labeling?

No Design or Formulation Needed

In a white label deal you are using the white label company’s formulation and resources. This means you are just paying for someone else’s product. While your product won’t be unique, you will at least know that it can be produced.

Hand’s Off Production

While also one of the biggest problems with cannabis white labeling – your involvement on production is basically non-existent so you don’t need to supervise production if you don’t want to.

Faster Ramp-Up Times

The time is similar to Type S licenses and faster than cannabis contract manufacturing. If you have a ton of money backing you to compete for market share – this is likely the fastest way to enter the market.

What are Costs to Consider for Cannabis White Labeling?

Costs to Consider for Cannabis White Labeling

Cannabis White Label Minimum Order Quantities (MOQ)

White Label deals have very high MOQs and will vary based on production capacity, equipment, etc. in order to make it worthwhile. Generally, white labeling is for well-capitalized brands that are ready to fight for market share with an existing product.

Cannabis White Label Price Per Unit

Normally, you would consider COGS when producing. However, in a white label deal – you are at the mercy of the cannabis white labeler. If they say “You’ll pay $10.00 per unit” that’s the price. If you want to negotiate – you can. Just keep in mind – a good white labeler doesn’t necessarily need your business – they would rather use their time for a bigger deal. On the flip side – you definitely need them, especially if you don’t own your own license.

Cannabis White Label Storage

One of the biggest hurdles to overcome is licensed cannabis storage because it is very valuable. Think of it this way, normal storage might be $5 sqft/month, a cannabis business will generally 5x the cost to $25 sqft/week.

In most cases, cannabis white labelers will set a time limit for you to move your product after already building this storage fee into your cost. A standard time frame is 3 days. So, if after 3 days, your product hasn’t moved out of their storage, you might start paying additional fees like $700/day until your product is sold.

Cannabis Distribution Fees and Network

Cannabis distribution is key. Just because your cannabis white labeler can produce, doesn’t mean they can or even will distribute your product.

The cannabis distribution license is a separate license and in order to transport your product, you need to use a distribution license. Normal cannabis industry rates vary from 10% to 33% of gross value with minimums of $200-$1000. Weight, volume, distance, and time will affect the cost as well.

Cannabis White Label Taxes

As a cannabis company, many times the cannabis white labeler will also need to calculate cannabis manufacturing taxes (city and state) and cultivation taxes which are passed down. This can get complicated and get expensive as well.

Cannabis White Labeler Profit Margin

Cannabis white labeler profit margins will vary. In most cases, 5% is low, 10% is average, 20% is high. They’ll build this into the deal with you.

Cannabis White Label Contract Length

Cannabis white labeler will want a commitment from you so they don’t waste their time, such as a long-term contract to ensure that if they are putting in resources - they won’t lose money. Any good white labeler will be picky about producing for someone because it is an opportunity cost for them.

A standard time is around 6 months for these types of deals and they might ask you to also put down a deposit up front.

So, What is the Cost for a Cannabis White Label Deal?

Be prepared to pay at a minimum $200,000 for production and distribution.

If you approach a cannabis white labeler to produce for you, you should be prepared to pay for everything above. The bigger price tag is attached to your marketing in having to fight for market share.

What Are Additional Considerations I Should Think About before I White Label Cannabis?

Additional Considerations About Cannabis White Labeling Cannabis White Label Product Competition

This is so important because with white label cannabis, you do not have a “new” product.

Another way to look at it is if white label company produces for 50 companies the exact same tincture. All 50 companies approach the same dispensary to carry their tincture – which of the 50 tinctures is that dispensary going to carry? Remember Amazon?

On the other hand, if you approach a dispensary with a cannabis infused product they’ve never seen yet – like a cannabis infused mooncake - which is going to be the easier sell?

Cannabis White Label Manufacturing License Status

While this seems obvious, verify the cannabis white labeler’s license with the state’s website https://search.cannabis.ca.gov/.

Black market operators, CBD/Industrial Hemp misconceptions, and even fraud does occur. Some black market or cbd companies will falsely use someone else’s cannabis manufacturing license to close the deal. In this situation, you also run the risk of illegally producing and selling cannabis products.

Other Cannabis White Label Clients

Keep in mind – in a cannabis white label deal you are not doing anything unique or launching a product that has any special characteristic. If you were smart enough to see that the white labeler’s product was good, it probably means someone else has too. If the cannabis white labeler is willing to create the product for you, it probably means they are doing it for others too. If they are producing for 10 clients, most likely they will choose the ones that pay the most money – and you may be put in the back of the line.

Cannabis White Label Financial Health

The worst thing that can happen is when your producer closes its doors and leaves you stranded with a large unfulfilled order. What is worse – is that since you do not own the formulation, creating the exact same product you wanted to brand as your own becomes pretty much impossible if your white labeler goes out of business. Whether you’re meeting with a new or established company, always ask them point-blank about their stability and financial health. Look into their history as well.

Cannabis White Label Product Quality

Another factor to consider is whether the company that is white labeling your product is actually producing the same quality product for you, or are they creating something of lesser quality?

Think of it this way: If the product really is good, (1) why would they produce for you? (2) why should they take the risk for you as an unlicensed entity? (3) why should they take the risk to produce a product that you might not be able to sell?


Legal Fees, Attorneys

A necessary evil we must bring up. As lawyers ourselves we always strive to think of the worst-case scenario and prepare for it. There’s a lot of risk in a white-label deal because what DOES happen if the white labeler ends up going bankrupt? If they don’t produce your product on time and your sales outlets are getting frustrated with delays? What happens if the DCC realizes you are an unlicensed entity receiving the profits? What else is the white labeler doing which could affect your business?

When is White Label Cannabis Good for Me?

When Is White Label Cannabis Good for Me

Cannabis white labeling is good when you:

⦁ have an existing cannabis license,
⦁ you have an existing cannabis brand
⦁ you have existing cannabis products to balance your portfolio of offerings
⦁ you have a lot of money – enough to compete against the biggest names for the product you are going to have white labeled (5) you are ready to compete not on quality, uniqueness, or price point – but branding.

If you aren’t at that stage, wait for it…

Then get a Type S license!

We hope this was educational and informative, if you have any questions or want to inquire about getting your own cannabis license, contact us!

Go Green the Way You Want, we do the Rest.

Read more Articles related to this.

If you haven’t read them yet, we recommend to read more about other ways cannapreneurs enter the industry:

The Top 5 Ways to Start Your Cannabis Business
⦁ Part 1:  The MyGN Type S License
⦁ Part 2:  The Traditional Route to get a Cannabis License
⦁ Part 3: What is Cannabis Contract Manufacturing?
⦁ Part 4: What is Cannabis White Labeling?
⦁ Part 5: What is Cannabis Co Location

What are Cannabis Co-manufacturing Costs?

What Are Cannabis Manufacturing Costs

Researching into Cannabis Co-Man or Cannabis Contract Manufacturing?

You’ve come to the right place. Welcome to the next installation of our educational series on how to enter the cannabis industry where we provide a practical guide on the pros and cons, and timing of each method to maximize your entry into cannabis the ~legal~ way.

At My Green Network, we believe transparent business is the best business. After all, our members’ success is our success. Let’s dive in to a big question that new cannapreneurs often have…

What is Cannabis Co-Manufacturing?

What Is Cannabis Co Manufacturing

Also known as “cannabis contract manufacturing” or “cannabis co-man,” this route is a great way for existing cannabis brands with capital to expand geographically or start new product lines.

A key difference between MyGN’s Type S License process or even getting a traditional cannabis licensing is that you will not own your own cannabis license.

Using a cannabis co man means you will be giving up control over your production, control, and formulation for someone else to do.

Is Cannabis Co-Manufacturing Good for Entrepreneurs, Startups, and Small Business?

Cannabis Co ManufacturingGenerally, NO.

The best time to approach a cannabis co man is AFTER you already have your own cannabis license, you are producing consistent cannabis products, and you are already in multiple stores and need to scale to hundreds of thousands of units.

Before you make any decision, you should always compare the pros and cons of getting a Type S License vs cannabis contract manufacturing as we go over in this article.

Is Cannabis Co-Manufacturing Legal in California?

Cannabis Co-Manufacturing is only 100% legal for already licensed cannabis operators.

California’s DCC Regulations, provide in Section 15001(b), “Commercial cannabis activity shall only be conducted between licensees.”

So what if you don’t own a license?

If you don’t own the license, you’ll need to find another way to justify that you are getting paid anything from the cannabis business.

How do I get into Cannabis Co-Manufacturing in California without a License?

Step 1: Find a licensed California cannabis manufacturer that is willing to take the risk to create your product for you as an unlicensed cannabis operator and has the expertise to produce your product.

Step 2: Have your product formulation and ingredients lined up and ready to go. Most likely, your co-man will have a source for the cannabis ingredients.

Step 3: Find out their costs and timeline to create the product on your behalf. This process will take a while and negotiation is a must, we go into these costs later in the article.

Step 4: If you’ve calculated out the costs to create a product through your co-man, see if it makes financial sense for you. If it does, set up the deal but we caution you to be careful how its structured.

Step 5: Have the co-man produce products on your behalf. Keep in mind additional costs and focus on sales.

Step 6: Begin selling your product. You will need to negotiate with your co-man on how to get samples to your sales outlets and the liability for license use.

What are the Cons of Cannabis Co-Manufacturing?

There are quite a few here, we’ll list our five biggest cons for cannabis co-manufacturing.

You do not own the cannabis license

Anything cannabis related you’re at the mercy of your co-man to do. From transporting, selling, or anything regarding your product to even showing investors or buyers how your product is created.

One Manufacturer, Shared-Liability

Everyone uses one license; one mistake can shut down everyone using the co-man. For example, Co Man X produces for Company A and you, Company B. Company A gets sued by consumers who say their label claims are fake, but Company A has no license which means Co Man X actually gets sued as the producer. Company B’s production, sales, is also at risk now. Once shut down, all of Co Man X’s inventory, assets, and equipment can be taken away.

Required to Share Intellectual Property

A great product is a great product. If you have a specialized production process or formulation, using a co man means you have to share it. A non-disclosure agreement can only go so far.

Inflexible Operations

Situations change but your production will not. For example, you contract to produce and sell 30,000 units every month for the first 6 months and shell out $90,000 dollars. Your product doesn’t sell the way you projected and your co man starts charging for additional storage. The following month, your contract says you need to pay for production, so they produce another 30,000 units and you owe another $150,000 dollars, and then – they increase storage fees to $600.00 a day.

No Control Over Anything
Cannabis Co mans produce according to their standards but well, sh*t happens. If quality isn’t up to your standard, the co man has the control. Most likely, you’ve paid for the product already so if you’re not satisfied, you either keep paying to work with that co-man or find a new one. This can get very expensive and/or delay the launch or consistent supply of your product to retailers.

At some point, almost every licensed operator realizes that most co-manufacturers just won’t create the product the way they want it to be done or at the level they want. As the old adage goes:

“If you want something done right, do it yourself.”

What are the Benefits of Cannabis Co-Manufacturing?

Startup Time

The timeframe will be similar to starting with us at MyGN. Since you will not have to apply for any license, you need to hire attorneys, negotiate and structure the deal, identify COGS, do test runs, etc. before starting full production.

Cheaper than Traditional Licensing

While it won’t be as affordable as MyGN, expect to pay around $100,000 to $200,000 for capital expenditures, raw ingredients, labor, etc. This is not including your marketing and sales expenses.

High Production Output

A big benefit is that with high MOQs, a co man deal will generally have high production output. So, co-man is great for companies that know they can sell tens of thousands of units or have big money behind them.

What are Costs to Consider for Cannabis Co-Manufacturing?

Costs to Consider for Cannabis Co ManufacturingCannabis Contract Manufacturing Formulation Costs

Though estimated costs for all of those vary, depending on how many of the components you can manage well yourself, at a minimum you can expect to pay $5,000+ to $50,000 to professionally formulate your products.

Cannabis Contract Manufacturing Minimum (MOQ)

Co-Man MOQs will vary based on production capacity, equipment, etc. and are generally – very high in order to make it worthwhile. Generally, co mans are to scale – not for brand new companies with no sales lined up.

Cannabis Contract Manufacturing Cost of Goods Sold (COGS)

The basic consideration is your COGS. How much does it cost to produce your product including labor, opportunity cost, and ingredients? While the ingredients are relatively simple to quantify, shipping to the co man and any upcharges for labor are a serious consideration. For example, a co man’s labor costs aren’t just limited for production, they need to charge for packaging, assembly, stickering, labeling, sourcing, intaking your ingredients, compliance, and more.

Cannabis Contract Manufacturing Storage

One of the biggest hurdles to overcome is licensed cannabis storage because it is very valuable. Think of it this way, normal storage might be $5 sqft/month, a cannabis business will generally 5x the cost to $25 sqft/week.

In most cases, co mans will set a time limit for you to move your product after already building this storage fee into your cost. A standard time frame is 3 days. So, if after 3 days, your product hasn’t moved out of their storage, you might start paying additional fees like $700/day until your product is sold.

Cannabis Distribution Fees and Network

Cannabis distribution is key. Just because your co man can produce, doesn’t mean they can also distribute your product.

The cannabis distribution license is a separate license and in order to transport your product, you need to use a distribution license. Normal cannabis industry rates vary from 10% to 33% of gross value with minimums of $200-$1000. Weight, volume, distance, and time will affect the cost as well.

Cannabis Contract Manufacturing Taxes

As a cannabis company, many times the co man will also need to calculate cannabis manufacturing taxes (city and state) and cultivation taxes which are passed down. This can get complicated and expensive.

Cannabis Contract Manufacturing Profit Margin

Cannabis co man profit margins will vary. In most cases, 5% is low, 10% is average, 25% is high. They’ll build this into the deal with you.

Cannabis Contract Manufacturing Contract Length

Co mans will want a commitment from you so they don’t waste their time, such as a long-term contract to ensure that if they are putting in resources - they won’t lose money. Any good co man will want long-term revenue where they can be guaranteed business and therefore even if you don’t sell your product – they still earn money producing your product. A single mistake can cost tens of thousands, if not hundreds of thousands of dollars for a co man. So, just as there is a risk on your side, the co man takes the risk of producing a product that they don’t know will sell.

A standard time is around 6 months for these types of deals and they might ask you to also put down a deposit up front.

So What is the Cost for Co Manufacturing?

Be prepared to pay at a minimum $250,000. 

Co Manufacturing CostsIn a cannabis co man deal, your mileage will vary, aggressively.

Before starting any co-manufacturing, you should understand cannabis co mans will receive inquiries all the time by people looking to “launch their dream product.”
Much like back in the legacy market where everyone touted “my sh*t is fire”, everyone believes they have a great product. Approaching a cannabis co man means you are already the weaker party in negotiations 99% of the time.

If you approach a co man to produce for you, you should be prepared to pay at a minimum $250,000 for formulation, production, capital outlay, and to cover any issues that could arise – not counting your marketing and sales budget.

What Are Additional Considerations I Should Think About before Using Cannabis Co-Manufacturing?

There is a TON to consider. We’ll list out some that we think are uniquely, hyper-relevant to the cannabis co man industry.

Cannabis Contract Manufacturing License Status

While this seems obvious, verify the co man’s license with the state’s website https://search.cannabis.ca.gov/.

Black market operators, CBD/Industrial Hemp misconceptions, and even fraud does occur. Some black market co mans or cbd companies will falsely use someone else’s cannabis manufacturing license to close the deal. In this situation, you also run the risk of illegally producing and selling cannabis products.

Cannabis Contract Manufacturing Experience

Since you don’t own the cannabis license, this means you are relying purely on the co man’s experience. Ever read a recipe the first time and still completely miss the mark? Then on top of that, how do they ensure consistent quality, accurate dosage, Taste, flavor, texture, etc. Ultimately, the resources, money, and time come out of your pocket.

Cannabis Contract Manufacturer Financial Health

The worst thing that can happen is when you have a contract manufacturer that closes its doors and leaves you stranded with a large unfulfilled order. Whether you’re meeting with a new or established company, always ask them point-blank about their stability and financial health. Look into their history as well. If a contract manufacturer offers pricing that seems too good to be true, ask questions.

Intellectual property Theft 

There are definitely situations where a co-man has produced for another company “not to satisfaction” which kills the deal. Then a short while later, release a similar co-man branded product as their own with just minor formulation modifications. Even if you are clear on the terms of your intellectual property, just keep in mind adding in one ingredient or changing one step is a new product.

Legal Fees, Attorneys

A necessary evil that we always have to bring up. As lawyers ourselves we always strive to think of the worst-case scenario and prepare for it. There’s a lot of risk in a co man deal because what DOES happen if the co man ends up going bankrupt? If they don’t produce your product on time and your sales outlets are getting frustrated with delays? What happens if the DCC realizes you are an unlicensed entity receiving the profits? What else is the co man doing which could affect your business?

A co man is usually producing for multiple companies and a single deal can shut down the whole operation. There are many cases where brands using co mans have been burned, lose a bunch of money, then have to try again.

Who is Cannabis Co Manufacturing Good for?

At the end of the day, cannabis co manufacturing is good for already licensed cannabis operators who have a product that is already on the market, is selling well, and needs to scale up their production to hundreds of thousands to millions of units a month.

Who Is Cannabis Co Manufacturing for

If you aren’t at that stage, wait for it…

Then get a Type S license!

We hope this was educational and informative, if you have any questions or want to inquire about getting your own cannabis license, contact us!

Go Green the Way You Want, we do the Rest.

If you haven’t read them yet, we recommend to read more about other ways cannapreneurs enter the industry:

The Top 5 Ways to Start Your Cannabis Business
⦁ Part 1: The MyGN Type S License
⦁ Part 2: The Traditional Route to get a Cannabis License
⦁ Part 3: What is Cannabis Contract Manufacturing?
⦁ Part 4: What is Cannabis White Labeling?
⦁ Part 5: What is Cannabis Co Location

What are the Benefits of a Cannabis Shared Kitchen?

My Green Network - Cannabis Shared Kitchen

A cannabis shared kitchen, also known as a cannabis cloud kitchen is where cannabis manufacturers coincide together to create and manufacture cannabis products in a centralized facility. If you can make it, bake it, or create it, chances are you can do so at a commercial level through a cannabis-shared kitchen.

Here’s the inside scoop, many small business owners, manufacturers, and entrepreneurs aren’t aware of the beneficial components that come alongside a shared cannabis kitchen. They often spend hundreds of thousands of dollars on equipment and facilities before ever selling a single product.

A shared cannabis kitchen facility is equipped with commercial-grade equipment to give manufacturers the leg up to create larger batches when creating a product without the crippling overhead. While in-home kitchens are a great way to produce your first product – it is mandatory to have access to a licensed manufacturing facility to be able to legally sell your products.

What is the Cost for Cannabis BusinessGet your own California Cannabis Manufacturing License

California’s DCC, also known as the Department of Cannabis Control regulates all licensing and commercial cannabis activity and manufacturing in California. In 2018, the DCC created the Type-S Cannabis Manufacturing License– allowing the creation of cannabis shared kitchens.

The biggest advantage is that when properly executed, each operator in a cannabis shared kitchen will get their own cannabis manufacturing license.

To frame it properly, if you had a choice between starting your own mocktail business vs owning an alcohol license to produce and sell hard liquor – which would you prefer? The Type S Cannabis Manufacturing License is the hard-liquor license giving opening the doors to the exclusive THC recreational/medical cannabis industry.

Get Access to Commercial-Grade Equipment & Facilities

Our shared cannabis facilities are perfect for individuals who are at-home manufacturers wanting to branch out into commercial cannabis manufacturing, as well as companies that are doing small production looking to scale, grow, and expand their business.

Being a My Green Network member means you get immediate access to facilities and commercial-grade equipment you normally would not have access to. We carefully review, perform due diligence, and select tried-and-true equipment which is purposely designed for cannabis manufacturing. If you need something special? That’s great! Our members are also allowed to bring in their own commercial-grade equipment to use during production.

All equipment within the facility can be transported and stored. or rented at a set price per day. Meaning, you will never have to worry about the “what-if’s” during your manufacturing process while creating your products in our cannabis cloud kitchen.

As a My Green Network member, you Weed License in California through a Shared Cannabis Kitchen receive immediate full access to our entire facilities as well, including conference rooms, production rooms, packaging rooms, storage rooms, etc. In addition, each business will also receive a storage locker to keep their materials in a temperature-controlled and safe environment while you are not on site.

Production, Distribution, and Experience All in One Place

Get all of your manufacturing, distribution, and experience to succeed all in one place. The cannabis industry is a nascent industry in which experience and education play a huge role in ensuring your products hit the market compliantly and saving time, money, and resources.

We have a saying in the cannabis industry – every year in cannabis is like a dog year.

Here’s an interesting fact, only licensed cannabis distributors can request the final state compliance test for a cannabis product. That means normally, a cannabis manufacturer cannot do their own state compliance – they must hire a distributor to request that test from a licensed testing lab.

Many new cannabis manufacturers are laser-focused on production thinking they’ll address issues as it comes along. However, in the cannabis manufacturing industry, even a small mistake can cost tens of thousands of dollars. Sometimes this is completely out of your control. Here’s a prime example and some free advice:

Ever wonder why 99% of cannabis products you find at the dispensary have stickers with the THC quantity, description, etc.? You have definitely thought “this would look so much nicer if they just printed everything on the package.” 

In 2019, the state of California changed labeling requirements and over the last 3 years, it has made multiple modifications such as placement, sticker size, font size, additional label information, etc. As a result, cannabis manufacturers produced their products then because they could not do their own state testing without a distribution license – they sent the products to a licensed distributor for final testing and distribution. Every time California changed labeling laws, the cannabis manufacturers lost millions of dollars because they had to recall and redo their packages, pay the licensed distributor to sticker their old packages, or just throw out their old packaging.

At My Green Network, we have production and distribution all in one place enabling our members to flexibly adapt to changes, address production/testing issues faster, and get state testing without having to waste time. We also help with the distribution for our member’s products at rates which crush the competition.

Why Choose MyGN as your Cannabis Shared Kitchen

My Green Network offers you the most professional and reliable services for our members in addition to full use of our cannabis cloud kitchen, facilities, equipment, and its benefits. Start smart with My Green Network and expand your cannabis small business into commercial cannabis manufacturing, today.