Throughout the United States, the legalization of cannabis—in particular, hemp-based edibles (e.g., gummies containing CBD or Delta 8 THC)—has facilitated the rapid emergence of an extraordinarily large marketplace featuring an ever-expanding array of novel products and offerings. In just three years, the U.S. cannabis market has grown from approximately $7.7 billion to over $13 billion. Moreover, cannabis market growth is projected to continue at an estimated annual rate of 15%. Convenience stores are uniquely positioned to capture a substantial share of the profits that will accompany this remarkable growth.
I am an attorney who specializes in assisting food and cannabis companies navigate the myriad legal, safety and operational challenges relating to cannabis. Over the years, I have helped clients work through every step of the process, from seed to sale, including hazard analysis, supplier approval, licensing, regulatory compliance, labeling and retail marketing. For the most part, industry has done an extraordinary job of ensuring product safety, often despite a lack of clear and sensible regulations. Unfortunately, as in any industry, there are actors for whom safety is an afterthought. This article is intended to guide retailers in identifying and minimizing the risks associated with marketing cannabis products.
No industry has ever achieved such rapid growth amidst so much legal and regulatory controversy.
The successful sale of cannabis products is predicated upon a clear understanding of the complexities surrounding product safety, supplier verification, labeling claims, legal/regulatory compliance and civil liability. Indeed, the legalization of cannabis is without historical parallel. No industry has ever achieved such rapid growth amidst so much legal and regulatory controversy. Indeed, regulators and legislators are simply unable to keep pace with industry innovation and consumer demand. The result is a confusing patchwork of laws that vary dramatically from one jurisdiction to the next.
Even now, despite the ubiquity of cannabis-based edibles offered for sale across the U.S., most of these products are illegal under federal law. And between the states, the rules and regulations governing cannabis products are as varied as the products themselves. In the bizarro world of contemporary cannabis law, there are places throughout the U.S. where what may be legally sold on one side of the street would be a felony if sold on the other. Of course, this is to say nothing of the civil liability risk, where class-action lawsuits and consumer protection claims create yet additional significant risk.
Suffice it to say, convenience store operators who want to share in the often-lucrative profits associated with cannabis products must also carefully consider the risks and uncertainties. This article focuses on five key aspects of marketing cannabis edibles: product safety and quality, supplier verification, labeling claims, regulatory compliance and risk mitigation.
Product Safety and Quality
The utmost priority for any company aiming to enter the market should be product safety. While it’s crucial for convenience stores to prioritize obtaining products from reputable, licensed suppliers who uphold rigorous quality standards, this is just one facet of the larger safety picture. Responsibility for ensuring the safety of cannabis edibles doesn’t lie solely with the supplier; they are just a single link in the chain.
Different products come with different risks. In most cases, those risks are readily apparent. In the case of cannabis edibles, the risks are largely unknown or misunderstood by consumers because the products tend to be new and are often unfamiliar, and rules vary in different locations. This challenge applies to both customers and employees. Consequently, any convenience store marketing cannabis products should prioritize risk awareness and training. This can be accomplished through careful product selection, rigorous employee training, secure product placement and consumer education.
Thoroughly training the staff plays a pivotal role in mitigating risks.
Thoroughly training the staff plays a pivotal role in mitigating risks. Training should include the significance of age verification, responsible dosing and identifying signs of potential misuse or abuse. Establishing comprehensive internal protocols for handling cannabis sales can protect both the store and its customers. Continuously educating staff about ever-changing regulations and safety protocols will greatly contribute to cultivating a culture centered around compliance and consumer safety.
Legal and Regulatory Compliance
Navigating the legal intricacies of cannabis products is challenging but important. Convenience stores must stay current with evolving cannabis laws and regulations at the local, state and federal levels. This may require engaging consultants who are well-versed in cannabis regulatory requirements and who can assist the store in meeting and understanding compliance requirements.
Staying current is especially important for retailers operating across multiple jurisdictions. Again, what is legal in one jurisdiction may be illegal in another. Moreover, compliance requirements span a wide range of subject matters, including age restrictions, licensing requirements, product taxation, labeling requirements, cannabinoid tolerances, processing rules and advertising restrictions, among many others. Adherence to all applicable legal obligations is an important step in safeguarding the store from legal and civil penalties and helps to ensure long-term sustainability.
One often-overlooked aspect of compliance is the rigorous tracking and reporting requirements imposed by regulatory agencies in some jurisdictions. Although much more commonly applicable to dispensaries selling marijuana products, as opposed to federally legal hemp-based products, it is worth checking the requirements where you are. Maintaining meticulous records of inventory, sales and supplier transactions is also helpful during compliance audits, ensuring traceability and demonstrating the store’s commitment to accountability. If your store is in a jurisdiction that requires tracking, automated point-of-sale systems that integrate with state or country cannabis tracking systems can be very helpful in streamlining the process of reporting and will minimize the potential for errors.
Supplier Verification
The process of selecting cannabis suppliers requires both careful vetting and ongoing verification. Performing supplier due diligence is among the best ways to ensure that the cannabis products you offer meet or exceed industry standards and best practices. Supplier verification activities for cannabis edibles are similar in many respects to those any food supplier would be subject to. They may include conducting independent audits that evaluate and ensure the implementation of good manufacturing practices; mandating rigorous testing to ensure products are free of contaminants, such as pesticides, heavy metals and pathogens; and ensuring that the edibles are produced in compliance with applicable safety and quality regulations.
Convenience store owners should assess prospective suppliers to ensure they are licensed, certified and in compliance with applicable regulations and utilizing best practices. Likewise, maintaining transparent and open communication channels with suppliers allows for ongoing collaboration and exchange of critical information regarding product safety and quality, as well as regulatory updates. Making regular on-site visits to supplier facilities enables store owners to witness cultivation practices firsthand, ensuring ethical and sustainable sourcing.
Cannabis edibles must have clear and accurate labeling, providing consumers with essential information about potency, dosage and usage instructions.
Unfortunately, there are still plenty of opportunistic, purely profit-driven entities out there seeking to leverage the lack of regulatory clarity and oversight to sell products that are often not what they purport to be. Thus, it is important to remain especially vigilant with respect to suppliers of cannabis edibles. Fortunately, it is easier than ever to distinguish reputable suppliers from the irreputable. With appropriate due diligence, you can significantly reduce the risk to both your customers and your bottom line.
Accurate Labeling Claims
Accurate labeling is among the most important emerging issues in cannabis. It is difficult to overstate how important labeling is. Cannabis edibles must have clear and accurate labeling, providing consumers with essential information about potency, dosage and usage instructions. Convenience stores should ensure that product labels comply with all relevant legal requirements, including THC/CBD content, allergen warnings, ingredient and nutrition panels, and expiration dates. Just as is the case with foods, misleading or false labeling claims can result in severe legal consequences, damage to the store’s reputation and, most importantly, harm to consumers.
In addition to regulatory legal peril, which may include fines, product seizures, operational suspensions and licensing revocation, consumer protection lawsuits may pose an equally dire threat. For years, the number of consumer protection lawsuits involving cannabis edibles has continued to increase. Often, these sorts of claims are not insured and can thus put retailers in grave financial jeopardy. To mitigate the risk of such lawsuits and claims, it is important to carefully review product labels and confirm compliance with labeling regulations before offering products for sale. Likewise, contracts containing liability-shifting provisions can provide an additional layer of protection.
Relatedly, there is significant variability in the potency and effects of different cannabis edibles. Factors such as serving size, cannabinoid content and processing methods can all impact how a given product might affect the consumer. Likewise, physiological differences between consumers can create additional variance. Convenience stores should take these considerations into account and implement measures to ensure consumers are aware of what they are purchasing, especially when the products contain impairing cannabinoids such as Delta-8 THC. Educating customers at the point of sale can be helpful in ensuring customers make informed decisions based on their preference and needs.
Moving Forward
As convenience stores consider entering the cannabis market, it is exceedingly important to do so using a risk-based, safety-centric, deliberative approach. By focusing on product safety and quality, legal/regulatory compliance, effective supplier verification procedures and labeling accuracy, convenience store owners and operators can significantly mitigate risks and protect consumers while still enjoying the substantial upside offered by cannabis products. Prioritizing consumer safety and trust is not only the right thing to do but is necessary to ensure long-term success. By partnering with reputable suppliers, adhering to strict labeling guidelines and ensuring compliance with ever-changing regulations, convenience stores can confidently enter the cannabis retail space and contribute to the responsible growth of this emerging market.