Pot shop fire sale: Dispensaries slash prices to sell non-compliant weed by July 1

Amy DiPierro | Palm Springs Desert Sun

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Starting on July 1, cannabis products in California must be sold in a resealable, tamper-evident and child-resistant package.

Labels must include a unique identifier in order to conform with the state's track and trace program, as well as a warning and a list of ingredients like THC, CBD and allergens, among other rules.

Products must also be tested for certain chemical compounds as well as contaminants.

Edibles are limited to 10 mg THC per serving and 100 mg THC per package; non-edibles must not contain more than 1,000 mg of THC in the adult-use market or 2,000 mg of THC in the medicinal market.

For the next four days in California, every weed must go.

Since the state fully legalized cannabis on Jan. 1, the industry had a six-month transition period to adopt new testing, packaging and ingredient standards. Businesses can continue to sell products that don’t meet the new requirements until June 30, but will be forced to destroy any leftovers come July 1.

The deadline has many in the cannabis industry scrambling to sell tens of thousands of dollars worth of old, non-compliant stock by the end of June, touting discounts and parties to lure customers. And some patrons can’t resist a deal.

“It’s just like Toys ‘R’ Us going out of business,” said Scott Lambert, CEO of The OG Collective in Cathedral City. “People are buying stuff they don’t really need.”

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But some in the cannabis industry say the bigger challenge will come after July 1, when retailers will have to stock their shelves with products that meet state standards. They say there are too few suppliers in compliance – and they worry shortages will allow the black market to thrive instead.

In the short term, many dispensary operators are just looking to cut their losses. The shortfall will be especially deep for businesses like OG Collective, where Lambert estimates 90 percent of his stock – easily $175,000 worth of products – won’t be compliant come July 1.

“It is crazy,” he said. “They’re forcing us to reduce the prices by 70 or 80 percent in order to get rid of it.”

Lambert is selling a gram of marijuana concentrate for $25 before taxes – about a quarter of its normal price. Even with deep discounts, Lambert thinks he’ll end up destroying as much as $150,000 worth of inventory that he doesn’t sell.

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But some shops are approaching July 1 with a festive spirit. At Remedy Inc. in Cathedral City, dispensary owner Klint Jackson plans to sell a remaining $20,000 to $30,000 of soon-to-be non-compliant inventory during a big barbecue his shop is hosting on Saturday. If need be, he said, he’ll sell product at wholesale pricing.

“The world explodes on the first,” he said. “It’s a big event for us.”

To avoid discount and destruction, other dispensary managers say they’ve carefully tapered their supply of product that won’t be compliant in July.

“We’ll be fine,” said Kenneth Churchill, CEO of West Coast Cannabis Club. “I’m surprised by how many people in this industry seem to be caught off guard.”

John Chaisson, owner of Cathedral City dispensary Atomic Budz, said he’s been reminding vendors to make sure they know about the upcoming deadline for a while. For the past month, he’s been whittling down the last 35 percent of inventory that can’t be sold next month.

“It will all be gone the day before (July 1),” he said.

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Joy Brown of Joy of Life Wellness Center in Palm Springs is down to her last few pounds of non-compliant product, too, some of it discounted up to 50 percent through the end of the month. She’s more concerned about what happens after June 30.

“On July 1, wilI I have enough stock to sell correctly?” That’s really the big problem,” she said.

Cris Scagliotti, President of Green Cross Pharma dispensary in Cathedral City, worries many small manufacturers won’t be able to provide legal product in time for July 1.

“You can’t reinvent an industry in six months,” she said. “It’s just not enough time.”

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Amy DiPierro covers real estate and business news at The Desert Sun in Palm Springs. Reach her at amy.dipierro@desertsun.com or 760-218-2359. Follow her on Twitter @amydipierro.