The California cannabis industry being covered in the national news is no surprise these days, but right before July 1, the storyline changed. “California pot shops slash prices ahead of new testing rules” was NBC’s headline.
So what changed on July 1 and what does this mean to you as you consider your cannabis investment options?
As the California rulemaking bodies labor to craft and install the long-awaited final cannabis legislation, their Emergency regulations are still in place. They include a timeline for moving licensees towards compliance with the nation’s most strict cannabis testing requirements. Licensed retail stores and delivery services in the state were given some time to convert their supply chain with a hard deadline of July 1 when only those products tested by the small number of licensed cannabis testing labs became legal to sell.
With the supply chain already choked by the current set of tests, there is more trouble headed its way as the list of elements for which there needs to be testing expands even more on January 1, 2019. In a letter to Governor Jerry Brown and Lori Ajax, head of the state’s Bureau of Cannabis Control, cannabis industry leaders begged for an extension citing shortages of licensed labs and a stockpile of pre-deadline inventory. This request was denied and there are no signs the state will back down on this requirement or its extension in 2019.
Making matters even more complicated is that fact that contrary to other states where cannabis is licensed, California’s cannabis testing labs are required to go to their customers place of business, mostly licensed Distributors who supply the Dispensaries with their finished goods, and they obtain random samples for each batch of cannabis flower or products while under video surveillance. Once the samples are logged, they are then returned to the cannabis testing lab for analysis. This additional step when compared to other states further stretches the resources of the few labs that are operational in the state.
There are a few reasons why the roster of licensed labs includes only 33 businesses at this time, some of which are duplicate, related companies and many are not yet open due to lack of funding or the length of time it takes to build out, equip and staff their operation.
If you aren’t entranced by the big exit or unwilling to suffer the inevitable big failures as brands fight for market share, and are looking for a more traditional way to enter the cannabis industry, investing in a cannabis testing lab may be the play. It’s one of just a few license-carrying “pick and shovel” support company options.
Here’s a short list of reasons why investing in a cannabis testing lab may be right for you:
In the current often blurry version of the legal cannabis industry in the State of California, nothing is more clearly in focus than the need for more testing labs as part of the supply chain and the financial opportunity for those individuals that invest in and operate these labs effectively.
With the right advice and team behind and alongside, you will build a company that takes on the challenge of ensuring that the cannabis products consumed by patients and consumers statewide are safe and labeled appropriately. And along the way, build a cash flow and profit stream that makes people at that party forget about branding and want to know how you did it.