National Post (National Edition)
Licensed producers forge ahead with plans for edible pot products.
LPs PLOW AHEAD DESPITE LEGAL UNCERTAINTY
Barely six weeks into cannabis becoming legal in Canada, a number of licensed producers are forging ahead in preparation of the next phase of legalization — edible pot products.
On Wednesday, Newstrike Brands Ltd. announced it would be teaming up with specialty food producer Neal Brothers, best known for its line of organic, non-gmo, gluten-free chips and accompanying “healthy” dips. “You can trust we will have a minimum of 12 to 18 SKUS of edibles ready by November or December 2019, whenever it becomes legal,” said Peter Neal, who founded Neal Brothers along with his brother Chris. “The innovations we are working on have not been seen anywhere. I’m pretty sure we are going to start out with a high gourmet chocolate, and then maybe chips that are organic or gluten-free, whatever people want.”
The deal marks the first time in Canada that a snack company has forged a partnership with a licensed cannabis producer to develop edibles, but it is by no means the first food or beverage company to enter thespace.
Just weeks before legalization, Canopy Growth Corp. partnered with Hummingbird Chocolate, a family-run niche chocolate-maker from of Almonte, Ont., a mere 30 minutes from Canopy’s headquarters in Smiths Falls, Ont
Hummingbird already occupies real estate within Canopy’s main complex, and is quite far along the process of developing cannabis-infused chocolate for the Canadian recreational market, according to Canopy’s CEO Bruce Linton.
“We are thinking about the regulatory requirements when we’re developing products. We don’t think there will be an opportunity to make gummies, but you might have chewable products. Chocolates will probably be sold in controlled containers,” Linton told Financial Post.
Cannabis edibles, as well as vape pens that contain concentrated cannabis oil, are expected to become legal sometime in the fall of 2019, but the government has yet to release draft regulations on what specific products will be allowed to be infused with cannabis. The overarching rhetoric of legalization has focused intensely on “protecting the youth” and “keeping drugs out of the hands of kids,” which suggests that any kind of food or drink product that appeals to children — like candy — will probably not make the legal cut.
With so many unknowns, it is no wonder that licensed producers are casting their net wide, forming partnerships with a multitude of sectors — food, beverage and even cosmetics companies — to prepare for this second wave of legalization.
48North, a Toronto-based cannabis company with a licensed facility to produce in Northern Ontario, is actively focused on the “infused” space, which involves gels, lotions, cosmetics, beverages and food products that all have cannabis laced in them. But the company, unlike Newstrike or Canopy, isn’t looking to partner up with an existing brand — CEO Alison Gordon believes that the more sustainable revenue stream for her company will be partnerships with contract manufacturers that make a myriad of products across many brands.
“We would create not just our own products, but we would be able to white label and create products for other producers in the in- dustry,” Gordon said. “Look, there’s no shortage of companies that are interested in getting into the pot space in the lead-up to edibles being legalized. But we’re trying to find partners that work with multiple brands and have an expertise in formulation — companies that actually do the work of manufacturing the product.”
Gordon hasn’t yet secured a deal with a specific company but says that she’s “far down the path” with a large scale Canadian contract manufacturer that makes upward of 14,000 products. “I don’t want to be stuck in a position where Health Canada changes the rules on what products we’re allowed to infuse cannabis with, and suddenly my partnership with say, a brand like Oreo, becomes meaningless because we can’t put pot in cookies.”
A Deloitte report published earlier this year forecasted that Canada’s pot market will be worth $7 billion measured by sales alone. the same report suggested that nearly 60 per cent of cannabis consumers plan to purchase and use edibles, suggesting that ingestible products could be the real money-maker in the pot game.
Canopy Growth, according to Linton, is already testing out demand for edibles — in a legal way, that is. In early November, the company started selling CBD-dominant softgels through its Tweed brand, containing 20 milligrams of CBD, and between 2.5 or 10 milligrams of THC. “I like to say that we have, on the market right now, the Canadian version of the Gummy Bear,” Linton joked. “But seriously, this is the first legal ingestible that is available in Canada, and we want to see what kind of outcome that product will get because people are basically ingesting it.”
For Newstrike’s CEO Jay Wilgar, conquering the edibles market is a matter of being “cautious, but nimble.”
“We’re all trying to build a business while dealing with so many unknowns, and so many potential policy changes. We’re focusing on development and innovation with the Neal Brothers right now, but we’ll have much more clarity next October .”