This article is part of an ongoing series from the Green Market Report covering some of the biggest challenges facing the California cannabis market in 2022.
Part 1 – Burdensome Legislation
The first quarter of 2022 has been busy with newly proposed cannabis bills in California, with more than two dozen bills submitted in the California State Assembly and Senate. Lawmakers introduced bills at a dizzying rate addressing a range of issues from insurance (AB-2568) and CEQA (SB-1148) to clearing criminal convictions (AB-1706) and re-felonizing homegrown cannabis (AB-1725).
In the haystack is a needle of a bill, SB-1097, introduced on February 16, 2022, by Senator Pan. SB-1097, which would impose new health warning labeling rules for cannabis packaging and advertising, could drastically change the cannabis brand landscape.
It is an important backdrop to understand that among the many roles Dr. Richard Pan has, he is a pediatrician and chairs the Senate Committee on Health. In the first section of the bill, Senator Pan presents studies of rising adolescent cannabis use, increasing use during pregnancy, and lowered perceptions of health harms with cannabis use, among other stats. It’s his “why.”
The bill would require that by January 1, 2025, in addition to the currently required labels, cannabis and infused products other than topicals include one of a set of warning labels that covers at least 1/3 of the front in 12-point type with a bright yellow background and a pictorial or graphic element. Products must have the rotating warning labels batched and equally divided between the mandated messages.
While the bill would give operators and brands until 2025 to become compliant, operators with slim margins will still take a bottom-line hit.
Ryan Jennemann, co-founder and CEO of THC Design, a Los Angeles-based cultivator, says that the initial cost of changing out displays is in the tens of thousands of dollars, not including the packaging. “Let’s just say the packaging [cost] increases by 10-20 cents; there’s $5,000-$10,000 a month moving forward conservatively,” Jennemann stated.
Jennemann also makes the case that, in particular, brands with small packaging will need to increase their size to accommodate the proposed health warning labels that “it’s bad for the environment to be pumping out a bunch more plastic packaging.”
Geoff Doran, CEO and founder of Van Doran Brands, a cannabis flower brand headquartered in Los Angeles, points out that “no other industry in the US has warning labels like the ones being proposed.”
“The concerning part is that we are already running out of space on packaging in order to comply with the current regulations,” Goeff Continued.
SB-1097 would also mandate a full-page printed flyer or folded brochure that includes warnings for safer use of cannabis, including starting with small doses, warning of edibles’ delayed effects, and the health warnings required on product packaging mentioned above. All this must be in 12-point type, have no advertisements, use the heading “Health Warning from the State of California,” and be given to a consumer at sale or delivery.
Lastly, the bill would require physical and online advertisements for cannabis or a cannabis brand to include the health warnings that cover at least 15 percent of the ad in the upper right corner and have a bright yellow background. Radio, television, and video advertisements would require the same rotating warnings.
Tracey Mason, the co-founder and CEO of House of Saka, a California company producing cannabis-infused beverages, thinks the bill is another nail in the coffin of an already struggling industry in California.
“It is punishing and ill-informed in nature, further serving to underscore the outdated and consistently refuted notion that cannabis use is somehow more dangerous or deadly than other intoxicants – like alcohol and prescription drugs – with zero data on which to base those claims,” stated Mason.
The rotating warning label language required on products, brochures, and advertisements is included in SB1097 with additional language for edibles and inhaled products. Only one warning would be required on the packaging at a time.
The ten rotating messages range from telling consumers to buy legal cannabis, not to use cannabis while breastfeeding, or that cannabis is not for kids or teens.
Eddie Kirby, the communications director for Senator Pan, pointed to the World Health Organization’s (WHO) guidelines for effective packaging and labeling of tobacco products, used in countries like Italy and Mexico, as established best practices that Senator Pan wants in California for cannabis products.
The WHO guidelines include packaging recommendations such as using pictures or a graphic for the warning label, bright colors and larger font sizes for visibility, and how much space the health warnings should take up.
Kirby also explained that Senator Pan is trying to create new cultural safety norms about cannabis with the label system, similar to what we have in the U.S. for alcohol.
“You don’t say chug; you say know your limits, and this new industry needs that,” Kirby explained.
Mason argues that the proposed language is ultimately not helpful to consumers, that “they will not have access to real information about how to best use and enjoy our products because the limited space we have to offer a level of education on our packaging will be lost to hyperbolic language not grounded in reality.”
The bill is set for a hearing on April 4, 2022, and the public can currently comment through the California legislative information website.