“Robots are not making more people jobless; robots are filling the labor shortage as more of the population converts into knowledge workers instead of labor workers.”
The cannabis scene has been recently flooded with news of several cannabis multi-state operators (MSOs) that are downsizing their workforce. Canopy Growth laid off 243 workers earlier in the year and has promised to lay off 200 more in the near future. Dutchie, the popular software startup serving the cannabis industry, laid off 8% of its workforce while Eaze, the cannabis delivery company, laid off 25 employees recently. Against the background of a seemingly booming industry, the recent layoffs are quite surprising.
The companies have cited several reasons for taking such drastic measures. For example, Canopy Growth stated that this cost-cutting measure to boost profitability while Dutchie attributed the move to a “dramatic market shift.” Generally, there’s been an inclination towards “learning from past mistakes” which has primarily been an over-investment in cultivation and manufacturing infrastructure which came with a bloated workforce.
Several cannabis companies are considering alternative strategies to scale their operations without necessarily hiring more workers; is robotics the solution? We spoke with Nohtal Partansky, CEO of Sorting Robotics, to better understand how robots are going to affect the status quo.
The cannabis industry is one that many would rather not associate with (stigmatized). How did your career path lead you here?
I used to work at NASA and then left the bureaucracy of government work to build Sorting Robotics for enterprise companies. Initially, I was building the Sorting Robotics company to service the eCommerce sector, and then we noticed a deep need in the cannabis sector for high-fidelity robotic systems. My co-founder and I consume cannabis and appreciate the medical/recreational benefits of the plant, so we decided to turn our focus to the cannabis market. The stigma doesn’t matter to us as we understand the science behind the endocannabinoid system and how pervasive legalization is the only path forward.
Introduce Sorting Robotics and what the company does, briefly.
Sorting Robotics builds robots for cannabis manufacturers. Our first product is a system that robotically infuses joints with cannabis concentrate like solventless live Rosin, the Jiko Robot. Our second product is a high precision, high-speed vape cartridge system that we just launched for large volume copackers, the Omni Filler. Our roadmap includes a vape cartridge packaging line and shatter/badder concentrate packaging prototypes.
Jiko is a robot uniquely designed for the cannabis industry. Can you tell us more about this project?
This system is made to inject concentrates into blunts or pre-rolls to create the ideal infused pre-roll. We developed it after working with a co-packer who tried to scale out a fuzzies kief style infused preroll; it was so labor intensive that it drove us to find a better way. We see a lot of customers liking the system because it allows them to dose directly into a finished pre-roll, and they know that each of their pre-rolls is getting infused consistently and repeatedly. Because it is so reliable, it’s the best way of infusing live rosin into pre-rolls without losses, and since rosin is such an expensive concentrate to make our customers love using our machine.
How is the market responding to Jiko?
Extremely well, we see adoption in all of the recreational states, and as the infused preroll market segment gets increasingly larger, Jiko is becoming the defacto method of infusing high-quality prerolls.
The employment rate in the U.S in 2020 was slightly above 50%. Will robots render more people jobless?
This month, the U.S. is at an employment rate of 60%, which is only 1.2% lower than pre-pandemic employment rates. That is in combination with a 30% growth in the robotics industry over the past two years. Robots are not making more people jobless; robots are filling the labor shortage as more of the population converts into knowledge workers instead of labor workers.
Many consider robotics to be cost-prohibitive. Is this true and if yes, what can be done to make robots more accessible to regular cannabis businesses?
That’s true, the capital expense is extremely high in most cases because robots are costly to develop and build. However, new business models like Robots-as-a-Service are becoming increasingly common, and they dramatically reduce the barrier to entry for these critical pieces of technology. For example, with our Omni-Filler robot we monitor the number of cartridges filled and then bill at the end of the month for pennies on each cartridge. This could be considered a “pay-as-you-go” type model, and we’ve had positive responses from our customers with this new model.
A recent survey by the National Cannabis Industry Association (NCIA) revealed that only about 42% of cannabis businesses are turning in a profit. Why is it difficult for most cannabis businesses to make a profit?
I would not be surprised if that number is actually lower. The two main reasons it’s difficult for cannabis businesses to make a profit are what I call the “cannabis tax” and the inability to scale.
If you look at any state where cannabis is recreationally legal, most traditional business services cost anywhere from 30% to 200% higher for a cannabis business. These include insurance, legal services, rent, and other essential services required for any business. All of these traditional markets say that their services are more expensive because of the “risk” involved, but really it is just greed. The greed that destroys the very fabric of an industry with massive potential. Additionally, 280E prevents cannabis companies from having standard accounting and leads to additional overhead with obscure corporate structures to avoid massive superfluous tax bills. Collectively, these issues are what I refer to as the “cannabis tax.”
The second thing is the inability to scale. You’re probably familiar with the term “economies of scale” and how if you’re able to generate a large number of products with the same fixed costs, a company can generate non-linear profits. Well, cannabis can’t cross state lines, so the law ends up creating a patchwork of “small businesses” in each state that are restricted from sharing resources across state lines. It’s a mess, in combination with the general “cannabis tax,” it’s no wonder why operators are struggling. All of this can be solved with thoughtful regulation. However, every time a new law passes, I’m scratching my head trying to imagine what these politicians were thinking.
One piece of advice that you can give to an entrepreneur looking to venture into the cannabis market?
If you’re going into the ancillary market, you should work in the industry, so you actually understand what your customers are going through. This is the only way to serve them correctly because their experience is so unique, empathy is essential to help them and your company grow.
What’s next for Sorting Robotics?
We want to continue building out the automated cannabis supply chain by solving one manufacturing problem at a time. Our current journey is simplifying the vape cartridge manufacturing process with a scalable, modular, and fully automated packaging line. Next will be gummies and dab concentrates.
It was a great pleasure to have this one-on-one with Nohtal Partansky, CEO of Sorting Robotics. Readers who wish to keep up with the company are more than welcome to visit their website.