CannaGuard’s Noah Stokes is seizing unique opportunities to create dovetailing security, storage, and delivery services with the potential to dominate the cannabis food chain.
Even in these uncertain times, when the specter of federal prohibition looks like it may extend longer than desired or anticipated, the evolving state of the cannabis industry creates unique opportunities for those with the vision to see the potential that lies before them. Sometimes, the thing being envisioned is made up of individual enterprises that no one has combined properly to create something of greater value. That is the case with Noah Stokes, the president and chief executive of Beaverton, Oregon-based CannaGuard, founded in 2014 to meet the security needs of a newly regulated market with limited options in the face of growing demand.
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“CannaGuard came out of OmniGuard, a residential/commercial security company I launched in 2012,” said Stokes. “We started getting contacted by people who had medical grows in Oregon, which had just passed laws for medical dispensaries that now needed to get a license requiring them to have initial compliance-verification security systems. We did a trade show and decided we wanted to launch a new brand called CannaGuard, so people would know we would work with them when they called us up, and that we knew what we were doing and what the rules were.
“In August of 2014 we started dipping our toe into Washington State, and it was like piranhas with everyone going nuts,” he continued. “We knew stuff was going on up there, but we had been so focused on Oregon that we just didn’t know [what to expect]. We’d already been servicing cannabis clients for a year by the time we moved into Washington, where we did thirty or forty projects before realizing there really wasn’t any competition. These guys were coming to us on a referral basis because every other place would turn them down.”
CannaGuard also levied another advantage in the newly regulating cannabis industry: its geek chops.
The hardware is basic, but the software is what takes it to another level. That’s been our approach all along, and people like it. – Noah Stokes
The Best Tech Wins
Stokes makes clear CannaGuard is not a security company. “We are a tech company that is operating in the security space,” he explained. The difference offers a distinct advantage for the company and its clients. “Security in general is ‘identify and prevent’: Identify access as it’s happening and prevent [a problem] before it happens. Through advances in technology, we do it better than security companies that have been in business for fifty years and whose technology has not changed in that entire time except for a few new features or increased camera resolution.”
The need may be old-school but the solution is anything but. “We provide basic electronic security: cameras and access security for any licensed facility, including outdoor grows, wholesale, retail, and processors,” said Stokes. “The hardware is basic, but the software is what takes it to another level. That’s been our approach all along, and people like it.”
Stokes said CannaGuard maintains the highest quality standards in security-systems hardware. “We are constantly doing our own internal [research and development], not just of vendors but of specific models and even the firmware of those models,” said Stokes. “Trial and error—we’ve done it so many times with the thousands of cameras out there. We love anything new and immediately throw it into our facilities, where we get to geek out and use it all day, every day. If we hate it, we don’t sell it to people. If we love it, we add it to our offering.”
But the hardware always takes a back seat to software. “We come from the standpoint of apps and alerts, plus all the software you now have and all the analytics. Anyone can run wires and put in motion detectors, door contacts, and a camera, but with the latest analytics you can have notifications based on geo-fences, so if you leave a site and the system is not armed, you get notified. The camera footage can even interpret what’s happening and identify a person or a vehicle over deer or birds, sending real-time identifications that a person has been in your field.”
Smile—You’re On CannaGuard Camera
Secure in its technology, CannaGuard has established an enviable safety record. “In over three and one-half years, with over 350 licensed facilities, we have yet to have had a successful break-in which someone stole more than in a smash-and-grab,” said Stokes. “That record is especially pleasing to us, considering the first fifty of those customers called us because they were sick and tired of being broken into so frequently. [Theft] had become a normal part of their business, but we advised them to put that money into a good security system, a one-time expense versus being robbed every three months or so.”
That level of expertise extends into the retail environment, where, Stokes said, “you’re always going to have a percentage of product the employees are stealing.”
The solution, once again, is tech-based. “We’re creating a software program that ties in point-of-sale (POS) analytics with our camera software, which sends a notification for a voided sale in real time to the security manager of multiple locations, who will be able to look at the camera and see if the employee in question put the money in his or her pocket. The point is, when we install cameras over the registers and scales that can see the denomination of the bills, and the employees know the cameras are that detailed, our customers tell us that profitability goes up ten to fifteen percent.”
Beyond Security
CannaGuard Transport was launched in Oregon in August 2016 as a natural extension of services already provided by CannaGuard. “Secure transport is one of the bigger facets of this industry that hasn’t really been able to be done, because most states don’t offer a transportation or distribution license,” said Stokes. “It’s one thing to keep products safe in one spot or regularly drive a high volume of cannabis products around, but to do so you must have extremely robust security measures in place. Not only were we well-positioned because of our connections in the industry providing camera and compliance security systems even before many of these places were open, but we now are best qualified to provide bulk product storage and transportation.”
Providing armed guards at facilities as well as armed and armored transportation of product and cash, CannaGuard Transport is a division of The Cannabis Distribution Company. “We subcontract out to retailers that want a standing guard, we have grows and wholesale facilities with 24/7 guards that we direct-hire out, and we also have our own employees that take the product to the storage facility or other locations,” said Stokes. “For instance, tomorrow we’re making a run of 184 pounds of products and bringing the cash back, and that’s just a point-A-to-point-B transport.”
Transport is “another industry that has not evolved from giant steel boxes driving around on the roads.” Up to the challenge, Stokes said of CannaGuard Transport’s vehicles, “We have so much technology in them, down to real-time tracking that is literally so sensitive that if the driver slams on the brakes, maxes on the gas, deviates from the course, or does a hard turn right or left, we get immediate notifications sent to our dispatch center. We can tap into a 4G router in the car, with cameras inside and outside the vehicle, so I can look from dispatch to see if it’s a pursuit situation or whatever. The driver focuses on getting from point A to point B safely, and we can relay to police exactly what’s happening while it’s happening.”
CannaGuard Transport also has a product storage facility in Portland protected 24/7 by armed guards, active watch monitoring, CannaGuard camera systems, and access control. The hub serves as a model for what the company wants to replicate elsewhere
Economies of Scale
Hot on the heels of CannaGuard Transport’s launch, in late December the company unveiled its newest offerings in its plan to provide a range of cost-effective services to growers seeking to take advantage of economies of scale while preventing product loss due to theft during the vulnerable harvest season.
“If you’re going to lose product it’s going to happen then, when it’s hard to have one farm or one producer monitor everything that’s going on,” said Stokes. “Our large-scale solution is through the distribution company. We have a farmer harvest their product and dry it, and then we offer them trimming services, testing services, bulk packaging services, retail-ready packaging services, distribution sales, and delivery. So now, a farmer doesn’t have to worry about monitoring all that for themselves at each stop; they can hand it to us. With our economy of scale and our secure building, it’s 100 times easier and safer for us to do it for 100 customers at once. This industry is so ripe for economies of scale to come into play.”
He added, “We charge by the pound to store, trim, and bulk package, and then, depending on the retail packaging, we will also charge in that way. Some people might want their product trimmed, and once it’s trimmed, have someone else package it.”
CannaGuard’s plan to offer growers a comprehensive range of services that provide reliable compliance, greater efficiency, and lower costs has been met with predictable enthusiasm, according to Stokes.
“As we build this out and understand the true volume available—because I have not had one person say they did not want to do it—the scale that I thought it was going to be three weeks ago tripled two weeks ago, tripled again last week, and then tripled again in the past four days,” he said. “It is going to be a logistical feat but one we are extremely committed to figuring out, because someone has to do it. Someone has to trim all of this product and package all of it, and I believe we can do it better and for less because we already have the product stored in our building.”
Market Share
To facilitate commercial relationships between growers and retailers, The Cannabis Distribution Company in early January hosted the first of many events bringing the two groups together for what could be the creation of a commodities marketplace. “The event was phenomenal,” said Stokes. “We tried to keep it to under 100 people to test the proof-of-concept, with twenty to twenty-five growers and about thirty retailers. We wanted to get the logistics set up to see if producers liked the way retailers presented the products and if retailers liked the way producers presented their products. It was invite-only, and there ended up being about 150 people. All the invitees were customers of ours on the camera side—an added-benefit of using us on the electronic side of things. Not only are we going to think of you first when we do these kinds of events, but we know these guys are generally more professional and dialed-in. We brought our growers and retailers and put them all in a room together, and the response was phenomenal.
“We also learned a ton from it,” he added. “The next one will be bigger: Producers will have more information about different packaging options they want to present and different strains. The website we launched at CannaGuardTransport.com has real-time inventory; people can go online and search the inventory that is stored in our warehouse, order product from seven different growers, generate a ticket, and we take it from the warehouse, load it onto the truck, and have it show up in two days.
Home Delivery, Amazon-Style
Not surprisingly, Stokes also has a solution in mind for home delivery, which Oregon just legalized. “Technically, it’s legal in the state, and Portland just legalized the ability to have Portland retailers provide home delivery in the city,” he said. “One day, I’m hoping to be able to facilitate straight-to-consumer delivery [that is] kind of like Amazon Prime Now, which has its own vehicles and warehouses that are a certain distance from you and can deliver in two hours.
“What I would like to see is that through a software platform we’re working with, the consumer can go to the retailer’s website, find the product they want, and order it to be delivered to them directly,” he explained. “The order would go back to our warehouse where the product is stored, and we would be able to facilitate the secure transportation at a scalable level. Right now, the rule is that each retailer must deliver from the retail store, which means that every one of the 200 dispensaries in Portland has to have its own delivery driver. Wouldn’t it be more efficient if there could instead be five delivery trucks that serviced all 200, running all day, every day? The law doesn’t permit it right now, but we hope through legislation to be able to allow it as an option in the future.”
California Dreamin’
With a solid vision to redefine the role of a security company in the cannabis industry, Stokes is methodically planning to make his mark in the largest market in the country: California. “We’re massively moving into California,” he said. “Everything we’re doing is to move into the rest of the country.”
In the latter part of January, he planned a trip to the Coachella Valley in Southern California, where he would “tour the largest project in the world that I know if, a 160-acre project in Desert Hot Springs that will be four million square feet of indoor grow when it’s built out over the next five years. It’s just one of about ten large projects in the Coachella Valley that is going forward right now.”
Stokes is moving forward, too. “We’ve set the foundation in Oregon so that we can go into California, because currently there isn’t another state that offers a wholesale distribution license,” he said. “Oregon is the first, and we are by far the largest distributor in the state, even though we just started this thing. In California, whether they require distribution or just allow it, the question will be ‘who is doing it currently?’ There are a couple of distributors in California working under the current model, but [California] only just starting to get licensed in the cities.”
Stokes clearly thinks he has an upper hand. “The way I see it working is for us to have four or five locations throughout the state, in Humboldt, Sacramento, the Bay Area, [Los Angeles], maybe the desert. But that’s the thing: The state is so big, we have to get the momentum going, which is why we’re not waiting to work in California.
“I have a meeting in Desert Hot Springs with a group that has a distribution license that wants us to transport 75,000 pounds of trim a month,” he continued. “We’re going to work with them to do secure product transport now. After our license is issued, we will ideally have vehicles transporting product throughout the state anyway, and then we will be able to add our hubs.”
He paused before adding, “Yeah, there’s a small amount of energy and effort being put to dominating the California market, but I believe that through the efficiencies of technology we will outpace and outperform the competition.”
I’m hoping to be able to facilitate straight-to-consumer delivery (that is) kind of like amazon prime now, which has its own vehicles and warehouses that are a certain distance from you and can deliver in two hours. – Noah Stokes
The End of Prohibition
One day federal prohibition will end, and when it does Stokes intends to be ready. “The distribution model we’re building is to secure the cannabis brands in California and Oregon, the distribution hubs, and the product, and then as the walls drop, to have distribution hubs in the Northwest and on the West Coast ready to go out to New York, Ohio, and Florida. The long-term goal is to have our hubs across the country.”
