Using ‘organic’ is taboo for marijuana growers, but there are options

(This story is part of the cover package in the July-August issue of MJBizMagazine.)

Most products that are certified organic by the U.S. Department of Agriculture – such as baby food, meat, produce and other items – enjoy a hefty upcharge that consumers are willing to pay.

“The most valuable certification on the planet Earth is organic, particularly as it pertains to consumer-packaged goods,” said Ben Gelt, an adviser to the cannabis practice at law firm Greenspoon Marder and board chair for the Denver-based Cannabis Certification Council, a nonprofit group providing education about cannabis certification.

Without that USDA organic certification, which was created in 2002, businesses are not allowed to use the word “organic” on their products.

No organic cannabis certification

There is some dispute over whether marijuana cultivators and products can achieve USDA organic certification.

Most stakeholders agree the USDA, as a federal agency, can’t bestow the certification on a product that is illegal under federal law.

“The USDA won’t have anything to do with cannabis,” said Chris Van Hook, a compliance attorney and director of Clean Green Certified.

The Northern California-based company is accredited by the USDA to certify as organic federally legal agricultural and other products. Clean Green Certified also has a private cannabis-certification business that is not sanctioned by the USDA.

Others aren’t so sure that organic status is unavailable to marijuana companies.

According to Gelt, the USDA does not directly certify products as organic.

Rather, that job is done by third-party organic certifiers that are accredited by the USDA.

Many of those third-party certifiers are state agriculture departments, but some are nonprofits and small businesses, Gelt said.

Most certifiers are not willing to grant organic status to a marijuana company for fear of losing their USDA certification accreditation, much like how banks and credit card companies fear losing their federal banking licenses.

“The more specific way to comment on the current status of availability is that no one has really been willing to test,” Gelt said.

Since hemp is federally legal, it does not face the same challenges, and there are many hemp products with organic certifications, he added.

Private cannabis certification

In the absence of a USDA organic certification, a handful of states have tried to launch organic marijuana-certification programs, including California, Colorado, Maine and Vermont, while many private certifiers launched as businesses.

Some of the best-known private certifiers of organic cannabis are Sun and Earth, Clean Green and Dragonfly Earth Medicine Pure (aka DEM Pure).

These businesses can award their stamps to marijuana businesses, but the stamps can’t say “organic,” since only the USDA can bestow that term.

“This is an entrepreneurial response to the effective lack of availability,” Gelt told MJBizMagazine.

Unlike products such as produce and baby food, which carry solid premiums for being certified organic by the USDA, cannabis does not enjoy the same premium for having a private certification, Gelt said.

“There’s really meaningful value-add at the produce shelf. Consumers pay more for organic-certified products.

That effect has not taken hold with any of the commonly found cannabis certifications that are effectively replacement regimes for organic,” Gelt said.

One reason certified marijuana doesn’t command a higher price is that consumers don’t recognize the private certifications as easily as they do with USDA-organic-certified products.

“That’s one of the problems with all of these marijuana certifications,” Gelt said.

“Nobody knows what Clean Green-certified or Sun and Earth-certified or Dragonfly Earth Medicine-certified means.

“You have to meet consumers where they are, and consumers don’t want Clean Green- or Dragonfly Earth Medicine-certified. Consumers want organic, and that’s one of the big challenges that goes on with all of these programs.”

When consumers see the word “organic” on a package, they understand it, Gelt said, adding that the same is not true of the other labels.

“Organic needs no explanation; all of these other things do need explanation.”

The second reason Gelt cited for lack of premium pricing is that so many private organic cannabis certifications have been awarded, the labels have lost value.

“None of these programs have market traction. None of them have delivered a premium to producers that qualify for their programs,”
he said.

Certified sustainable

Van Hook of Clean Green disputes the assertion that his and similar organic certifications don’t bring value to cannabis products.

Clean Green had more than 200 certified farms before California passed its recreational marijuana program in 2016, but many of those initial farms haven’t survived, Van Hook said, and now that number is about 80 or 90.

Yet last year, Clean Green certified more than 400,000 pounds of cannabis trim and flower in eight or nine states plus some Canadian provinces, Van Hook said.

He added that what critics call “awarding too many certifications,” he calls growth.

“We grew. I’m glad we grew that much,” Van Hook said.

“Is the premium program worth it? Well, 400,000 pounds a year think it is.”

Van Hook noted that for cultivators to get the most out of their certifications, they need to know how to leverage them.

For example, they should have the logo on their products and marketing materials, and they should post frequently on social media and include the logo in posts, so people begin to recognize it and associate it with organic.

“The only thing I’m concerned about is helping our own members get their own products sold at a good price,” Van Hook said.

Price premium

While Gelt doesn’t believe current organic certifications help marijuana growers much, he does see hope for the future.

“Producers can get paid premiums for producing these products, and that is well established in the supermarket.

There’s no reason to think that this other agricultural product that is effectively a consumer packaged good (CPG) wouldn’t get the same benefits,” Gelt said.

“The value opportunity connected to organic certification is significant.

“People want to know that what they’re smoking doesn’t have noxious chemicals. I think there is a huge opportunity.”

A significant opportunity also exists with non-flower products, he said.

“With edibles, people care a lot.

“The logic is, if consumers will pay 150% more for baby food that’s certified organic, of course they’ll pay a percentage more for a certified organic edible, because they want to know that everything put into that product meets certain quality standards, including the marijuana.”

Having a shot at premium pricing is especially important to small growers that can’t leverage economies of scale like their larger rivals – but they can get a boost from the organic label.

That said, when the opportunity arrives, large growers likely will try to offer organic products.

“I think big producers over time will incorporate it into their product SKUs,” Gelt said.

“They will be like Driscoll’s, which grows organic berries and conventional berries.”

But getting to a place where the USDA is willing to certify marijuana as organic – and the accompanying premiums for growers – will take more than the federal government reclassifying marijuana from Schedule 1 to Schedule 3.

“The end of federal prohibition is likely what’s necessary to really unlock the organic opportunity as it pertains to marijuana,” Gelt said.

“Until you can easily put a label on one of these effect-based products, until there’s a pathway for that product to have an easily understandable organic label, it’s really very difficult for producers to realize the type of premium that typical CPG companies can realize with an organic label.”

Omar Sacirbey can be reached at omar.sacirbey@mjbizdaily.com.