On October 1, 2016, the Oregon Health Authority (OHA) issued new marijuana testing requirements to “lessen the burden of testing by allowing for fewer samples to be taken,” said OHA’s spokesperson, Jonathan Modie.
The new rules include that cannabinoid products must be separated into process lots of not larger than 35,000 unit batches, up from 1,000 unit batches. OLCC-licensed (Oregon Liquor Control Commission) producers will only be allowed to sell these products until March 1, 2017, according to OHA’s website.
Cannabis market research firm, BDS Analytics, issued an analysis of the effects of the new regulations, stating “the greatest October declines occurred in the edibles category, which cratered 32%, from $3m in September to $2m in October, the lowest level since adult-use stores began selling the category in June.”
Due to more frequent and expensive testing being required throughout the supply chain, the overall edibles market sales “declined steadily as October progressed, with dollars sold dropping 22% from the first week to the final week,” the report added.
“As supply diminished throughout the month, prices rose 5%, so units declined even more than dollars did, dropping 25%.”
Modie told BakeryandSnacks that OHA believes the new rules will allow the cannabis industry to move forward as fewer samples are needed to be analyzed, yet the health of consumers is still being protected.
The owner of infused brownies firm Dave’s Space Cakes, Dave McNicoll, said the new OHA rules will likely be helpful to his business.
“The previous rule stated the maximum batch size for edibles must be 1,000 units, which was completely unworkable. The new process lot limit of 35,000 units is reasonable and will makes proper safety testing economically feasible,” he said.
McNicoll is also the president of Oregon Responsible Edibles Council.
Has altering requirements made matter worse?
Prior to the latest rules, OHA previously changed marijuana testing standards in response to industry's complaints that testing costs were driving up consumer prices, creating product shortages and causing some processors to close shop.
“However, the requirements made it worse, with some word on the street suggesting the rules may change again,” the CEO of Leif Medicinals told this site.
Leif Medicinals is known for producing organic edibles, including a variety of infused chocolate bars.
“Overall, the combination of long lead times and high costs have made it extremely difficult to continue to keep product flowing to the market, and have, in fact, created an environment where many processors cannot even afford to be in business,” she added.
The edibles manufacturer said its revenue “essentially skyrocketed” before the new regulations took effect in October, however, "we had no sales in the month of October.”
Dave McNicoll also complained that the increased lab testing fee has cost his business a fortune.
“The cost of lab testing has increased from $150 to $1,500, making it virtually impossible for small edible companies to bring products to market,” he said.
Pursuing OLCC licensure
In addition to the testing regulations, McNicoll said commercial kitchens are now required to be licensed by the state of Oregon before edible production can begin, which causes more burdens.
“Many companies are not able to find or cannot afford commercial kitchen space so many of them are shutting down temporarily or going out of business,” he said. “I have a kitchen space that we are still building but won't be ready until February.”
The same situation happened to Leif Medicinals who said it was shutting down temporarily after December sales instead of paying the high fees to obtain a short-term medical license.
According to OHA, a dispensary now has to undergo an entirely new licensing process through OLCC. It has to withdraw from the Oregon Medical Marijuana Program (OMMP) as a registered dispensary in order to be recognised as a licensed recreational retail store.
Leif Medicinals has said it has been able to generate enough revenue to weather this storm and plans to take the 'shut-down' period to refine its product lines, as well as to expand two brands to relaunch in March.
“We will continue to pursue our OLCC licensure,” the company's CEO added, despite the challenge of facing a 75-day process to obtain one.
McNicoll said his firm also plans to get an OLCC license to begin production for a wider recreational adult-use cannabis market.
“As we scale up and continue to grow, we are already looking for partnerships in other recreational cannabis states to take Dave's Space Cakes to the next level as a nationally-recognized brand name,” he said.
“The key to running a successful cannabis company has nothing to do with money or sales or projected revenues,” he added. “It's about who can maneouver their company through the regulations, achieve that longevity and survive.”