By John Schroyer
New labeling rules that take effect Oct. 1 for marijuana edibles produced in Colorado have been a huge expense for many infused products manufacturers – and may cause headaches for retailers, too.
Edibles companies have spent upwards of six figures to retool manufacturing equipment, retrain employees and pay for new packaging.
Retailers, meanwhile, could be left with unsold inventory that doesn’t meet the new standards, which apply to both recreational and medical products.
Any unsold inventory could prove a boon for consumers, with retailers forced to unload edibles at steep discounts at the end of November. But that could have a negative impact on retailers’ bottom line. By Dec. 1, dispensaries and recreational stores must sell only products that comply with the new regulations.
Whatever the case, the new requirements have proven pricey for edibles makers.
The Cost of Compliance
Nancy Whiteman, the co-owner of Boulder-based Wana Brands, estimates her company spent around $100,000 to revamp its entire production process.
Andrew Schrot, the CEO of infused chocolate bar maker BlueKudu, said his Denver company spent more than $30,000 on new molds for its bars to comply with the regulations – plus an estimated $5,000 more a month for additional chocolate to make the bars larger so they can accommodate the newly mandated THC logo.
“The laws change so frequently, specifically for edibles companies, that you have to have some financial assets set aside when things like this come up,” Schrot said.
“It is going to be quite a significant financial cost to most companies to change their production procedures and put this stamp on every individual piece, and I think that’s where you may see some edibles companies either change the product that they offer to the market, or change their pricing.”
The Rules Themselves
Under the new rules:
- All edibles must have one of two visible diamond-shaped stamps on the front of the package identifying the product as containing THC. The stamp must also be on every individual serving, which means every 10-milligram dose for solid recreational edibles such as chocolates and gummies.
- Medical edibles “may choose to determine standard portions,” according to a press release from Colorado’s Marijuana Enforcement Division; the medical edibles’ stamp also must include an “M.”
- All edibles must come in new packaging that states: “Contains Marijuana. Keep out of reach of children.”
- The words “candy” and “candies” cannot be used on packaging, unless they’re part of the company’s name.
- Labels must include potency and state that the product has been tested for contaminants.
- Health-related claims are prohibited.
The new rules bar retailers from selling infused products after Nov. 30 that don’t comply with the labeling rules.
As a result, storefronts that have edibles products without that THC labeling at the end of November may wind up trying to unload that inventory, just to get whatever they can for it.
“There’s absolutely going to be a lot of fire sales” at the end of November, predicted Wanda James, owner of the Denver adult-use shop Simply Pure. “Because of silly things like labeling, we now have to find a way of moving all that product on our shelves.”
James called the new rules “ridiculous,” and said they’re an unnecessary burden on law-abiding companies.
“None of this is a bump in the road. Even the larger edibles companies are getting hit. Having to replace $100,000 in packaging or $60,000 in packaging is a hit, no matter how big you are,” James said.
Whiteman of Wana Brands added that Colorado’s edibles makers will probably weather the new rules – especially because the industry has known the changes were on the way for months. But there may be some smaller edibles producers that can’t afford to make the transition.
“I suspect that this regulation is going to put some edibles manufacturers out of business, because they’re going to find it too expensive to comply with this,” Whiteman predicted.
“There’s layers of costs with this. One of them is the actual equipment itself, but there’s also the cost of new packaging, there’s the cost of old inventory that you can’t sell through in time … and there’s a huge labor cost in terms of getting everyone up to speed and producing enough product to meet demand.”
Both Whiteman and BlueKudu’s Schrot said their respective companies will survive the transition, however, and they expect most other edibles makers will as well.
Retailers Not Worried
To some of the retailers they supply, this is business as usual. Moreover, manufacturers already have begun supplying retailers with newly-labeled products.
“Lots of manufacturers have already switched over, anticipating this, so it’s really not a huge concern for us,” Shawn Coleman, the director of government affairs for Boulder-based Terrapin Care Station, said.
“We’re confident in our manufacturers and suppliers. And if, for whatever reason, a company hasn’t been able to get their products updated, then we won’t carry them until they are able to do so.”
Denver-based Colorado Harvest Company CEO Tim Cullen said he’ll work with suppliers to spread around the cost of the transition, but that ultimately it’ll prove to be “a blip on the radar.”
“We have to run through our product that’s not in compliance, and if that means a fire sale at the end (of November), then so be it,” Cullen said. “We’ll end up eating some of it. There’s no way that 100% of our inventory will be sold at that point in time.”
He’s also found a way to at least slightly offset the loss: Colorado Harvest Company commissioned a line of t-shirts, some with the new diamond-shaped label and some that say “Contains THC.”
“We’ve been selling them like hotcakes,” Cullen said with a laugh.
John Schroyer can be reached at [email protected]mjbizdaily.com