About $350m worth of cannabis products could be destroyed as new regulations take effect on Sunday in California.
New rules stipulate that all cannabis products must be sold in child-resistant packaging, and must be lab-tested for potency and a variety of contaminants. Additionally, edibles will be limited to 100mg of THC per package, divided into 10mg servings.
The long-anticipated switch has prompted California dispensaries to sell non-compliant products at steep discounts. Amid the buyers’ market, dispensaries that overstocked the items are feeling the brunt of the rule change.
The United Cannabis Business Alliance estimates the damage from products that have to be destroyed could exceed $350m.
“We’re sort of at the point where the rubber meets the road,” the Los Angeles marijuana business attorney Ariel Clark said. “It’s a rough transition for a lot of people across the state.”
The switch highlights the difficulties California faces in bringing its vast, multibillion-dollar market for the federally illegal drug out of the shadows.
With so much product heading for the incinerator, there has been speculation about product shortages following the changeover.
“We just don’t have enough labs” to test products, said David Hua, CEO of Meadow, an online cannabis purchasing platform. “A lot of the brands we know may not get through in time to get on shelves.”
Alex Traverso, spokesman for the state bureau of cannabis control, said there were 31 licensed testing labs throughout the state. “We’d obviously love to have more, but I think we’re cautiously optimistic,” he wrote in an email.
In the six months since California’s legal recreational marijuana market opened on 1 January, stores have been allowed to sell products which don’t conform to the new requirements.
For businesses, whether the transition is a welcome development depends on factors like what they do and where they are located.
Hezekiah Allen, executive director of the California Growers Association, which counts more than 1,000 members, said under the new rules, his members would not be “competing with growers who cut corners and sell dirty product”.
However, the new rules do not help growers who operate in areas that have not yet allowed them to obtain licenses, notably Los Angeles, the state’s largest market. Those companies cannot legally bring products to market.
For some in the industry, the new rules highlight an even more significant problem: businesses that try to follow the law are still competing against those that have no intention of obtaining a license and can afford to sell for less.
Adam Spiker, head of the Southern California Coalition, an industry group, said the switch and its attendant bottlenecks benefited unlicensed businesses, in effect rewarding bad actors. “In my estimation, 80% of the market is still being captured illegally,” he said.
For some, though, the transition to a more tightly regulated market represents an opportunity.
“Our warehouse is filled with tested product and we’re ready to go to market,” said Kenny Morrison, CEO of the edibles company Venice Cookie Company. With so much demand for compliant merchandise, he said, customers “are buying boxes without knowing what’s in them”.
“The cannabis industry is nimble,” he said. “You’ve got to be able to turn a cruise ship on a dime.”