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Cannabis Recalls Threaten Your Company and the Industry. What Are You Doing to Prevent Them?

Some strategies to help you navigate recall hell.

Opinions expressed by Entrepreneur contributors are their own.

Recalls are the single biggest threat to the profitability of any manufacturing or CPG business. But even when there are just whispers of a product recall in the cannabis industry, there's much more at stake than just dollars and cents. 

The cannabis and hemp market is still so new that the smallest product recall can have a damaging impact on the public perception of the entire industry. Recalls can affect the profit margins and become PR nightmares for brands, but they also negatively impact the industry.

Related: Michigan Recalls 10,000 Cannabis Edibles

Why recalls happen

In general, recalls occur when there is a legitimate public health concern. If a company isn't following Good Manufacturing Practices (GMPs), there's a strong chance a recall will rear its ugly head. Regulatory bodies like the FDA are getting more involved in false label claims and health concerns that prompt a recall. This also applies to the cannabis industry, even though it doesn't yet have a regulatory framework. The FDA can still force cannabis brands to have a recall.

Painful lesson from other industries

The fallout from a product recall can destroy businesses and hurt entire industries. Just look at the peanut industry. After official identified contaminated peanut butter as the culprit leading to a deadly Salmonella outbreak that killed nine people and sickened over 700 people back in 2009, the Peanut Corporation of America was forced to file for bankruptcy.

During this multistate outbreak of human infections, consumers were hesitant to purchase peanut butter and other products with peanuts. The entire supply chain was negatively impacted, including the small peanut farmers who had nothing to do with the recall.

Cannabis is not immune to such nightmare scenarios. Just like how consumers doubt the safety of lettuce after countless recalls due to E.Coli, they will also question whether or not their local dispensary is selling moldy cannabis flower.

MSOs, in particular, are at significant risk for recalls due to the larger quantities of product they turnover.

But small companies are also risky due to minimal resources to pivot quickly. Even if the product is only recalled for a month or two, that's an eternity for any company to not have a product moving, especially for small to medium-sized operations.

In my previous article on cGMPs, I mentioned a company in Michigan that recalled over 3,000 pre-rolls last year because an employee licked several of the pre-rolls to seal them shut. This resulted in a 14-day suspension. Since this was such a major and blatant violation, I predicted this wouldn't be the last violation we heard from this company. I was right. The Michigan Marijuana Regulatory Agency issued another recall for 10,000 cannabis-infused chocolates that didn't undergo proper inspection and suspended the license of MedFarms.


Problems with testing

Products must be manufactured following cGMPs to ensure that safety and quality are built into every step of the manufacturing process. Even with these standards in place, there are issues around inaccurate or partial product testing, as they often fail to test the final product for overall safety collectively. 

For example, a cannabis farm in Washington recalled their product after O-Phenylphenol (OPP), a chemical known to cause cancer, was found in the food-safe gloves used to handle their crop. Gloves that are made for food handling only require initial FDA approval, and FDA compliance requires a rough outline of the ingredients of the gloves rather than the final product. 

Lack of communication or miscommunication with your state's health department could also prompt a product recall. Several legal markets such as Colorado, Missouri, Oklahoma, and Michigan have encountered mold scares that serve as decent examples of this over the past year. 

In October 2020, over 200 medical cannabis patients in Missouri's newly opened market were told they'd been potentially exposed to moldy cannabis flower, within days after a local medical dispensary opened its doors to the public. The Missouri health department halted sales on all remaining product from the batch linked to the mold complaint. But further testing ultimately revealed that the batch did not breach the threshold for mycotoxins.

Although state officials found the flower safe, Missouri still does not require cannabis license-holders to test for mold, which is relatively standard across other legal markets such as Colorado. 

After undergoing a series of recalls in 2017, Arizona went from one of the only states with no requirements for testing marijuana to enacting some of the strictest safety standards in the country. The Arizona Department of Health Services (AZDHS) has a 10-day regulation for Arizona cannabis labs to provide test results, with hefty $1k-$5k fines per day for each violation. Penalties add up quickly for any cannabis lab not meeting the new AZDHS deadline.

Meanwhile, suppliers are getting frustrated by long wait times for results, especially since once the results finally come back, the lack of accuracy paired with a high failure rate of products leads dispensaries to throw in the towel and stop ordering safety tests altogether.

Earlier this year, a cannabis testing lab in Arizona initiated a ​​voluntary recall of certain cannabis products following test results showing Salmonella and Aspergillus (mold) traces. The lab put out a statement clarifying that the recall is not the result of any wrongdoing by the products, dispensaries, or brands, but rather an audit-based testing discrepancy between it and the state Department of Health Services.


Solutions for Avoiding Recalls

Many companies were not prepared for the Covid-19 crisis. But by conducting a mock recall at least annually, your cannabis business is taking the appropriate steps to prepare for the worst. This way, when an actual recall occurs, your business is ready to act fast and minimize the loss of profits and save face with the public.

Recalls can be prevented, but they continue to cause consumers to doubt the sanitation of cannabis products, perhaps even prompting mandatory regulations or forcing some companies to shut down completely. Self-regulation is the key to moving the industry forward, recall-free, and a safety standard compliant with GFSI requirements will help the industry mitigate these hurdles and 'future-proof' your business. While becoming certified to CSQ does not guarantee that a company won't eventually be faced with a product recall, companies certified to CSQ are guaranteed to have the appropriate policies and procedures in place for recalls and will be prepared to mitigate the potential damage of the recall. Overall, the likelihood of a recall is significantly reduced when comparing certified companies to non-certified companies. 

When companies fail to follow cGMPs and other best practices, recalls pop up, and if the product has reached the consumer level, their lives are left to hang in the balance. Exposing the health of the general public like this is certainly not a good look, especially for an industry that's giving big pharma a run for its money.