LPs must also hold on to any products returned for two years before they are destroyed. Olivier Le Moal / iStock / Getty Images Plus

After a year plagued with staff layoffs, shelved facilities, delayed product launches and plummeting stock prices, the cannabis industry is now grappling with another beast: product returns.

While it’s hard to know exactly how much product is being returned, since provinces and producers have different means of tracking returns, the figure can be exacerbated through issues such as oversupply.

Products that don’t sell can be returned to cannabis producers en masse — and the perishable nature of the product means those returns can add up for the industry.

“We are in the process of seeing the first wave of returns,” Robyn Rabinovitch, a cannabis business strategy consultant with Hill+Knowlton Strategies, told CTV News.

“I think there is a risk of some of the slow-moving product on the 1.0 side being returned to licensed producers (LPs) just to free up space at the retail and wholesale level.” / Photo: Getty Images Getty Images

“As we get into more robust offerings… and additional product categories, I think there is a risk of some of the slow-moving product on the 1.0 side being returned to licensed producers (LPs) just to free up space at the retail and wholesale level,” Rabinovitch said.

Recalls are also a factor, such as those issued by UP Cannabis in January 2019 over possible mould, Zenabis in December 2019 as a result of mislabelling THC gelcaps as CBD, HEXO in September over mislabelled flower and Aphria last month because of leaky vape cartidges.

Producer CannTrust was flooded with product returns last year (reported to be more than $1 million from Alberta alone) after the company landed in hot water for allegedly growing product illegally. The company continues to struggle financially and has lost a significant percentage of its workforce.

LPs must also hold on to any products returned for two years before they are destroyed, further adding to the cost and logistic annoyance related to returns.

Health Canada regulations dictate that cannabis products be destroyed via specific methods. / Photo: Aonip / iStock / Getty Images Plus Aonip / iStock / Getty Images Plus

There is also a cost associated with disposing of returned product. Health Canada regulations dictate that cannabis products be destroyed via methods such as shredding, incinerating, soaking in vinegar or mixing with cat litter and water. Beyond that, steps must be taken to ensure no person may be exposed to cannabis smoke as a result of the destruction method.

“Cannabis is considered to be destroyed when it is altered or denatured (stripped of its natural qualities) to such an extent that its consumption and propagation are rendered impossible or improbable,” André Gagnon, media relations advisor for Health Canada, toldThe GrowthOp last year.

According to Health Canada statistics, an average of 11,152 kg of dried cannabis has been destroyed every month by LPs since federal legalization came into force in October 2018.