Q&A with CEO of Cannabis Packaging Supplier on Impact of Regulations

For any product with government regulations, there are rules that need to be followed. So, naturally, with more states legalizing the use of recreational cannabis, making way for dispensaries to open, packaging regulations have been introduced. Leafly, an online resource for cannabis information, recently reported that California's foray into the world of recreational cannabis has brought along new rules that will impact both packaging design and sizes, including the removal of cartoon logos and, in certain areas of California, requiring all purchased cannabis to be placed in a child-resistant package called an exit bag.

Changes won't happen overnight, though, Nick Kovacevich, CEO of cannabis packaging supplier Kush Bottles told Leafly, as until cannabis suppliers can satisfy regulations, the burden will be on the retailer to ensure it is in compliance.

To find out more about the impact of these regulations on companies providing packaging to dispensaries and suppliers, we reached out to Kovacevich via email. Kovacevich pointed to the new regulations in California as an indicator of opportunity for cannabis packaging providers to meet the demand for prepackaged goods. As more states open the doors to legalized usage, Kovacevich explains opportunities will emerge for packaging companies in this burgeoning industry.

pP: How will the regulations in California affect your business?
Kovacevich: As we focus a lot of our efforts on compliant packaging, we have experienced, and are still experiencing, positive results from state legalization. We support regulations in legal states as it promotes safety in business operations and consumer handling. However, due to being a cannabis-specific company, we have experienced complications in business operations. We have lost bank accounts and warehouse leases
because of our affiliation to this industry, and are continually overcoming those small operational obstacles.
pP: Do you expect more work as distributers/cannabis companies transition to meet regulations while also choosing packaging that helps them stand out?
Kovacevich: Our sales team really contributes time and effort to be experts in their specific territories, which we have facilities in four major cannabis markets and sales presence nationwide. Numerous hours are dedicated to gain more product and industry knowledge, so that we can add value to our customer service. Related to product inventory, we carry thousands of SKUs and continue to increase the number because of the constant additions and changes of regulations in various states. This requires us to participate in rule making so we have insight and can make more effective decisions so we do not get left with bad inventory.
pP: I understand that if the packaging is not up to regulation, that doesn’t mean it can’t be sold. Can you describe how how exit bags work? 
Kovacevich: In the cannabis industry, exit bags, or exit packaging, is a form of packaging products to exit a licensed cannabis facility. California requires retailers to provide their customers with opaque, child-resistant packaging to leave their facility, if the product is not already pre-packed in that format. The child-resistant packaging is required to be tested and certified to follow Title 16 CFR-1700 guidelines.
pP: Eventually, there will be a bulk ban, which means that cannabis will no longer be able to be sold out of bulk jars and will have to be prepackaged. Will this affect your business in any way?
Kovacevich: The industry is moving towards pre-packaged cannabis products and we believe this is great for the overall industry and for our business. With prepackaged products, it is easier to preserve quality and to ensure that products are packaged and transported in a safe and compliant manner. We are already seeing growers and producers build their brands using our compliant packaging and we expect this to continue. However, this means we have to service thousands of smaller growers in remote areas that tend to deal in cash. This creates a logistical and operational challenge, but we then become a vital part of the supply chain with this niche.
pP: In the Leafly article, you mentioned that the onus would be on the retailer to meet regulations until the six-month compliancy period is over. How are retailers meeting the regulations? (Labels, stickers, etc.)
Kovacevich: This statement is specifically towards California legalization, and they are currently going through a transition period of retailer-focused responsibility to grower/producer/processor-focused. As they are transitioning, the retailer is mainly focused on warning labels and child-resistant exit packaging.