A longstanding cannabis testing lab in northern California suddenly closed its doors this week with almost no notice to employees or clients, multiple sources confirmed to Green Market Report on Wednesday.
Santa Rosa-based Sonoma Lab Works is now effectively shut down, said one former employee who requested anonymity.
“We are completely shut down,” the employee said. “We came into work yesterday, and one of the managers of the company came over and pulled everyone in, and said, ‘Hey, unfortunately, this is the end of the line for us. We’re shutting operations down.’”
An email shared with Green Market Report that was reportedly sent out to Sonoma Lab Works’ clients this week read, “Today, SLW made the difficult decision to cease lab operations,” and directed clients with questions to email the accounting department.
Some members of a private Facebook group that share intel on the California cannabis industry were already on Tuesday trading recommendations for replacement testing labs.
The former employee said the company had roughly 25 workers who are now out of a job just before Christmas, and that workers were told they’d be paid only through Thursday with no severance packages offered.
“It’s been definitely a whirlwind for the last 24 hours, to be just told so abruptly like that,” the employee said. “It’s a hard pill to swallow.”
The employee added that there weren’t any major signs before the closure, and that the lab had even made some new hires recently. The company website also was still active as of Wednesday afternoon.
The lab’s owner, businessman Darius Anderson, could not immediately be reached for comment.
Competition in Compliance
The lab’s closure is just the latest sign of industry-wide hurdles and price contraction, the employee said.
“It’s clearly due to the struggles we’ve faced in the cannabis testing space. Prices going down, and just not making enough revenue to keep the doors open, is my understanding from what was shared,” the employee said.
“We’ve had too many labs in the space, and just like all areas of the supply chain, the operators have been too competitive against one another.”
There are currently 46 active marijuana testing lab permits, according to data from the California Department of Cannabis Control, a hefty increase from the 26 licensed labs in mid-2018, when testing requirements kicked in.
“Compliance tests were $900 back in 2019, sometimes more expensive than that, and now, there’s tons of folks operating tests for $400 for a compliance test,” the employee said. “That’s a problem, because now, you really need to have a significant amount of market share to make up for that loss of revenue.”
The ex-staffer doesn’t anticipate any major supply chain disruptions due to unexpected testing cancelations with clients, and said the Sonoma Lab Works team spent much of Wednesday handing growers and manufacturers in need of product testing over to other labs.
“We did make sure to honor pushing out all reports for anything that was still in the queue,” the employee said. “We had a wonderful team of people who stayed to do that work … because they cared for the clients, and didn’t just want to walk out the door when they were told basically, ‘Hey, you’re fired.’ There was still integrity amongst everybody here.”
The other labs still in business are probably “foaming at the mouth” now at the possibility of gathering up Sonoma Lab Works’ clients, the employee said.
“They very well may be in a similar position, where they really need it.”