July 1 could be ‘extinction event’ for some California cannabis businesses

Discussion in 'The Black Briefcase' started by vostok, Jul 1, 2018.


    vostok Well-Known Member

    Starting July 1, licensed operators in California’s marijuana market must be in

    compliance with the state’s readopted and updated emergency regulations.

    Retailers will no longer be able to sell product that hasn’t passed testing lab

    standards mandated by regulators.

    They were given six months to exhaust their supplies of cannabis products

    made before the new requirements, and the deadline is now looming.

    July 1 might even prove an “extinction event” for businesses struggling to comply,

    observed Pamela Epstein, founder of Los Angeles-based Green Wise Consulting.

    Consultants, lobbyists, manufacturers, distributors and retailers in California

    pinpointed five pain points the state’s licensed operators are feeling:

    1. Compliance ‘cash crunch’

    The price tag of coming into line with California’s regulations, in addition to state and local licensing costs and state and local taxes, could make this the first year in a decade that Oakland-based infused-product manufacturer VCC Brands spends more money than it makes, according to the company’s CEO, Kenny Morrison.

    “We’re calling it the great cash crunch of the cannabis industry because everybody is so tight right now,” said Kristi Knoblich Palmer, co-founder of Oakland-based edibles producer Kiva Confections.

    2. Testing costs and lab gridlock

    The new testing regulations’ cost is three to five times higher than when Oakland-based edibles producer Korova, a licensed manufacturer and distributor, voluntarily submitted product for testing, said CEO Steve Adkins. Other manufacturers provided similar estimates.

    To be cost-efficient, cultivators and manufacturers are sending larger amounts of product to labs.

    But doing so puts them in the position of having large amounts of product fail, or having it sit for weeks in quarantine until samples are processed.

    “This is not how traditional food manufacturing is done. This is not how pharmaceutical manufacturing is done,” Kiva’s Knoblich Palmer said. “This model we’re putting in place in California has never been done.”

    If final product fails testing, distributors must pay to have the goods destroyed and, thus, manufacturers lose market opportunity.

    California has 31 licensed testing labs, but it’s unclear how many are in operation and certified to do all the required tests. That means operators are expecting labs to be inundated with product, and infused-product makers must adjust their manufacturing processes to accommodate testing.

    Infused-product makers have increased batch sizes, converted weights in recipes for added precision and started testing distillate or infused ingredients earlier in the manufacturing process – all to accommodate the new testing requirements.

    “It’s not like on Jan. 1, when the emergency regulations came out (that) any lab was offering these tests, so the real crunch is getting manufacturing processes adjusted to hit those test marks,” Korova’s Adkins said.

    3. Regulations are unclear

    Operators and consultants say California’s regulations – drafted by the state’s Bureau of Cannabis Control (BCC), Department of Public Health (DPH) and Department of Food and Agriculture (DFA) – are tricky to navigate.

    Regulations are either extremely detailed, vague or contradictory:
    • Some labeling rules dictate specific font size and color.
    • Others prohibit cartoons on labels but provide no direction on illustrations.
    • Yet more have manufacturers and distributors simply wondering or waiting. For example, the DPH says ethanol is allowed as an ingredient in tinctures. But the BCC classifies ethanol as a residual solvent in testing – which would cause products with ethanol, including tinctures, to fail state testing requirements.
    In an email to Marijuana Business Daily, the health department wrote that it’s “working closely with the Bureau of Cannabis Control (BCC) to clarify requirements for these products,” and “the BCC regulates testing of cannabis products and can address how these and other products are currently tested.”

    The BCC did not respond to a request to elaborate on the health department’s statement.

    When enforcement of the regulations starts, rules interpretations may have to be decided in courts, noted Korova’s Adkins.

    4. Compliant packaging is pricey, hard to find

    Kiva Confections, Korova and VCC Brands sourced child-resistant packaging before the state’s Jan. 1 emergency regulations kicked in. Others who didn’t might find themselves in a tight spot July 1.

    Child-resistant packaging that’s brand-consistent is costly – up to five times more expensive than that used by some companies in the past, manufacturers told Marijuana Business Daily.

    Manufacturers and distributors also noted they face long lead times for supply, often having to order a minimum of 10,000 units of a single stock-keeping unit (SKU) more than 90 days in advance. And most suppliers want cash payments up front.

    The state’s packaging regulations leave some unanswered questions, too.

    For example, a health department regulation stipulates that all packaging for edible products must be opaque. Bottles for VCC Brands’ Cannabis Quenchers beverages carry a transparent strip that shows milliliters of THC and CBD.

    Morrison is waiting for the state’s permanent regulations to define whether the strip is allowed.

    The health department wrote in an email to MJBizDaily: “The permanent regulatory text, which will be released later this summer, may contain clarification.”

    5. Retailers are unloading product

    Retailers are sitting on stock they purchased before emergency regulations took effect Jan. 1, and there’s a sense of immediacy to get those products sold instead of destroying them, said Joshua Drayton, communications director for the California Cannabis Industry Association.

    Delivery services and online menus for retailers throughout the state show dispensaries are deeply discounting product.

    One lobbyist said 50% of a client’s inventory won’t meet July 1 regulations, and CCIA’s Drayton said fire sales have been a common occurrence as the compliance date nears.

    Joey Peña can be reached at [email protected]
    Lucky Luke, LoudRCure and Skiball like this.

    LinguaPeel Active Member

    Why don't they ban processed weed so users can use their eyes and ears and whatnot to evaluate the quality. I dont need the state claiming my dank is dirty because it's living as it cures.

    The opposite will happen. Raw Cannabis going the way of raw milk.. Factory weed is here to stay. Grown dirty as hell and ran through a distillery.

    I buy strawberries every day of my life. And I see mold every day of my life. Why can't Cannabis be like strawberries?

    LoudRCure Member

    I'm really confused by this response lol please explain if you'd like
    CCCmints likes this.
    Lucky Luke

    Lucky Luke Well-Known Member

    So, Did anything happen?
    Rob Roy

    Rob Roy Well-Known Member

    Remember all those people that cannabis killed before government stepped in with all their bullshit regulations? I mean the bodies were piling up. :lol:
    vostok likes this.

    GoatSoup Well-Known Member

    California: Since July 1 that stock in dispensaries appears to have decreased a LOT! They still have bud but fewer types and a lot fewer vape pens, etc.
    LoudRCure likes this.

    LoudRCure Member

    how has the price been effected?:leaf:

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