The cannabis industry is equal parts exciting and volatile. The excitement stems from the possibilities it can offer an entrepreneur who wants to get involved in a nascent industry. Even though cannabis is still illegal at the federal level, different states have passed laws making it legal, providing opportunities for new business owners.
But that’s also where the volatility can come in. Within those states, the regulations are constantly undergoing scrutiny and change. Even in a state where cannabis has been legal for some time, there can be an unpredictability in doing business there. Massachusetts, which passed a law to make cannabis legal back in 2016, has seen its share of unpredictability recently. Here are some potential pitfalls in the cannabis industry, and how data can help you navigate them.
Changes in regulatory bodies
In Massachusetts, the cannabis industry is overseen by the Cannabis Control Commission (CCC). The agency has had a tumultuous year, featuring controversial leadership changes and accusations of it being unresponsive to difficulties faced by business owners. Some have called for a restructuring of the agency, pointing to the fact that the industry in the state has undergone significant growth since the agency was created almost a decade ago.
There are regulatory bodies in every state where cannabis is legal, whether that is the legislature itself or independent agencies like the CCC. A lack of stability within that organization is an added frustration, but there are always going to be regulatory changes that companies need to respond to. An analytics solution can make it easy to meet the regulations that are put in place. When those regulations change, a scalable solution allows an organization to take its data and produce a customizable report that also meets those adjusted needs.
Regulatory changes
The CCC put into place one such change recently. The agency eliminated a rule that required two people in a vehicle for all cannabis transports. The new rule states that for products with a total retail value of up to $5,000, drivers can make a delivery alone, with two people still required for business-to-business transportation of any value.
In Massachusetts, delivery licenses are only granted to business owners in the commission’s social equity and economic empowerment programs. The programs are meant to help people in communities most impacted by the war on drugs, but business owners said the delivery restrictions made it harder for them to turn a profit due to payroll and insurance costs.
These are the kinds of insights an analytics solution can provide. In some states, like Maine, operators can bring regulatory suggestions to the agency in charge of the cannabis laws. Being able to make those suggestions with all of the necessary data needed to back them up strengthens the request, while also keeping you on top of your finances at all times.
Testing controversies
Regulatory bodies like the CCC are meant to keep the public safe, ensuring that the product that is put on store shelves is safe for consumption. The Boston Globe recently reviewed data and interviewed industry insiders and found that the cannabis industry’s testing system in Massachusetts is “poorly designed and fitfully enforced.” The newspaper report states cannabis companies are able to go “lab shopping,” seeking out the labs that are more likely to pass their product. The Globe found three of the four labs with the highest failure rates for total yeast and mold have seen the number of samples they test fall, as cannabis companies go to other labs that pass more of the product.
The data involved here is twofold – cultivators have to factor in the cost of testing, while laboratories also have to examine their costs, which include specialized equipment and trained scientists. For cannabis companies, the move is a logical one – in addition to how much it costs to test their product, a failed test means less product making it to the point of sale. If there are labs that are less likely to fail a product, it makes financial sense for the companies to use that lab. It’s on the regulatory commissions to make sure labs are consistent with their findings.
In the best-case scenario, data informs much of what the regulatory commissions are deciding in the first place. The CCC’s research team “explores the social, economic, and health impacts of marijuana across the Commonwealth. The Research Department contributes to Legislative research reports, original science papers and presentations, and educational projects.” This type of work, though, is inconsistent from state to state.
In some respects, the best-case scenario for cannabis companies might be legalization at the federal level. While that might mostly benefit the larger companies that would then be able to more quickly establish interstate business, it would at least provide a little more regulatory consistency. Either way, the best way for a company to be prepared for anything is with an adaptable analytics solution that can help an organization react to any event.
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