New cannabis product lines could provide a boon to Canada's burgeoning industry.SUPPLIED
After 95-years of prohibition, and one year of legalization, the cannabis market is about to go through another evolution. This fall, Canada will introduce new products like edibles, concentrates, topicals, beverages, and extracts. These formulations, and the opportunities they present—from attracting new customer segments to establishing partnerships with popular brands—could provide another boon to the nascent industry.
“I think the new product formulations coming into fall are going to be a bit of a game-changer,” says Brad Poulos, an instructor at Ryerson University’s Ted Rogers School of Management, where he teaches the Business of Cannabis.
“There's probably been a relatively small amount of experimentation since October 17 of last year, but with these type of products—edibles, topical creams, and beverages especially—I think we'll see a lot more experimentation than you've previously seen among new users of cannabis.”
Matt Karnes, the CEO of New York-based GreenWave Advisors, says these product lines have proven popular in legal states and he expects a similar scenario to play out north of the border. “If you look at the consumer behaviour in the U.S., there’s definitely a shift out of flower and into the edibles and concentrates,” he says. “It’s something new. I think that those foreign factors are more appealing to the consumer and that might spur additional demand.”
Further opportunities also await in new markets. Twenty-six states in the U.S. have now decriminalized cannabis, while eleven states and the District of Columbia have legalized recreational adult use. “We’re starting to see the U.S. open up,” says Sebastien St-Louis, the CEO and co-founder of HEXO Corp. “We’re starting to see Europe and Latin America open up and really worldwide this phenomenon is catching on. The early, early stage in Canada just finished. We’ve got through the first inning, but we’re looking at an industry that’s going to continue to evolve rapidly.”
Accessing the emerging global market will be key for Canadian companies moving forward and critical to that success lies in their ability to navigate regulations. A Canadian product sold in the U.S., for example, would be subject to not only the federal and state government but also government organizations like the Food and Drug Administration, in addition to the Canadian government.
“This is a highly complex business to operate in any jurisdiction,” says St-Louis. “You're often dealing with multiple levels of government and when you go international, now you're dealing with multiple different governments. It is very critical that we follow all the rules and often all the rules haven't been written yet.”
Canadian companies have invested heavily in regulatory teams for this reason. Captivated by the potential of the European market, and the interest around CBD products, HEXO, which is headquartered in Gatineau, Quebec with facilities in Ontario, partnered in a licensed facility in Greece last year. That operation provides a permanent European presence for the brand and, most importantly, a launching pad for Eurozone approval of their products. “I’m really excited about the United Kingdom,” says St-Louis. “I think that the U.K. and France are actually going to be very interesting, non-THC markets in the near term.”
Technology is another side of the industry where there is room for growth, according to Poulos. “There is an opportunity for Canadian know-how and tech. It's what we've traditionally done well,” he says. “We've been leaders in telecom for a long time. Companies like Blackberry and Nortel are signs of what Canadians can do. We have built up a huge amount of know-how and that's valuable.”
Poulos points to everything from software used for growing plants, to analytics for patient management, to artificial intelligence and automation. “There are a lot of smart people in this industry and I think we will see a lot of innovation, especially on the tech side.”
“There's lots more to do,” says St-Louis. “I think the next five years we'll really start to see our infrastructure develop and our IT develop to levels where the cannabis industry will be unrecognizable from where it is today.
“With that said, Canada is a world leader. We are miles ahead of the next closest country in terms of IT, in terms of quality, even in terms of scale and infrastructure, but there’s still much more to build.”
Advertising feature produced by Globe Content Studio. The Globe’s editorial department was not involved.