The First Line of Defense in Combating Cannabis’ Black Market Challenges

By Steve Everly, brand director of WestPack and The Cannabis Packaging Summit, Informa Markets

The allure of cannabis may sell itself—but as the industry matures, cannabis product companies face a growing number of obstacles compared to traditional retail categories. The rules and regulations that govern the cannabis industry continues to evolve at an ever-increasing rate, making foundational business initiatives such as marketing a product difficult. Making matters more complex, another challenge has appeared alongside the shifting regulatory landscape, counterfeit cannabis products. With 62 percent of Americans supporting the legalization of cannabis, the first line of defense to combat this thriving black market is traceable packaging. As black market impostures have nearly perfected the look of legitimate cannabis brands’ products and packaging, traceability has become an imperative aspect companies need to incorporate in order to ensure consumers that they are purchasing safe and legitimate products.

The global cannabis packaging market is forecasted to be valued at $20.41 billion by 2025, which is why financial investors and regulators have begun to closely scrutinize this booming ancillary business. As a result, digital advancements have grown alongside the market leading to the creation of easily traceable packaging.

Tag Don’t Lag

Currently, most states require standard radio frequency identification (RFID) tag implementation, which supports the entire seed-to-sale process, from the growers who need to track the entire supply chain ecosystem, to the purchasing consumers who are reassured their product is safe, and regulators who need to trace the product for compliance.

Notably, the same microchips utilized to trace displaced pets are also now keeping cannabis users safe, as states such as Colorado and Washington have widely begun utilizing microchips. The process starts by inputting a blue barcode in the soil with a tag containing a microchip with a serial number, and as the plant grows, the same numbered tag moves to a branch, then a sticker for cannabis products that head to the stores for customers to purchase. Along the entire process, a RFID scanner tracks its progress.

Once a cannabis product is tagged with an RFID tag, growers can use a reader to scan each transaction related to that plant and create a detailed history of when it moved and who moved it—without the need for manual entry, thus leading to the minimization of human error. Such an approach leads to a controlled and consistent product that may turn certain cannabis users away from purchasing unpredictable underground market goods. Additionally, while compliance can be a costly endeavor, this type of integration saves time, money, and effort on behalf of growers.

The Race to Trace

The reasons for the existence and steady growth of the black market vary. Yet many turn to the black market due to the high barriers of licensing restrictions that governments impose. For instance, New York City taxi drivers must purchase a license called a medallion in order to operate a taxi business, however these medallions cost hundreds of thousands of dollars, prohibitively expensive for most. Although obtaining a proper business license is costly and time-consuming for cannabis companies, the value of working with local state inventory systems does see success in gaining and retaining new customers.

After a business receives their license, they then must obtain the necessary inventory system training where then they can even begin filing data in their state’s own track-and-trace system. Traceable packaging is key to integrate the growing and retail aspects of the business. The California Cannabis Track-and-Trace (CCTT) system records the inventory and movement of California-grown cannabis and cannabis products. Humboldt County in California has seen success with the track-and-trace system, as now consumers were successfully able to identify and purchase product through counterfeit-proof origin stamps that contained a QR code placed on each product to identify the producer and even provide health and safety facts.

The inconsistent legal status between state and federal laws creates an uphill challenge for cannabis manufacturers. Nevertheless, by embracing and innovating traceable packaging technology, bridging the gap between counterfeited and regulated products is plausible. Look at Canada’s example by legalizing cannabis federally, more regulation has been keeping its users safe while taking the black market down 21 percent since legalization.

The industry is clearly shifting. As “baggies” no longer lead as the main type of packaging for cannabis anymore, cannabis packaging manufacturers need to embrace and put forth traceability methods as the main focus on their packaging that will, in turn, promote safer products and commit to defeating dangerous counterfeit cannabis.

About the Author

Steve Everly is brand director – materials, automation and packaging for Informa Markets’ Advanced Manufacturing Group. He oversees a number of Informa Markets events including North America’s first B2B event focused exclusively on packaging for cannabis products to feature senior-level speakers, roundtable discussions, networking opportunities and more,