Week in Review: CA cannabis rollout hinders sales, Arizona mulls MMJ testing & Maine rules delayed

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Scotts Miracle-Gro says California’s slow implementation of marijuana regulations is hurting sales, Arizona considers medical cannabis testing, and Maine’s governor delays MMJ regulations.

Here’s a closer look at some notable developments in the marijuana industry over the past week.

Scotts’ sales decline

Scotts Miracle-Gro CEO James Hagedorn said California’s slow rollout of regulations has hindered sales for his company.

Scotts’ hydroponics subsidiary, Hawthorne Gardening, sells equipment to marijuana cultivators, and Hagedorn expects flat revenue, or even a decline, this year because of the sluggish developments in California.

But Scott’s issues shouldn’t deter other major, mainstream companies from investing in what will become the largest marijuana market in the world, says one industry insider.

“The Golden State remains a bright and shiny object,” said Scott Hawkins of Grun Strategic, a California-based cannabis consulting firm.

Hawkins said if he were the CEO of another large company considering investing in the cannabis industry, or California specifically, he wouldn’t let Scotts’ position influence his decision.

He still considers California ripe for opportunity, pointing out it’s a populous state with a healthy appetite for marijuana.

The state’s marijuana momentum is moving in the right direction, Hawkins said.

“There’s lots of opportunity for many businesses large and small,” he added.

Arizona testing on tap

A new requirement is in the works for Arizona’s 130 licensed medical marijuana businesses: lab testing.

While mandated testing has become a significant trend in the cannabis industry nationwide in recent years, it’s not required in Arizona.

But the state is on the verge of doing so under the terms of Senate Bill 1420.

It’s a step that could create a new and major hurdle for Arizona’s MMJ companies.

Testing has led to turbulence in other marijuana markets, largely because of longstanding, questionable MJ growing practices, such as the use of potentially toxic pesticides.

But at least one Arizona MMJ company not only isn’t worried about the prospect of testing, it’s been anticipating it.

“Some version of this has been in the making for quite some time,” said Ryan Hurley, an attorney for Copperstate Farms, one of Arizona’s vertically integrated MMJ licensees.

Hurley said his company’s only reservation about the bill is that it grants “broad rulemaking authority” over the MMJ industry to the state Department of Agriculture.

That’s worrisome, he said, because it means an agency chief could conceivably regulate MMJ companies out of business.

However, Hurley said, “this bill in and of itself doesn’t make that a foregone conclusion.

“It’ll have to be as the rules develop that we keep a close eye on the situation.”

If the bill passes, Hurley said, required testing likely wouldn’t go fully into effect until 2019.

That should give Arizona’s MMJ companies enough time to update their business practices so they don’t experience major problems adjusting.

Maine’s MMJ rules

Dispensaries in Maine hoping for changes to rules that regulate the state’s medical marijuana caregivers will have to wait until at least May after Gov. Paul LePage halted the implementation of those and other rules that were supposed to take effect Feb. 1.

The state’s Health and Human Services Committee now has the task of drafting a new law to implement the changes.

How caregivers are regulated in Maine has become an important issue to the state’s eight dispensaries.

Those MMJ businesses have recently seen their sales decline while the number of caregivers has ballooned to 3,000-4,000.

“We just want them to be regulated in a way that’s fair,” said Dan Walker, counsel to the Wellness Connection of Maine, which owns four of Maine’s dispensaries.

“A level playing field is critical to a strong medical marijuana program, but right now we don’t have a level playing field.”

The problem stems from the MMJ program’s original rules, Walker said, which didn’t establish oversight mechanisms for caregivers.

Consequently, some caregivers have taken advantage of the lack of oversight to cultivate more cannabis than they are entitled to grow and serve more patients than they’re allowed, Walker said.

For example, the current rules say a caregiver can have up to five patients and grow up to six plants per patient, plus they can grow for themselves if they are patients.

Thus, a caregiver is allowed to possess up to 36 plants.

If spouses both serve as caregivers and grow their maximum allotted number, their household is permitted up to 72 plants.

Either number is a lot of plants for five patients, but some caregivers rotate the patients on their lists multiple times per day, so they are serving significantly more than five customers.

Meanwhile, other caregivers are contracting with labs to make infused products to sell.

And some caregivers have even opened retail stores to sell to patients – but without the regulatory burdens and, therefore, the costs that licensed dispensaries face.

Walker welcomes added regulations, which he believes would benefit both Maine dispensaries and the MMJ program at large.

Increased compliance, he believes, would make interference from federal and local law enforcement less likely.

Bart Schaneman can be reached at barts@mjbizdaily.com

John Schroyer can be reached at johns@mjbizdaily.com

Omar Sacirbey can be reached at omars@mjbizdaily.com