Unable to comply with law that hasn't been defined, Iowa hemp retailers cut staff, hours

Owners of some Des Moines businesses that sell consumable hemp products say they are curtailing sales, cutting store hours or closing stores and laying off employees as a still-undefined state law governing the market takes effect, leaving them uncertain how to proceed.

The bill restricting the products containing tetrahydrocannabinol, or THC, derived from hemp took effect Monday. The bill bans the sale of consumable hemp products and beverages to people age 21 and over and places limits on the amount of THC, the psychoactive component in cannabis, in each serving. It also requires warning labels.

All products that do not meet the new standards cannot be sold after June 30. But the law left specifics about the limits and warnings to the Iowa Department of Health and Human Services, which as of last week was saying it would be mid-July before it could define them and perhaps a month or more before they could be made public.

Over the weekend, several Des Moines metro stores selling consumables and beverages advertised on social media accounts that they were holding sales to get rid of products they would not be able to keep on their shelves as of Monday.

At Unkl Ruckus’s Smoking Emporium & Skate Shop, 3427 Merle Hay Road, owner Zerron Horton-Herrera said the shop could lose 25% to 30% of its revenue after the changes. On Monday, he said, he cut operating hours from 9 a.m. to 9 p.m. to 11 a.m. to 7 p.m. because of the losses he expects.

"A good main source of our income was coming from that cannabis product or those consumable hemp products," Horton-Herrera said.

The shop, open since 2013, had gradually sold increasing amounts of edibles, tinctures and drinks of various brands, which complied with state and federal laws, Horton-Herrera said.

"We didn't want to get too involved with to start because we didn't know how long Iowa would allow it and then how strict the regulations would be," he said. But he noted that "we've been progressing more and more into those realms and trying to provide a good source and outlet for our customer. Consumer interest blew up overnight."

At another Des Moines hemp products retailer, Despensary, Chief Operating Officer Sabrina Bergloff said that with the changes in state law, the store took products with THC off its shelves.

Bergloff said she had to lay off eight employees, and the chain's locations at 221 Fourth St. downtown and 2817 Ingersoll Ave. could lose 75% to 80% of their revenues.

"They are not talking to their people," Bergloff said of the elected officials who drew up the law. "They are not talking to the people that use the products or what they use them for. ... At the end of the day what is truly happening is the state is eradicating the hemp industry."

Eight companies sued the state last week over the law's implementation. HW Premium CBD, which has a location in Urbandale, said it would lose $171,000 as a result of the new law. Owner Rick Wagaman, one of the operators advertising a "last chance" sale online, declined to comment Monday.

American Shaman, which has retail locations in Altoona, West Des Moines and Indianola, said in the lawsuit that the law forced it to close one store and that it may have to close remaining stores as well. Beyond CBD of Des Moines projected a loss in the suit of close to $200,000 in revenue. Campbell’s Nutrition Centers of Des Moines projected lost revenues of $50,000 per month, according to the suit.

The law imposed limits of 4 milligrams of THC per defined serving in a consumable product and limited the total quantity to no more than 10 milligrams per container. But the HHS has told retailers and manufacturers that it plans to define a serving size as one container — meaning no matter what its size, it could contain no more than 4 milligrams of THC.

The rules will be finalized no earlier than July 17, more than two weeks after the law took effect, and they might not be published until Aug. 7. The law also requires that each consumable hemp container contain a warning label. But the law does not include language for the warning. So manufacturers are still waiting for guidance from DHHS.

That means that even hemp products with THC amounts in serving sizes compliant with state law currently cannot be sold.

"Our vendors are still in the process of getting those products together," Bergloff said. "We are asking businesses to do a complete overhaul of how they make edibles and what they do."

The Iowa makers of two THC beverages, Field Day Brewing's Day Dreamer in North Liberty and Climbing Kites in Des Moines, a joint venture of Lua and Big Grove brewing, sued separately, seeking an injunction to stop the law from taking effect. But a judge on Friday rejected their request.

'This state is screaming for cannabis,' says executive of hemp products retailer

Cannabis-infused products have been a growing sector for Iowa businesses since 2018, when the federal farm bill cleared the way for hemp-derived THC products.

Field Day and Climbing Kites both said in May that they were adding employees and that there was more demand for their products than they could cope with.

Amid the boom Despensary opened its second store in August in the Ingersoll Avenue building long occupied by the Badowers menswear store.

The last-chance sales over the weekend drew many customers "trying to get what they can before this bill goes out," said Horton-Herrera, who had a buy-one-get-one-free sale.

"I've had people in here buying product in droves," he said.

At Despensary, the staff was educating consumers about why their products would suddenly be unavailable, Bergloff said. The prohibition on limits to consumable hemp products applies only to goods sold in Iowa.

Goods legalized by the federal farm bill remain legal in Iowa and can be shipped to customers here, Bergloff said. Several shops in Minnesota and Illinois each sell and ship $1 million per week in consumable hemp products to Iowans, crossing the Mississippi River to make the purchases, Bergloff said.

"I just wish the focus would go back on the customers that we are serving and the citizens because the people are not being asked," Bergloff said. "The community in which we serve is not being considered at all."

In neighboring Missouri, as in Iowa, Republicans also have a supermajority in both chambers of the General Assembly. But in 2022 Missourians voted by citizen initiative to legalize recreational marijuana use.

Iowa does not have an initiative process. If it did, Bergloff believes a similar measure would pass.

"This state is screaming for cannabis," Bergloff said. Lawmaker "are just absolutely ignoring it."

Philip Joens covers retail and real estate for the Des Moines Register. He can be reached at 515-284-8184, pjoens@registermedia.com or on Twitter @Philip_Joens.

This article originally appeared on Des Moines Register: Unable to comply with law that hasn't been defined, Iowa hemp retailers cut staff, hours