Buyer Beware: Consumers Getting High on Black Market Supplies

Published on November 1, 2019

We’re in the midst of a U.S. revolution in the legalization of marijuana. Today, 11 states and the District of Columbia have legalized recreational cannabis, while 22 others have legalized its medical use.

Although marijuana is still considered illegal under federal law, the industry has come a long way since the days marijuana was listed as a Schedule I drug along with heroin, LSD, and ecstasy. Furthermore, America’s growing use and acceptance of cannabis show no signs of slowing. In fact, sales of legal marijuana are expected to surpass $66 billion by 2025.

Despite such growing use and acceptance, the evolution of legalized marijuana has not solely resulted in greener pastures for the industry as a whole. While growing numbers of licensed cannabis dispensaries and reputable supply-chain companies are popping up throughout the nation, a black-market also is looking to capitalize on the multi-billion-dollar consumer demand, which creates further challenges for consumers, suppliers, and the government.

Counterfeit consumer goods are nothing new. In fact, counterfeit products exist in virtually every industry sector, from food and beverages to apparel, footwear, electronics, and more. According to a recent report from Harvard Business Review, selling fraudulent merchandise is a $4.5 trillion marketplace.

Knock-off Cannabis – Not Your Fake Rolex

At times, consumers are aware they are purchasing counterfeit products. Take Canal Street, for example, located in New York City’s Lower Manhattan, the street is known for “good quality knock-offs” and attracts thousands of consumers each day looking to get their hands on fake designer bags, watches, jewelry, and more for a fraction of the price of the genuine articles. Although these business transactions are considered illegal, for the consumer, what they save in terms of financial output often times justifies the end result.

But the counterfeiting of fashion merchandise does not equate to that of the cannabis industry. The emergence of black-market imposters not only has cut into the profits and reputations of legal brands but also has put consumers in harm’s way.

Recent research has shown 80 percent of all packaged cannabis products are from the black market. Despite such high odds, consumers are usually unaware when they are purchasing counterfeit products and therefore oblivious to the potential pitfalls of their decisions. Such pitfalls extend well beyond product inconsistency. Tainted cannabis products have exposed hundreds of users to harmful chemicals making them seriously ill with even multiple reports of death.

Imitation Vapes

Perhaps the biggest concern within the cannabis market at the moment is the selling of fake vape pens. People across America have developed potentially life-threatening lung issues as a result of using marijuana vaporizers. Earlier this year, The Washington Post reported, “New York state and FDA labs told officials they found vitamin E acetate, an oil derived from vitamin E, in samples of marijuana products collected from patients who had been sickened by vaping.”

These conditions were caused by knockoff vape pens which are being sold across the nation outside of licensed dispensaries and therefore in an unregulated market. Counterfeit products are not tested for pesticides and other contaminants. Furthermore, even states that have legalized the use of recreational marijuana are still flooded with unlicensed cannabis dispensaries, as well as illegal delivery services, which sell knockoff versions of vape pens to oblivious consumers. California, for example, is the biggest legal marijuana market in the world, and still, the black market is three times larger than the legal one. Such illicit competition has resulted in a significant threat to public health and safety and has created a massive problem for the marijuana community.

The competitive crisis the cannabis industry is currently facing is similar to the time when alcohol was outlawed in the U.S. In the decade of Prohibition, thousands died every year as a result of tainted bootleg liquor. Many have argued that the best way to put a stop to the hazardous cannabis products running rampant through our nation is to end marijuana prohibition at the federal level, allowing weed to be taxed and regulated like tobacco and alcohol. Although change must be made at a federal level, there is no time to wait for lawmakers to come to such accord. It is important now that we immediately focus on the education of consumers so the public can demand change.

Packaging’s Defense

One segment of the supply chain taking matters into its own hands is the global packaging market for cannabis products, which is expected to be worth $25 billion by 2025. Beyond ensuring packaging safety, environmental friendliness, and marketing appeal to consumers, packagers also want to eradicate the black market. Both packagers and pro-cannabis associations are rallying for a more regulated marketplace.

Although the black market has been able to counterfeit many popular cannabis brands’ packaging, the legal marketplace is now fighting back with advanced packaging, which can include the incorporation of barcodes, regulated stamping – similar to the watermarks and holograms found on money – and other consumer protection innovations. Some cannabis brands are already incorporating QR codes into packaging so consumers can scan the code for info on product tracking, ingredients, testing history and more, before vaping, lighting up, or consuming an edible.

The cannabis industry may still have a way to go before conquering the black market. However, the industry is projected to flip in the next five years, in which sales of regulated cannabis will surpass illicit. Along with the education of consumers who are purchasing cannabis products about dangers and qualitative difference between the legal and black markets, changes also will occur due to packaging manufacturers aligning with legislative and regulatory stakeholders to ensure consumer protections through innovations in cannabis packaging technology and drawing up new regulatory guidelines that focus on consumer protection.

Steve Everly is a Columnist at Grit Daily. He is Brand Director of Materials, Automation, Packaging and Processing at Informa Markets, a leading B2B information services group and the largest B2B events and exhibitions organizer in the world. Everly oversees the growth and strategy for events within Informa Markets' Advanced Manufacturing Group including Automation Technology Expo (ATX) West, ATX East, ATX Minneapolis, Advanced Design & Manufacturing Expo Toronto and Montreal.

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