Venice Cookie Company, a licensed California cannabis company, recently initiated a voluntary product recall, the third to happen in the Golden State since more rigorous product testing standards went into effect on July 1.

New state standards, issued by the Bureau for Cannabis Control, require vendors to sell only those products which meet specific lab, packaging, and dosing standards. The cookie company recalled several of its marijuana-infused beverages due to a changed testing grade from San Diego-based testing facility PharmLabs.

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In a news release dated August 15, company CEO Kenny Morrison clarified that the failed test came from the company’s utilization of an ethyl alcohol-based flavoring in some of its marijuana-infused beverages. Beginning on Aug. 13, Venice contacted nearly 100 retailers carrying the Cannabis Quencher™ Lemonades (Classic and Strawberry), and Mango flavors as they contained trace amounts of ethanol similar to the alcohol-based flavoring used in most Kombucha beverages.

While this alcohol-based flavoring is completely safe for consumption, the use of it in combination with cannabis does not meet California’s current state standards.

Source: Venice Cookie Company

What are the new standards, again?

Beginning July 1, all cannabis goods meant for retail use must meet all state statutory and regulatory requirements. These requirements include specific laboratory testing standards, packaging and labeling specifications, THC limits for edible and non-edible cannabis products, and California Department of Public Health requirements for ingredients and appearance.

Currently, California only has 28 licensed Marijuana testing laboratories. Labs check cannabis products for such items as potency, pesticides, metals, contamination, and residual solvents.

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Cannabis companies must also comply with stringent potency standards. For edibles, the standards are 10 milligrams per serving with packages not to exceed 100 milligrams. For non-edible cannabis products, the THC dosage cannot exceed 1,000 milligrams per topical package for recreational cannabis, and 2,000 milligrams per topical for cannabis meant for medicinal use.

What does the end of the transition period mean for retailers?

Cannabis for non-medicinal adult-use became legal in California on the first of the year. Retailers distributing cannabis-products had to meet these state standards by July 1, allowing growers, retailers, and labs approximately six months to meet all state cannabis retail requirements.

With a state that has nearly 20 million square feet of canopy and 28 state-licensed labs that can only process 100-120 samples per day utilizing full-compliance testing, some product bottlenecking is expected to occur.

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Additionally, any cannabis goods that do not meet these requirements must be destroyed in accordance with California law. Retailers that stocked up on pre-regulation products before the cultivation tax went into effect either had to fire-sale their supply or destroy it.

More established growers, edible producers, and retailers that have done their homework are less likely to encounter a loss in their inventory. The end of this quick transition period is more likely to hit those newer players in the cannabis industry who are facing a serious supply-chain interruption.

Source: Venice Cookie Company

Is there any good news?

Cannabis distributors facing longer-wait times for labs or facing a loss of inventory can at least breathe a sigh of taxation-related relief. The cannabis excise tax markup rate will remain the same for an extended amount of time.

The Calif. Department of Tax and Fee Administration announced that the cannabis excise tax markup rate would continue to be 60 percent for the next six months, beginning July 1. The department determines and announces the state markup rate on a biannual basis (every six months).

Cannabis distributors must collect the excise tax from retailers that they supply with product based on the average market price of cannabis or cannabis-related product. Distributors are responsible for calculating the average market price by using the retailer’s wholesale cost of the cannabis plus the markup rate (60 percent).

When life gives you lemons, make cannabis lemonade

While this is only the third pot-product recall, California can be sure to see a few more products pulled as retailers deal with the end of the transition period. It is a new area for a state known for its fondness of red tape and regulations, and some confusion and growing pains are inevitable.

Venice Cookie Company voluntarily recalled their product and continues to be in good standing with the Bureau of Cannabis Control. Most importantly, the company will continue to sell their cannabis lemonades. To ensure compliance with California retail standards, they will change the flavors to non-ethyl alcohol based ingredients.