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Business Commentary Marijuana legalization will weed out the bad and cultivate the good

Michael J. Armstrong teaches courses on quality improvement in the Goodman School of Business at Brock University.

Recent Globe and Mail reporting has uncovered a "Wild West" of grey-market marijuana sales where product quality ranges from uneven to potentially unsafe. Given this situation, the federal government should proceed promptly with its legalization promise. This will not only protect consumers from hazardous products but also enable industry self-improvement.

Many products are easy for customers to evaluate before purchase. For example, before buying a sweater, I can see colour, feel texture and test fit. In product-design terms, these are "search" characteristics. I can judge quality while searching for the best product to buy.

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Recreational pot isn't one of those products. Like a restaurant meal or a massage, it instead has important "experience" characteristics, such as the high it produces. Consumers can evaluate these only through use.

Marijuana also has "credence" characteristics consumers can't easily assess, even after use. Some are desirable, such as tetrahydrocannabinol (THC) and cannabidiol (CBD) content. Others are hazardous, such as bacteria and pesticide contamination. For these, buyers must rely on sellers' claims.

Because these unseen factors affect consumer health, government regulation is appropriate. As others have argued, the products themselves need standards, such as for minimum THC content and maximum pesticide levels. Likewise, processes need defining, such as for product testing and retailer licensing. Some of the new cannabis grower and retailer associations could participate in this.

Regulatory standards and oversight will help prevent defects that could harm consumers. In the quality field, these are part of conformance quality: ensuring products meet the minimums and maximums set for them.

But quality isn't just about avoiding the bad; it also involves creating the good. From a consumer viewpoint, what is a high-quality high? What are the best THC and CBD levels? Do the answers vary by market segment?

Those issues are part of design quality: making products great for consumers. This is where marijuana producers and retailers should take the lead, once government sets the baselines.

Marijuana's credence and experience aspects will likely make branding important. Name brands allow products to establish trustworthy reputations. Given a choice, would customers buy weed from some guy allegedly named Mike, and risk an unpredictable result each time? Or would they purchase Mike's Genuine (TM), knowing it consistently provides the desired effect?

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To create and protect those brands, retailers and producers will need reliable supply chains that provide product traceability. Industry associations can also help by creating guidelines that encourage higher quality, much as the Vintners Quality Alliance does for wines.

The industry's eventual structure will largely depend on the details of legalization. Will marijuana be treated like tobacco, widely available but with restricted advertising? Like alcohol, with sales only through licensed (often government-owned) retailers? Like medicines, available only from pharmacies? Or like dietary supplements, with relatively few limitations?

In any event, controlling chemical compositions and establishing brand images won't come cheaply. So the recent proliferation of small retailers and suppliers likely won't last. Some will consolidate into regional or national firms, while others will get marginalized.

(For parallels, look at the personal-computer industry. Decades ago, many small shops built homemade computers. Now, big companies such as Dell and Lenovo dominate sales to mainstream consumers.)

But before any of this can happen, governments need to create the legalization framework. The sooner this happens, the better, as marijuana's current in-between status is the worst of all worlds. It's increasingly available to consumers, but impossible for regulators to control or for entrepreneurs to develop.

In this budding industry, it's time to not only weed out the bad, but also cultivate the good.

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