By Sean Samuel
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October 2, 2024
The Prevalence of Consumer Complaints in the Cannabis Industry The legal cannabis market is experiencing rapid growth, particularly in North America. As of August 2024, 25 U.S. states have legalized cannabis for recreational use, and many others allow cannabis for medical purposes. Similarly, Canada's legal market continues to grow since the 2018 legalization. However, as more consumers turn to legal cannabis products, the volume of consumer complaints has risen in tandem. Several factors contribute to this increase in complaints. As cannabis products become more accessible, consumers have higher expectations for product quality, consistency, and safety. Furthermore, the legalization of cannabis has brought in a wider range of consumers, many of whom are less familiar with the potential risks and variability of cannabis products, leading to heightened concerns when products do not meet their expectations. Common Complaints in Legal Cannabis Products Consumer complaints in the legal cannabis market cover a broad spectrum, but some of the most frequent issues include: Product quality concerns : Consumers often complain about the perceived or actual quality of cannabis products. This includes issues like mold, contamination with pesticides, and inconsistency in potency levels. Labeling inaccuracies: Mislabeled products, particularly in terms of THC and CBD content, are a common source of complaints. Consumers are rightfully concerned when the product they purchase does not match the advertised potency or ingredients. Packaging issues: Complaints about cannabis packaging are also common, with some consumers finding the packaging difficult to open, while others raise concerns about its environmental impact. Adverse effects: Unexpected side effects from cannabis products can lead to consumer complaints, especially when the products do not provide adequate warnings or instructions for use. Customer service grievances: Slow response times, poor handling of product returns, or inadequate customer service can also lead to negative consumer experiences. A Case in Point: California’s DCC and Pesticide-Laden Cannabis Products A particularly significant example of the prevalence of consumer complaints in the cannabis industry occurred in California, one of the largest and most heavily regulated cannabis markets in the world. In 2020, the California Department of Cannabis Control (DCC) received a wave of complaints from consumers about cannabis products that were allegedly contaminated with pesticides. These complaints prompted an investigation by the DCC, which ultimately led to the discovery that several cannabis producers were using illegal pesticides in their cultivation processes. The investigation revealed that multiple batches of contaminated cannabis products had reached the market, putting consumers at risk of exposure to harmful chemicals. In response to these complaints and the subsequent investigation, the DCC enforced strict penalties on the non-compliant businesses, including product recalls and fines. This case highlights the significant role that consumer complaints can play in uncovering non-compliant practices within the cannabis industry and driving regulatory enforcement. The Impact of Consumer Complaints on Cannabis Operators The rise in consumer complaints poses several risks for cannabis operators, particularly in a highly regulated industry like cannabis. The impact of these complaints can be wide-ranging, affecting everything from a company's reputation to its bottom line. Reputational Damage In today’s digital age, consumers have more avenues than ever to share their experiences and voice their concerns. Social media platforms, cannabis review sites, and online forums are filled with consumer feedback, both positive and negative. Reddit, for example, seems to be a popular forum for cannabis product feedback. When complaints about product quality or safety arise, they can quickly spread across these platforms, damaging a brand's reputation. For cannabis operators, negative reviews can have long-lasting effects on customer loyalty. Consumers are likely to steer clear of brands that have been associated with safety issues, poor quality, or negative experiences. In an industry as competitive as cannabis, where brand differentiation is key to success, maintaining a positive reputation is crucial. Cannabis is still a relatively nascent industry and as such many brands haven’t yet built a foundation of credibility quite yet, which means that a) product complaints can really set you on the back foot without brand equity to fall back on but it also means b) there is an opportunity to build consumer loyalty from your response to complaints . Easier said than done, we will explore this in more detail shortly. Regulatory Implications Cannabis operators are subject to stringent regulations, and failing to address consumer complaints can lead to serious regulatory consequences. In the United States, for example, the Food and Drug Administration (FDA) has issued warnings to several companies selling cannabis-derived products (particularly CBD products) due to consumer complaints about mislabeling or false claims about product benefits. In cases where complaints reveal violations of regulatory standards, cannabis operators may face penalties such as fines, product recalls, or even the suspension of their licenses. The DCC example mentioned earlier demonstrates the regulatory risks operators face when they fail to address quality issues brought to light by consumer complaints. Financial Losses Consumer complaints can also have a direct impact on a company’s finances. Negative experiences can lead to lost sales, as dissatisfied customers choose not to make repeat purchases. In addition, when complaints result in product recalls or regulatory penalties, the financial costs can be substantial. Companies may need to halt production, issue refunds, or invest in corrective actions, all of which can strain their resources. The Formula for Handling Complaints: Compliance x Speed x Resolution x Reporting = Success The Importance of an Expedited Complaint Response Process Given the potential consequences of consumer complaints, it is essential for cannabis operators to respond quickly and effectively. A slow or inadequate response can exacerbate the problem, turning a small issue into a larger one. Building Customer Trust and Loyalty One of the most important reasons for addressing complaints quickly is the impact it can have on customer trust and loyalty. When consumers feel that their concerns are being taken seriously and that the company is committed to resolving the issue, they are more likely to continue purchasing from that brand. In contrast, a slow or dismissive response can drive customers away, leading to lost business and negative word of mouth. Mitigating Legal and Regulatory Risks For cannabis operators, speed is not just about customer satisfaction—it’s also about compliance. Regulatory bodies like the FDA, Health Canada, and the DCC require companies to respond to complaints in a timely manner. Failing to do so can lead to investigations, fines, and other penalties. By establishing a robust complaint response process, operators can reduce the risk of regulatory action and ensure they remain compliant with industry standards. Reducing the Risk of Escalation A swift response to consumer complaints can prevent small issues from escalating into larger problems. For example, a complaint about mislabeled THC content can be resolved through a refund or product replacement, but if left unaddressed, it could lead to regulatory scrutiny, fines, or a full product recall. Addressing complaints promptly can help operators resolve issues before they spiral out of control. Operational Efficiency Handling complaints efficiently can also improve overall operational efficiency. By addressing issues quickly, operators can identify potential problems in their production or supply chain early, allowing them to make necessary adjustments before more products reach consumers. This proactive approach can lead to better quality control, fewer recalls, and a more streamlined operation. Leveraging eQMS Solutions for Complaint Handling One of the most effective ways for cannabis operators to manage consumer complaints is by leveraging electronic quality management systems (eQMS), like C15 Solutions . These digital tools can streamline the complaint handling process, ensuring that issues are addressed quickly and compliantly. Automating Complaint Receipt & Tracking An eQMS streamlines the process of receiving, logging, tracking, and resolving complaints. By centralizing complaint data in a digital system, operators can ensure that all complaints are documented and addressed in a timely manner. Automated tracking also allows for greater transparency, making it easier for operators to monitor the status of complaints and confirm timely resolution.