Hempyreum.org
Local Time
English (UK) Deutsch (DE) Français (FR) Español (ES) Italian (IT)
Co-Packing Cannabis: The 101
Author: Vince Sliwoski 06/11/2017 - 15:28:00

(Your cannabis here) 

Recently, we covered the basics of cannabis supply contracts here on this blog. Supply contracts are used when Party A is selling pot to Party B in a responsible way. Today’s post looks at another form of cannabis contract: the contract packager (“co-packer”) agreement. Co-packer agreements are used when Party A is working with Party B to produce a saleable cannabis product (also responsibly). Like supply contracts, we have seen a marked increase in co-packer agreements over the past year or so, and we expect that trend to continue. 

Co-packers offer packaging equipment and expertise for hire, and may also provide services related to design, labeling, purchasing, and shipping logistics. Large numbers of companies exist solely to co-pack all around the world. In state-legal cannabis, co-packers tend to pack for themselves, as well: this probably stems from the value associated with holding a state marijuana license. In addition, most marijuana co-packer agreements are limited to packaging, labeling, and sometimes, sourcing of product. These services will likely expand as states refine their program rules and the industry continues to scale. 

Co-packer agreements conform with the rules of most state cannabis programs when both parties have a marijuana license. When the non-packer party does not, however, the legitimacy of a co-packer agreement may be a much closer call– depending on the way the contract is written. In any case, when the non-packer lacks a license, that party will not be allowed to handle cannabis. At that point, the question becomes whether the state will allow the non-packer to delegate all cannabis purchasing, labeling, shipping and even sales of pot to the co-packer. If this is allowed, the non-packer can legitimately profit in a state-legal cannabis program, by virtue of its relationship with the licensed co-packer.

When the non-packer is allowed to profit without a license, a co-packer agreement can be a great fit. The model is attractive for start-ups that lack the interest or wherewithal to lock down their own premises and cannabis license. The model also works nicely for large, established cannabis companies looking to leverage a brand from one state to the next, without having to wade through a foreign licensure process. We have seen co-packer agreements deployed successfully in both scenarios.

Cannabis co-packer agreements tend to be accompanied by, or heavily weighted with, nondisclosure agreements and provisions. In the case of cannabis processing, the non-packer will provide its co-packer with recipes and formulas related to the final product. In the case of a grower or producer, the non-packer may not have these concerns but may bring other trade secrets to the table. In almost every arrangement, the non-packer will have a brand to protect, which means the agreement will carefully lay out control and licensing issues.

In most other respects, co-packer agreements cover many of the same topics as cannabis supply agreements, including terms like scope, title and tracking, invoicing, indemnity, representations and product recall. Co-packer agreements can be built off standard forms, but final documents will be unique to the parties at issue, and highly negotiable. If it is unclear whether a co-packer agreement or its terms will jibe with state program rules; our practice as cannabis business lawyers is to bring the issue to program administrators for review and consideration. Ultimately, if the parties are able to strike a deal, the co-packer agreement is a uniquely attractive option.

Original article from cannalawblog.com:Co-Packing Cannabis: The 101


©2017 - Hempyreum.org - News aggregator about Hemp and Cannabis [Beta] | All rights and ownership of the contents belong to their respective holders

Advertising