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Marijuana Industry News September 20, 2019 MJ Shareholders

In the wake of recent news surrounding vaping-related lung illnesses and seven reported deaths in the U.S.—and the first confirmed illness reported in Canada...

In the wake of recent news surrounding vaping-related lung illnesses and seven reported deaths in the U.S.—and the first confirmed illness reported in Canada Sept. 18—cannabis cartridge manufacturers and retailers have taken to social media to convey the safety of their products.

Quill, a vape delivery technology manufacturer based in Oregon, issued a statement on Instagram, echoing similar sentiments across the industry. “No additives. No dilutants. No fillers. Just pure extract. Everyone has been asking in the last week about what’s in our pens. The questions that we’ve been getting are truly, very good ones. And, to be honest, these are questions we wish consumers had been asking all along. Do we use Vitamin E? No. Do we use MCT? No. What about botanical terpenes? No. The answer is always, emphatically: NO.”

And so on.

Similarly, the staff at Oakland, Calif.-based Magnolia Wellness is distributing a handout describing what customers should look for in a vape pen to ensure they are using products that have been tested and are proven to be safe.

“Our RN on staff put out a sheet that teaches people that if it causes you to cough, if you have shortness of breath or if you have a fever, that’s a problem,” says Magnolia Wellness Executive Director Debby Goldsberry. “Of course, we haven’t had a single person that’s had a problem, but we’re putting out information, so people know the symptoms to be aware of so that they immediately stop use and seek medical attention.”

There’s very good reason for this sort of communication with customers and patients. For one, as Cannabis Business Times has reported, cannabis researchers and scientists see a tremendous opportunity for public health education in the cannabis industry. Much of the technology behind popular cannabis products is new to a marketplace that, until recently, operated underground and almost totally in the world of flower. Now, customers are greeted with licensed storefronts and a gleaming spectrum of interesting products, including vape cartridges.

“Frankly, I’m surprised it has taken this long for consumers, the public and the media to focus on the ingredients in cartridges.”

– Suzanne Silva, director of sales and marketing at Farmer’s Friend Extracts

The other side of the coin is business. How will the uncertainty of these national headlines affect vape sales—or cannabis sales across the board? While the Centers for Disease Control and Prevention have logged 380 “confirmed and probable cases” of vaping-related lung disease, it’s unclear whether these illnesses stem from illicit cannabis products (concentrated cannabinoid vape cartridges filled with who-knows-what) or flavored e-cigarettes. President Donald Trump has urged the Food and Drug Administration to pull flavored e-cigarettes off the market; Michigan health officials have already pledged to do so.

But for cannabis vape manufacturers and retailers, what comes next?

Anna Shreeve, managing partner of The Bakeréé in Seattle, Wash., says that her shop hasn’t seen a significant reduction in vape sales. She attributes this to sourcing techniques that steer clear of additives like PEG and VEG, and chain-of-custody proof that keeps her business’s supply chain intact and focused on pesticide/microbial testing well before anything even enters the store’s inventory.

“Yes,” she says, “customers have asked us about the current health concerns, but if retailers and processors are diligent, they provide customers with tested product. We operate in the highly regulated state of Washington. Sadly, inexperienced cannabis users are often drawn to cheap prices by processors that are sourcing starting material for distillates that can contain contaminants. I urge retailers to ask questions and demand proof of chain of custody and test scores at each level to prevent any charges of product liability down the road.”

Maintaining sales amid industry-wide shockwaves is far easier when certain quality-control processes have been put in place ahead of time. Shreeve and her son opened The Bakeréé in 2011; they grew the business alongside the very industry itself in Washington State. They’ve taken what they’ve learned from patients and consumers, considering those demands as part of their supply chain management.

While sales may hold steady, Shreeve points to regulators’ grasp of the health scare as something to watch.

“For example, do you know who manufactures the carts used by the vape pens you represent?” Shreeve asks. “Can the brand prove that they have been screened for heavy metals testing? We prefer cannabis-derived terpenes and accept food-grade terpenes from a reputable source. This is probably easier to accomplish because our customers are quality-oriented first and foremost. So, I suspect more stringent regulations will be put in place moving forward to protect the consumer and provide guidance to processors that don’t have the benefit of research.”

Magnolia Wellness also carries a limited selection of vape pens produced by manufacturers that have gone to extra lengths for quality assurance, Goldsberry says. “We always only work with very dependable suppliers with good test results and a long history. I think it starts right there, just using a process that’s discriminating on what products you carry in your shop.”

The intersection of the legal cannabis industry and the rash of vaping-related pulmonary diseases is one of consumer protection, indeed. And as consumers have brought new questions about product integrity to dispensaries around the U.S. and elsewhere, it’s incumbent upon budtenders and dispensary staff members to understand the supply chain landscape well enough to answer those questions.

Christopher Schiel, co-founder of Quill, says that customers are reaching out more than ever before.

“Yes, there’s definitely been a huge uptick of customer questions about our ingredients in general—and Vitamin E in particular,” he says. “We’ve been super proud to be able to respond that the Quill [vape pen] has always been 100-percent cannabis-derived, with single-source terpenes that keep all of our releases strain-specific. It’s too soon to tell what is going to happen with sales, but, as we mention in the [Instagram] statement, we’ve been fortunate to work with discerning dispensary buyers who have always been asking these kinds of questions about ingredients.”

Elsewhere, some cannabis product manufacturers and retailers are seeing negative hits on vape sales, but it’s not yet clear if any of that is explicitly tied to the CDC reports or to some other, more nuanced trends in the industry. Market research groups contacted by CBT did not have data—or conclusive data—available at press time. As more states have legalized medical and adult-use cannabis, the discreet and user-friendly vape category has seen explosive growth. Whether any draw-down is the result of market corrections or something more explicitly tied to the public health news cycle is a matter of debate and interest.

“Vape sales have dropped just a bit, and, yes, questions are on the rise,” Sole Fiumefreddo, marketing and education specialist atBest Buds in Portland, Ore., says. “My manager asked our vape manufacturers to send us information about their vapes, and they have. We’ve all discussed how to mitigate the conversation; we explain that a lot of those harmful vapes come from the black market without rigorous testing standards. Additionally, we know the ingredients in our products. Reintroduced terpenes are the only ‘thinners’ in our carts.”

The conversation is ubiquitous, especially in the longer-running adult-use markets of the Pacific Northwest. And while it may be a new, suddenly vocal conversation outside the industry, stakeholders and business owners have been keeping it on the radar for years.

“Cartridges! Oh, boy. Frankly, I’m surprised it has taken this long for consumers, the public and the media to focus on the ingredients in cartridges,” Suzanne Silva, director of sales and marketing at Farmer’s Friend Extracts in Oregon, says. “When I was a budtender three-plus years ago, we discussed as a company the ingredients in cartridges and why our company chose not to carry certain popular brands due to the ingredients. That conversation led to us educate our customers and created a trust that served us well.

“For Farmer’s Friend Extracts, cartridges are our number-one selling product, and we’ve experienced an increase in sales over the last few months. Despite the recent news coverage linking health problems to vaping, we have not seen any changes in sales this month. However, we have received many questions from consumers regarding the oil in our cartridges and are responding to every inquiry to allay concerns. … We highly encourage consumers to question and research the ingredients in the cannabis products they purchase along with the methods of production.”

In Colorado, Pam Reach, CEO of Rare Dankness Industries and the Denver dispensary House of Dankness, says much the same. The story is one of supply chain management and self-awareness. As long as internal safeguards and communication channels are in place, then the public health education part of this story will run smoothly. She says that the company has avoided third-party cannabis vape cartridges for just this sort of reason.

“We don’t carry a lot of cartridge-based vape products, since we don’t produce them ourselves,” Reach says. “We prefer to do everything in-house and, at the moment, we don’t have the ability to produce more than a handful of carts manually per month. We cannot control the quality of the cartridge done through a third party, which places our brand reputation at risk. We’ve basically stopped using third-party producers due to poor quality production when compared to our small batch in-house production and their choice to use cheap cartridges with high ‘failure to ignite’ [rates] and low-quality coils. We have seen an uptick in flower sales, but it coincided with our change in nutrients rather than the vape scare.”