California cannabis dispensaries and distributors have found themselves in a bit of a pickle this week.
It’s not really “new news” to most, but it’s come as a big disappointment to a lot of people that the state will not be extending the deadline on restricting cannabis product sales to California cannabis inventory which meets tougher testing and packaging standards.
California cannabis dispensaries were having the equivalent of fire sales last week in order to try to clear out as much unsold (and unsellable under the new regs) cannabis as possible before the July 1 regulations came into effect.
California knows how to party – Tupac Shakur
New packaging regulations require packaging to include the product’s potency, where the product came from, and what other ingredients are found in it. Maybe this sounds like much ado over nothing, but the reality is much more grim – there simply aren’t enough approved testing facilities in the state, and that makes it nearly impossible for these retailers to become compliant in time for the July 1 deadline.
California is requiring shops to sell only marijuana that has been tested for pesticides, potency and microbiological contaminants.
So what will really happen to this non-compliant inventory? Will dispensary and delivery service owners send the product out to have it tested and repacked to meet the new standards? Will it be sold illegally on the black market at cut rate prices? Will some dispensaries take the risk and continue selling their old California cannabis inventory, with their fingers crossed that they won’t be caught doing so?
How will consumers react to the new regs? Do they even care whether or not their products have been tested, what they have been tested for, and how those test results are presented to them? Or do they just want their weed?
The United Cannabis Business Association sent a letter to Gov. Jerry Brown, detailing the issues and potential consequences that dispensaries and delivery service owners could face if they have to destroy their non-compliant cannabis inventory. ABC7 Bay area news reports –
Association president Jerred Kiloh estimated that businesses could face nearly $400 million in losses if those unsold supplies are destroyed.
To make things worse, there are only 30 labs that are certified to do testing in the state, while there are more than 3300 cultivation licenses and more than 400 retailer licenses. That’s a lot of testing of a lot of California cannabis inventory, and it’s unlikely that the small number of testing facilities will be able to successfully test and authenticate enough product to supply retailers around the state with any sort of quantity.
Watch how you advertise those products while you’re at it.
California has also instituted some strict controls on marketing and advertising across the board, and for such a large state with so much cannabis changing hands, it has the appearance of being incredibly restrictive. Only Canada seems to be going for a more full on buzzkill on the advertising front.
Last but not least, the state is seeing a much, much lower rate of tax dollars coming in from recreational marijuana sales than initially projected. This could be the result of a confluence of factors, and is not likely limited to any one facet of the California cannabis industry. Rumors that the black market is flourishing due to super high taxation likely have some truth to them, but for the moment, the tax issue is on the back burner, at least for retailers in the state.
Crazy times, eh?
If you’re trying to figure out the crazy maze of local and state laws that control your advertising and banking compliance, drop us a line, we’d be happy to talk to you.