This article originally appeared in the September 2021 issue of Security Business magazine. When sharing, don’t forget to mention Security Business magazine on LinkedIn and @SecBusinessMag on Twitter.
All indications show that opportunities abound for systems integrators in the cannabis sector. Grandview Research, for example reports that the global legal marijuana market size was valued at $9.1 billion in 2020 and is estimated to witness a year-over-year growth of approximately 25% to 28% in the next five years.
One of the major factors fueling the market growth, Grandview contends, is the expanding demand for legal marijuana, owing to the growth in the number of legal cannabis states and recent changes in government policies.
According to Forbes Magazine, coronavirus lockdowns and growth in mature markets such as Colorado and Oregon saw adult use and medical sales of cannabis hit a record of $17.5 billion last year.
In response, several new start-ups are venturing into R&D, cannabis testing, and production. There has been a significant increase in the number of cannabis cultivators in the U.S. as the government is now accepting more applications. And while growth is absolutely certain on the cannabis horizon, many systems integrators aren’t absolutely certain just how to capitalize on it and segue to this highly compliance-driven market.
All of that projected growth may multiply at an even faster rate, with talk of a bill – the Cannabis Administration and Opportunity Act – to legalize cannabis on a federal level, allowing adult Americans to buy and possess up to 10 ounces of marijuana without facing criminal penalties. This bill would also allow cannabis companies access to essential financial services.
The eBook explains the risk and threat profile, as well as the security requirements placed upon this fast-growing and compliance-driven market. The eBook is broken into six key sections, as outlined below. Taken together or in part, these technologies and strategies will help systems integrators build a compelling business case that offers them long-term opportunities in this exciting and evolving sector.
Regulatory Compliance
The cannabis industry is strictly regulated to ensure that businesses operate safely, products are contaminant-free and labeled to inform purchasers, and that cannabis is kept away from children.
Compliance is currently mandated at the state level with varying physical security requirements. The penalties for non-compliance also vary depending on the incident. A significant lack of regard to security measures can result in penalties ranging from business shutdowns, revoked marijuana licenses, and criminal charges that can even lead to jail time if there is sufficient proof of negligence or misconduct.
Most regulatory requirements dictate that dispensaries mitigate risk with a comprehensive security plan. In California, the country’s largest cannabis economy, one of the most critical requirements is the need for robust video surveillance with a minimum 720P resolution and 15 frames per second image capture that provides complete indoor and outdoor coverage and 24/7 continuous recording that is stored for a minimum of 90 days.
In addition, surveillance systems need to be easy enough to access remotely by non-security staff such as store owners and licensees via desktop client software or mobile devices.
Not only are there a stream of new project opportunities, but regulatory compliance also makes maintenance services critical.
Reducing Upfront Costs
The immediate need for security compliance does not come cheaply for this emerging sector. It also gives security consultants and integrators opportunity to recommend upfront savings on security solutions that make the most sense for different-sized growing sites.
These span end-to-end solutions, NVR- and server-based storage vs. cloud offerings, cameras for best internal coverage, as well as perimeter protection. Also important are extended warranties, given the fact that many growers are often located in areas contending with harsh and varied weather conditions.
Risk of Crime, Shrinkage and Reputational Damage
When equipped with knowledge of the risks and challenges that cannabis clients are faced with, integrators are better prepared to advise these clients on the solutions best suited to mitigate those risks.
These risks include protecting legal growers from a sizeable black market, external and internal theft, lack of federal regulation means retailers are unable to move money electronically through banking systems or take payment by debit or credit cards, making cash more vulnerable to robbery, and the threat of reputational damage due to a security breach.
All of these factors translate into opportunities for security systems integrators to educate their cannabis customers and specify solutions tailored to meet their specific challenges.
Cybersecurity and Medical Dispensaries
Medical marijuana dispensaries are subject to the Health Insurance Portability and Accountability Act (HIPAA), which requires the tracking of sales and retention of patient information. HIPPA compliance means cybersecurity measures are critical in protecting patient data and medical records or dispensaries can face stiff penalties for a breach or non-compliance.
Consequently, medical dispensaries need to be reassured that their security technology does not provide cybercriminals with the opportunity to exploit vulnerable IoT devices or cyber loopholes often caused inadvertently during implementation, particularly during multi-site deployments.
Another concern that integrators should convey to cannabis customers is that hardware should not feature “back doors” that conveniently allow manufacturers to reset passwords. If these techniques are leaked, they can cause catastrophic breaches. Dispensaries, therefore, will be looking for a multi-pronged cybersecurity approach to video access, transmission, and storage, along with the guarantee of timely firmware updates.
VMS and AI Deliver ROI
Many cannabis production companies and dispensaries start out by building relatively straightforward business models based on operating costs, year-on-year yields, and optimistic sales revenues and margins; however, the mishmash of local and state regulations, sales taxes, and continued competition from illicit sales, combined with internal shrinkage, is making it harder for them to ensure profitability – particularly for those selling recreational marijuana.
Unsurprisingly, operators expect a rapid return on security investments that are designed to meet regulatory compliance and reduce shrinkage but also deliver a low total cost of ownership (TCO).
This means recommending affordable, future-proof solutions, with the scalability to add value through point of sale (POS) integration, functionality that will support inventory and stock control, as well as the addition of analytics without replacing the entire system or adding expensive equipment.
Growers and licensees with plans to expand and diversify will be looking for a VMS that gives them the flexibility to connect additional cultivation sites and dispensaries to centralized control rooms without exponentially increasing license fees. They will also be attracted to VMS that gives them an intelligent video analytics (IVA) platform, particularly as the sector matures.
Dispensaries, like most retail outlets, will want insight into customer behavior that will enable them to turn browsing into purchasing by optimizing promotions, store layouts, and better-utilizing staff to reduce wait times and improve customer service. VMS and add-on appliances that generate AI- and deep learning-assisted notifications are already proving useful for cultivation sites with large perimeters.
Integrators will also have the opportunity to propose upgrades to higher resolution cameras, with the addition of AI and deep learning functionality as well as integration with third-party systems.
Jason Burrows is Western Sales Director for IDIS America. To access the IDIS Cannabis eBook (with no need to provide personal or company details), visit https://bit.ly/IDIScannabisEBook. To request more info about IDIS, visit www.securityinfowatch.com/10863336.
