Life has stabilized for California marijuana testing labs since 2018, but hurdles remain

marijuana testing

California’s cannabis testing industry was stressed to the brink in 2018, with newly required testing thresholds going into effect first in July 2018 and then in January 2019.

The result at the time was long waits for test results, a temporary increase in product testing failures and various industry stakeholders arguing the state needed far more labs.

Much of that, however, has changed since final regulations were adopted in January.

Lab executives now generally report:

  • Their businesses have stabilized.
  • Wait times for testing results have become more predictable.
  • Product failures are down.
  • The 27 currently licensed labs are enough to handle the state’s testing workload.

“Things have definitely stabilized quite a bit. Right at July (2018), when testing was being enforced and mandated for the first time, there was a rush everywhere” for testing services, said Zach Eisenberg, vice president at San Francisco-based Anresco Laboratories.

Stabilization has occurred despite the fact only 27 licensed labs are serving the entire state market, while another 66 lab licenses have been canceled, surrendered, revoked or have expired, according to the Bureau of Cannabis Control’s licensing data.

However, plenty of issues still face California testing labs and the larger industry they serve.

“Everyone expected the market to be at a different point than it is right now. The trajectory that started in July last year … we’ve flatlined right now,” said Swetha Kaul, chief scientific officer at Santa Ana-based Cannalysis, referring to an apparently stagnated number of product batches that have been tested in recent months.

No labs at full capacity

Marijuana Business Daily spoke with several executives from testing labs around California, and none of them reported being anywhere close to capacity.

“By and large, everyone has scaled up in terms of their capacity,” said Daniel Witt, president of Sonoma Lab Works in Santa Rosa, adding that most labs have the capacity to do more testing.

Lab executives said that indicates two things:

  1. The legal market has not reached its full potential, since, if it had, it would produce far more samples for labs to test.
  2. The number of labs may not expand much in the near future since there isn’t a need at the moment.

Some lab consolidation, in fact, may be coming.

“You definitely need a healthy number of labs, but you don’t need a really big number,” Kaul said.

“California is still in the process of finding that healthy balance between what makes a good lab versus what’s easy for the regulators to oversee.”

Chasing clients on testing bills

Part of the problem is the illicit market is still so strong and undercutting legal retailers and growers.

Many of those companies haven’t been able to – or simply don’t want to – pay the fees labs charge for testing services, said Greg Magdoff, CEO of PharmLabs, which has testing facilities in San Diego, Monrovia and Coachella.

It’s usually either because clients are strapped for cash or because they’re unhappy with the actual lab results on their products, Magdoff said.

“One of the larger California companies, out of Northern California … they couldn’t pay their bill – a $5,000 bill,” Magdoff said.

“There’s a few companies that have no problem paying their bills upfront, but it seems like 70% of our clients need some net terms.

“It’s like not having $1 in your car to get over the toll bridge. … It leads me to believe that the entire industry is struggling.”

Other labs said they’ve had similar problems with clients skipping out on bills, but the consensus was that’s part of doing business in the current industry climate.

Misuse of lab names, results

Several labs reported that they’ve had to chase down instances with clients where a company has paid to have a small sample of a wholesale batch tested and then misrepresented to potential buyers that everything that was for sale was lab-tested.

“We have people that will give us 5 grams of oil to test one time and then they sell off that (certificate of analysis) for a year,” said Antonio Frazier, vice president of operations at CannaSafe in Los Angeles.

“We have to go after people sometimes. … If you want to certify bulk oil, there are certain ways to do it.”

One testing company – Santa Cruz-based SC Labs – has sent a flurry of cease-and-desist letter to companies.

“My brand shows up on so many products that I’ve never heard of and I’ve never tested for, that it’s a bit frustrating. So we have a steady stream of cease-and-desist letters that go out,” said Jeff Gray, SC Labs’ CEO and founder. He estimated that SC Labs has sent up to 25 such letters in the past year.

“We’ve just been really aggressive about challenging every instance that we can find,” Gray added.

Gray warned that other labs should remain concerned about the possibility of their professional credibility being usurped, especially given the recent vaping illness epidemic and the potential for labs to be roped into investigations if their names are falsely linked to vape products that may have contributed to the illnesses.

John Schroyer can be reached at [email protected]

3 comments on “Life has stabilized for California marijuana testing labs since 2018, but hurdles remain
  1. Arthur Mogilefsky on

    The statements from the labs are self serving. They seek to limit the number of labs because they are not at capacity. What a great way to limit competition.

    I would like to see their price lists for testing published. If they seek to limit competition price fixing would be another way to do it.

    • Jason Iannuccilli on

      I wouldn’t worry about anyone wanting to “limit” the number of testing labs. The cost of entry for labs is prohibitively expensive enough as it is, coming in just under $1.5M per lab. Labs also require the necessary expertise of a PhD chemist to run them, which also comes with a hefty price tag, and cannabis-specialized chemists are a rare breed.

      Most labs charge between $400-$450 for a complete “panel” of tests that a product would need to “pass” to get to market. That’s a per-“batch” cost specified by a regulatory body, which is determined statistically based on the inherent heterogeneity of the particular product. For dried flower (which is the most heterogeneous) it’s usually 5-10 lbs trimmed weight, depending on the State you live in. For extracts and concentrates it’s significantly larger (% volume of total batch) because the process of extraction inherently homogenizes the product as it changes form. The components (cannabinoid oils and terpenes for example) are more miscible/uniform in oil form, and a smaller sample has more of a chance of being representative of the entire batch for labeling purposes.

      The “bottleneck” in time that it takes to process samples for legal market is mostly a product of methodology used for microbial analysis. A traditional plate-and-count method takes 7-8 days. qPCR takes about 36 hrs. This could be at the root of the major discrepancy for price and turn-around times seen by clients. The problem is that if you want results sooner you’re having to pay more for the more expensive technology.

      I do agree that our lab situation is a mess. Differing state regulations (or lack thereof) that define what is “required” for a legal product to bear a state-sanctioned label make it tough to compare “full panel” pricing from state to state. Additionally, lab inefficiency can add cost to the service. Is this a dedicated lab, testing only cannabis and hemp, or is this a potluck lab that runs soil samples, etc on their equipment, requiring time for transition (ie cleaning) of the equipment before switching between media?

      THE REAL PROBLEM: What we have now is a situation where consumers don’t trust the producers. Shotty labs and dishonest practices of cultivators/producers is uncoupling truth from what appears on product labels. Cutting corners only hurts the product manufacturers in the long run. If this continues, it will degrade the market and again create an even playing field between the legal and illicit markets, driving consumers back to the cheaper black market products, especially if they perceive the risk of use to be the same between the two. Overhead cost of legal production will stomp out the legal market in time, then the revenue will cease.

      Data and consumer behavioral trends suggest however that consumers want quality products, and manufacturers of quality products are overall more profitable.

      MY ADVICE:
      1. We don’t need more labs, we need better labs (ie higher regulatory standards for labs themselves). If products of one manufacturer are truly superior to another in terms of content and potency the label of a reputable lab will show it, the consumer will know it, and the buying trend will reflect it.

      2. Choose a reputable lab, run by physicians and a specialized PhD chemist—these are rare, but are likely to be the only labs that thrive in the industry. There is true science behind good practice. Test their tested product for yourself to get an idea of how good their sampling and analytical practices are.

      3. If you sell wholesale dried flower to market, refine your harvesting practices such that for each individual strain you separate out the high yield vs. low yield flower into separate batches to improve homogeneity prior to sampling. This will improve accuracy of your product label, and earn the trust of your consumers. Your lab can help you do this (if they’re any good) based on your growing practices.

      Labs and product manufacturers NEED each other for the industry as a whole to succeed. Competition is a good thing (as you’ve indicated), but only if the competitors are all playing by the same rules.

  2. Arianna on

    With all of the brand new legislation regarding CBD (and the potential requirement of certificates of analysis depending on state) there is an interesting lag time between the RULES being created and the industry catching up with them when it is already in motion.

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