Just because the state is delaying doesn’t mean you should. It's time to pick your POS.
While legal recreational cannabis is a great step for California, it comes with a lot of regulations and compliance. Tracking the complete supply chain from seed to sale is vital for all businesses involved and is required by section 26067 of the Adult Use of Marijuana Act (AUMA).
Temporary licenses were extended on May 18, 2018 for 90 days, which helped a lot of California businesses continue operating during the turbulent rollout this year. Businesses with temporary licenses aren’t required to be METRC compliant until they receive their permanent licenses, and most are good through November.
And of course, as MJ Business Daily reports, there’s still no firm date for the rollout. As of August 2, 2018, there are 2,864 temporary licenses issued in the state, although this includes businesses that folded after the July 1 transition to lab-tested cannabis products with proper packaging.
The uncertainty of integration with METRC caused a lot of cannabis dispensaries to delay choosing a cannabis POS. There’s no better time than now to understand how METRC works and ensure your system is ready when it finally does go active.
The Importance of Inventory and Sales Tracking
One of the lingering questions on everyone’s mind is how complete data from January will be migrated into METRC once the system is finally operational. The longer the state delays, the more data piles up.
According to estimates, California consumers spend approximately $170 million a month on cannabis. Divide that by the state’s 261 retail dispensaries, and each is earning over a half million every month. That’s a lot of inventory to track, and it’s only going to continue growing over time.
Businesses that are manually tracking everything right now are going to find themselves in the middle of a logistical nightmare when it comes time to comply with METRC. Manually entering all of this data is a massive project that could take a staff of dozens of data entry workers months to complete.
Meanwhile, non-compliant businesses will face the risk of fines and loss of business, as licensed businesses won’t be able to continue working with unlicensed businesses. Although I don’t want to point fingers at the state, cannabis businesses didn’t create this problem. But they may find themselves suffering from it if not prepared.
Still, California has much more business-friendly rules than other recreational states like Washington and Colorado. For example, the emergency industry rules issued in November 2017 allows businesses with class M medical licenses to do business with those holding class A adult-use permits.
This wasn’t allowed when recreational cannabis was legalized in Washington, causing a massive product shortage throughout the state. Growers were forced to destroy millions of dollars of medical product that couldn’t simply be transitioned to the recreational market.
California’s unified supply chain is the result of learning from mistakes made by states that legalized first. In fact, Franwell, the company behind METRC, has already adapted its system for use in Colorado, Oregon, and Alaska’s recreational markets, along with medical markets in Maryland, Michigan, and Ohio.
While it is the same software platform, major differences in each state’s laws (from regulations themselves to who’s responsible for enforcing them) makes each implementation very different. It’s clearly taking time for California regulators to implement and test the system.
How METRC Works
Although the implementation differs for each state, the main functionality of METRC remains the same. It tracks cannabis plants and products with radio identification (RFID) tags. These tags include a plant identification number (along with a scannable UPC code), application identifier (medical or recreational), tag order date, license number, and facility name.
These tags cost between $0.25 and $0.45 a piece and must be on every product. This is something every grower, distributor, manufacturer, and dispensary must consider and prepare for.
METRC tags are placed on cuttings, seedling, and clones, identifying them as immature plants. This tag stays with the plants throughout the cultivation process so they can be identified and properly grouped through their vegetative and flowering phases.
Once the product is harvested, it’s packaged and affixed with package tags. These package tags will often change multiple times as the product is processed.
Extracts are labeled as such, as are edibles, tinctures, topicals, and other products created with cannabis extracts.
The METRC database records all interaction with these plants throughout the entire process, including employee activities, room changes, growth phases, transfers, processing activities, repackaging, and sales. It also tracks waste records and inventory volumes throughout the process.
Each product’s entire life cycle can be traced through the METRC database, and any discrepancies may trigger a red flag. This, in turn, can cause your business to be audited by the state’s marijuana enforcement regulators.
Mistakes and errors cannot be erased, as the audit trail on the system of record can’t be compromised. Adjustments or corrections can be made in the system, though. As you can see, METRC compliance can be quite a headache to implement, and it’ll be especially difficult for businesses that aren’t already tracking this level of information.
Preparing for the Inevitable
While METRC compliance isn’t mandatory just yet, it’s only a matter of time. This change is coming, and it will be disruptive for every cannabis business in the state of California. Preparing for these changes now gives you time to adjust to the financial and time burden. It gives you time to train employees and iron out any mistakes before they become much more costly.
Even if your license is only temporary, it would behoove you to equip your supply chain for METRC compliance. This means installing a compliant POS and inventory tracking system now.
This is why many dispensaries have delayed choosing a proper cannabis POS for their businesses. But this delay is only going to make the transition harder when it does come through. Procrastinating today can cause fines and even a loss of your cannabis license.
Jeff Sessions and the US Department of Justice already announced their intention to strictly enforce marijuana regulations. How well California handles cannabis regulation moving forward will have a massive and lasting effect on the industry’s viability and sustainability in the long term.
Let’s be honest: we’re all in this business because we believe in the benefits of the product and the culture behind it. Cannabis is a lucrative business that helps tens of millions of American people every day. We need to be responsible and take regulations seriously, even if the state is facing delays in enforcement.
When California finally announces a firm date for the METRC rollout, it’ll happen quickly. When it does, you’ll have 10 days to complete state-mandated training and 15 days to begin compliance. This process can take 45 days or more, and being proactive with a METRC-compliant POS like Green Bits now is the best step any cannabis business can take.
The global cannabis market is a $31.4 billion industryand growing. This market is a ripe breeding ground for startups to disrupt existing pharmaceutical, tobacco, and alcohol businesses. California in particular is a high-end market that demands quality. Competing in this market requires rigorous compliance.
POS platforms like Green Bits automatically track and upload this information to make things easier on cannabis business owners. It’s capable of tracing the full supply chain from seed to sale. This keeps consumers safe while ensuring all government regulations are wholly met.
When METRC is finally rolled out, businesses that are compliant will not be able to do business with those that aren’t. Even if you are compliant, you may find issues with some of your vendors are not. This is why you should not only become compliant, but promote compliance among all your business partners. This is a vital step in ensuring the compliance of your business and safety of your customers.