Returns and Refunds – The Brave New World of Returned Dispensary Cannabis Products

Returned cannabis products can be challenging for businesses due to complex regulations, product perishability, and safety concerns. Managing returns requires understanding regulations, strong customer service, and effective logistics and inventory management.

Canopy Growth Corp. ran into a $26.9 million issue shortly after cannabis products were flying out of stores following legalization.

During a conference call with investors and analysts in November to discuss its financial results, the Smiths Falls, Ontario-based company said it was handling $20.5 million worth of product returns from regional retailers and is focusing on the Arrival of another $6.4 million in prepared products.

The company had already written off $8 million of unsold oil and gel caps from the previous quarter.

THE PROBLEM OF RETURNING CANNABIS PRODUCTS

The incidents offer a glimpse into the relatively unspoken world of marijuana returns, where merchandise is returned to manufacturers for a variety of reasons, including lack of sales, customer complaints, and quality issues. It’s difficult to determine how common returns are because companies and regional marijuana distributors track them differently and occasionally withhold data, but analysts believe returns are more often a source of contention between distributors and wholesalers than customer complaints.

The capsule returns the company was experiencing were caused, according to Jordan Sinclair, vice president of communications, because the goods were “not catching on in the recreational market as quickly as they had hoped, due in part to slower distribution.” was due in the shops”.

They see this as natural friction as customers and retailers do their part, he said. And adding that since it’s a new industry, she’s still learning about customers’ tastes and how they differ from region to province.

As a second wave of marijuana-infused items hit the market, including candies, cookies, chewy candy, vapes, mints, and tea, some experts believe that returns will surge like Canopy’s.

Robyn Rabinovitch, a former employee of TerrAscend and CannTrust Holdings Inc. and a corporate planning consultant for marijuana clients at Hill+Knowlton Strategies, stated that “they are seeing the first returns.”

He explained that they believe some of the slower moving 1.0-side items will be returned to licensed manufacturers to make room at the wholesale and retail levels as they move to larger offerings and more product categories.

According to Rabinovitch, consumers are demanding goods that are cheap but have the greatest effectiveness. Due to their habits, items with concentrations of tetrahydrocannabinol below 12%, the compound in cannabis that causes a high, were occasionally left on the shelves.

Greg Engel, the CEO of Organigram Holdings Inc., claims he has yet to see anything that gives him the impression of unsold merchandise being returned to make room. In his opinion, slow-moving products made a significant contribution to the industry’s earnings at the time.

Many regions and retailers are considering a rationalization approach to SKUs to assess their current category mix after next-generation products are launched, he said. Typically, these operations deplete existing inventory rather than generating returns.

IMPACT OF RETURNED CANNABIS PRODUCTS ON BUSINESSES

However, this is just one aspect of the problem cannabis companies are encountering with their returned goods.

There have been voluntary recalls, like the one RedeCan Pharm conducted in November 2018 in response to allegations that some of their merchandise may have contained mold.

CannTrust Holdings Inc., a company based in Vaughan, Ontario, was hit hard by significant returns when millions of dollars worth of goods were returned after it was revealed the company had been growing marijuana in unauthorized greenhouses.

Cannabis retailers across the country are also experiencing instances where customers receive late orders, shipments that cannot be delivered, and merchandise that is ruined or not up to par. Occasionally, returns may occur because customers change their minds after purchase.

Marianella de la Barrera, vice president of communications and corporate relations at WeedMD Inc., explained that she’s heard there are some quality issues with some licensed distributors, but she’s not really getting much return.”

Returns from WeedMD are “atypical,” she claimed. Only one or two are sent to the company each month, and the majority are undeliverable product returns.

According to Bin Mathew, the company’s Quality Manager, the top three reasons for quality-related returns at OCS are recalls, empty containers and dry goods.

The yield fell from 0.27 percent between October 2018 and May 2019 to 0.04 percent between May 2019 and the end of January.

They were expecting a big number given it’s a new product and sector, Mathew said. It was a learning experience, but they’ve noticed a big drop.

DISPOSAL OF RETURNED PRODUCTS

All returned items must be kept by licensed manufacturers for trial purposes for two years; thereafter they are free to destroy the product as long as no one is at risk of exposure to cannabis smoke during the destruction process and two witnesses are present.

According to Health Canada, an average of 11,152 kg of dried cannabis has been reported destroyed each month since October 2018. The total weight of marijuana destroyed each month has tended to increase as the number of registered growers has increased, but the percentage of plants destroyed has remained fairly stable at about 4% of licensed growers’ inventories.

Federal law allows companies to dispose of the chemical by incineration, shredding, and mixing with other inorganic materials before composting or disposal through local garbage collection services.

Vendors are switching from earlier in the industry, when Rabinovitch saw a unique strategy popular, using composting techniques or third-party waste management companies to save space. Buying kitty litter would be your next step. It would be possible to dispose of the stuff traditionally after adding water, proving that nobody can consume the items while dumpster diving.

FINAL EFFECT

Returned cannabis products can present significant challenges for businesses due to complex regulations, product perishability, and safety concerns. These include financial loss, reputational damage, and difficulty in determining whether a product has been tampered with.

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