In the wake of all the excitement surrounding California’s adult use legalization came scores of regulations. While we’ve detailed how these regulations impact Caliva and similar companies, others feel the impacts differently depending on their size and industry. Edibles producers in California have been feeling the pinch especially hard.

GreenState highlighted several companies in the Oakland area that particularly felt the consequences of new regulations. This includes the city deeming producers’ commercial kitchen spaces ineligible for an edibles production license. As GreenState put it, new regulations “makes it all but impossible for her products to legally be sold in cannabis dispensaries.” Now, kitchens need to operate within industrial “green zones.”

The updated regulations come with good intentions aimed at regulating the market and providing safety to consumers. By implementing the new measures, customers are given a higher assurance that their cannabis-infused edibles are correctly dosed and packaged securely. However, the good intentions could level much of California’s edibles production.

Industry experts believe that California is heading down a path that follows Colorado and other major player states. In this scenario, regulation will force the industry to consolidate production activity to just a few important names. Meanwhile, insiders and cannabis advocates call on local cities and counties to do their part to reverse the projected outcome. Advocates believe that if local regulations allowed for small kitchen production in more parts of town licenses could become cheaper. Thus, negating the need to make a costly decision and move to another city that will follow through on licensing small edible manufacturing.

Immediate Regulation Changes Cited as Problem for Producers

The introduction of regulations doesn’t appear to be the problem. Instead, the complaints are centered at the immediacy of the new rules. Industry consultant Sean Donahoe told GreenState that “Every other industry has had processes to slowly have the pot brought to a boil. We’ve been immediately thrown into the pot as it is boiling with no safety net of commercial financing and dealing with issues of federal intervention.” Meeting the new regulations can include upgrading to green-zone approved spaces, which can cost thousands of dollars, as well as permit fees, insurance and lab testing fees.

While this could mark a turning point in California’s edibles market, it may also be another pain point in the early months of the adult use market. With numerous headaches including taxes, packaging and other regulations in flux, small kitchen edible producers could find a reprieve. Or, the extinction in the market could take place if the current path leads the way it looks. Time will tell, and we are sure to hear a lot more on the issue in the coming months.

How the Current Events Impact California Dispensaries like Caliva

The regulations not only affect edible producers. The changes impact the entire supply chain. Customers now have fewer choices thanks to the list of qualified partners shrinking considerably – only 28 companies currently have the basic Type N license required by the state for infusing edibles with cannabis. Caliva has always worked with compliant vendors, with 2018 not changing that a bit. However, it did limit some of the products that could be bought.

As Caliva General Manager Erika Henika explains, “There are many products that we can no longer purchase and sell as many companies have not been able to keep up with the changing requirements. It was a bit slow going in January, as vendors were trying to adhere to the new regulations quickly.” She added that with the regulations now a few months old that, “We have been able to add to our product array as manufacturers become compliant.”

Edible Sales Continue to Be Strong

Despite the updated rules and regulations, edibles have continued to sell strongly in January and beyond in 2018. Following the trend in other states like Washington and Colorado, edibles represent one of the most popular products for consumers. In less than 4 months, Caliva’s edible sales have already hit 57% of last year’s total sales. This number is expected to hold steady, despite some edible prices rising significantly to offset the producer’s upgrade costs.

Henika went on to explain that new customers and product variety are driving the interest. “The new recreational customer is very excited to purchase from this new category as it is a far step up from homemade brownies! There is a wide variety and dosage available for all customers and we do have a nice array even considering the limitation on compliant distributors.”

Some edibles that customers can find at Caliva and in our online menu include products from noted names like Kiva. Henika noted that favorites from Kiva and others will continue to be sold at Caliva, just in smaller doses. Everything Caliva offers in the store is 100 mg or fewer and is divided into 10 mg servings to meet state regulations.

An Uncertain Future for California’s Edibles Market

While it’s almost guaranteed that strong edibles sales will continue in California and beyond, the outlook is less clear for the fate of in-state producers. What comes of their business could continue to impact how dispensaries like Caliva obtain their edibles from qualified vendors. With a limited pool, how this could affect the customer down the line is not entirely sure.

At the moment, the rising costs should decrease as the year continues. With costs mostly front-loaded, licensed edible producers will hopefully experience smoother operations going forward. With profits coming in, this should bring prices back down. The question is how many will remain? Will California’s edibles market be significantly reduced due to costs and regulations?

We’ll have to wait and see. Like any evolving adult use cannabis market, things could change at any moment. For the state’s edibles producers, they are surely hoping the next rapid change doesn’t come at a cost to their business.

 

By Andrew Ward


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