Welcome to another edition of Tailored Benefit’s Cannabis in the News. In this issue we need to address the material issue of what is wrong with our pot.

Well, in the Golden State, or as locals refer to it, “the center of the univverse,” it turns out inconsistent test results, false positives and actual contaminants are starting off the new era (July 1st) with a band. Just a slight taste of a much larger issue. According to the Orange County Register, newly released BCC statistics report that 1 in every 5 pot samples tested by the state’s licensed labs since July 1st has been red stamped. Of those failed tests, 19% were accredited to residual pesticides like Myclobutanil, a fungicide commonly used in food production, but deemed unsafe when heated. Outside of chemical sprays and bug killers, 68% of the failed tests were rejected for false claims about THC and CBD.

One in five batches of marijuana has failed laboratory testing since new state safety requirements kicked in July 1, according to data from the California Bureau of Cannabis Control. Failures have been triggered by inaccurate labeling or contamination from pesticides, bacteria or processing chemicals. Those testing requirements and results have left some retailers with severely limited inventory over the past few weeks, as cultivators and product manufacturers scramble to get compliant products to market. The new testing requirements have also created backlogs at busy labs. The state has licensed just 31 testing labs, most located in Northern California. As a result, Rinella said cannabis safety tests are taking between one and two weeks. Those numbers would likely be higher if companies weren’t paying for independent lab tests before putting their products through the official supply chain.

According to Verdant Distribution founder Brian Blatz “smart brands are pretesting first, then testing again in the labs”. Some marijuana is testing positive for pesticides that cultivators never used, according to Micah Anderson, president of the Southern California Responsible Growers Council, a cannabis trade group. He said product from several growers who’ve taken over former vineyards, for example, failed initial tests because the soil was contaminated, with stricter limits on pesticides allowed in marijuana than in wine.

“For growers, this will definitively be the biggest challenge they face”,

said Cliff Yeh, co-founder of Encore Labs, a cannabis testing center in Pasadena. There are 60-plus banned or regulated pesticides. Growers can pass the majority of the limits on the pesticide guidelines, Yeh said, but if they fail on a few the whole batch is considered a failure. As an emerging growth industry, this will need to be expeditiously addressed and rectified.

Given the faulty test, little wonder that the “recall” door has now been open with it’s first (and second) voluntary recall of cannabis products. Last week, Bloom Brand vaporizers recalled THC distillate cartridge products from over 100 Golden State dispensaries, citing residual pesticide contamination. The products, four types of vape cartridges and disposable pens in varying sizes and strains, including GSC, King Louis XIII, Pineapple Express, and more, were produced and distributed by Greenfield Organix, sold across California from the Bay Area to Los Angeles. “Batch Number B-180504 contains the pesticide Myclobutanil and does not comply with the Bureau of Cannabis Control (BCC) standards,” a press release announcing the recall detailed. “We are working closely with the BCC to remedy this issue and expect clean, compliant products to be back on shelves in three weeks.” BCC spokesman Alex Traverso confirmed in an email to Marijuana Business Daily that this is California’s first MJ product recall since Jan. 1, when the state’s newly regulated market formally launched. “The Bureau is focused on public health and safety and is actively working with the California Department of Public Health and Bloom to ensure that all affected products are successfully recalled,” Traverso wrote.

On the heels of Bloom Brands recall, David Elias, CEO of Los Angeles-based Lowell Herb Co., confirmed to Marijuana Business Daily that his pre-roll-production business had issued a voluntary recall beginning July 27 after a testing lab reversed its initial finding that a specific batch passed muster and was cleared for retail sale. “We are in the process of a voluntary recall,” Elias said Monday, adding that the company has already contacted 74 retailers that had the affected pre-rolls on shelves. The recall involved two stock-keeping units (SKUs) and is “an expensive hit we will be taking,” he said, because the company has decided to destroy all the recalled pre-rolls instead of trying to remediate the product and get it back to market. In this particular case, he said, the flower in question was approved by SC Labs in Santa Cruz, manufactured into pre-rolls and sent it to a distributor. The distributor then had the pre-rolls tested by San Francisco-based Anresco Laboratories, which initially gave the batch a green light, so the product was sent to retailers. Two weeks later, however, Anresco changed the batch’s status to “fail,” Elias said. Lowell Herb then had the same batch tested by a third lab, Long Beach-based BelCosta Labs, which also determined the pre-rolls passed state testing standards. But out of an abundance of caution, Elias said, Lowell Herb decided to issue the recall. “We will make sure our customers can trust us and the actions we will take,” Elias said.

Food for thought: in addition to formulating a solid and reliable recall plan, one may want to consider conducting a mock recall to ensure your recall systems will work when the real deal occurs. Compliance audits can also be a big help in shoring up loose ends on a recall. In the world of cannabis product recall, especially in California, licensees need to be very proactive in order to protect themselves. Relying on the state’s thin recall standards isn’t likely enough to protect licensees against an overwhelming liability exposure.

Finally, the Golden Bear State is requesting the separation of cannabis from alcohol, kinda like Church and State, but different. For background facts, let’s head up to cannabis-centric Canada, Province Brands, a local Canadian company, announced the development of the world’s first beer brewed from the marijuana plant. Where this new brew will differ from its American counterparts is that Province Brands’ offering will be brewed using parts of the actual cannabis plant, instead of being brewed with barley and grains. Their cannabis beer will be brewed with the stalks, stems and roots of the marijuana plant, according to the Guardian, offering growers an alternative stream of income for the parts of the plants least used in the marijuana smoking industry. Each of Providence Brand’s cannabis beers will have 6.5mg of THC, the Guardian reported. “The beer hits you very quickly,” Dooma Wendschuh, Province Brands’ CEO, told the newspaper. “Which is not common for a marijuana edible.

Hot off the press, Molson Coors Brewing Co. is turning to cannabis drinks in search of growth as the No. 2 U.S. brewer reported another quarter of weak beer sales. The company said it is forming a joint venture with The Hydropothecary Corp., a Canadian cannabis producer, to develop non-alcoholic, cannabis-infused beverages for the Canadian market. The brewer’s pivot follows similar moves by Corona brewer Constellation Brands, which last year invested in Canadian cannabis company Canopy Growth with plans to develop beverages, and Heineken NV, whose Lagunitas brand this week launched a cannabis-infused sparkling water in California.

States in the U.S. that have legalized the adult use of marijuana may not be far behind the Canadians. In fact, Keith Villa, the inventor of MillerCoors’ Blue Moon beer, might say his new company called Ceria Beverages is ahead in the race. Villa announced in an interview in March that Ceria will be focused on developing a line of cannabis-infused craft beers. Lagunitas, which is owned by Heineken, has already released a THC-infused “sparkling water” called Hi-Fi Hops in California , which legalized recreational marijuana at the beginning of 2018. A California winemaker began shipping its marijuana-infused sauvignon blanc on Jan. 1, on the day its new law took effect.

The memo offers two reasons for that ruling. First, because cannabis cannot be sold at an ABC-licensed business, any product with both alcohol and cannabis is not allowed. Is this the final word, death knell or is this just #fakenews? Although the advisory is an attempt by regulators to clarify matters surrounding alcohol and cannabis, the introduction warns that the information given should not be relied upon as the final word on the issues. “The following frequently asked questions and responses are intended to offer some guidance,” the advisory reads. “This is not intended to be a comprehensive review of what may be permitted or prohibited. You should obtain independent legal advice before engaging in business involving either alcoholic beverages or cannabis, and you should not act in reliance on any information presented herein.” So, for now, separate the two so that the twain shall not meet.

Tailored Benefits is an employee benefits company that has had cannabis clients for over eleven years. Jeffrey Rosen, Tailored Benefit’s founder, practiced law for ten (10) years in San Francisco, Silicon Valley & Taipei, Taiwan. He has run an employee benefits company for over twenty years. Tailored Benefits’ has evolved over the past several decades to play an integral part in the cannabis industry and specifically Employee Benefits. With the surge in demand for cannabis employees, Tailored Benefits’ specific cannabis employee benefit solutions is how you can set yourself apart, attract and retain valuable employees.

If you need more information on how to insure your cannabis business, Tailored Benefits is here to guide you and keep you informed on local and federal policies.

All the best,

Jeffrey Rosen, President

(415) 974-1114