Growing our Own: Canada’s Potential as a Cannabis-Exporting Powerhouse
Prime Minister Justin Trudeau has said that legalized multi-use marijuana will become a fact of Canadian life sometime this summer. While much of the debate over the move has focused on the domestic legal and public health implications, the rapid scaling up of Canada’s marijuana industry will also position the country as a major medical cannabis exporter.
In June, the Senate of Canada will finalize its consideration of Bill C-45, the foundation of Canada’s new legal cannabis regime. Once the provinces finalize their own frameworks and the supply pipeline starts to fill, Canada will be the first major country to have national legal multiuse cannabis within the context of a responsible, reasonable, and highly controlled legal and regulatory environment. And while recreational or adult-use cannabis has taken the lion’s share of attention in recent months, we cannot overstate the importance of this new cannabis regime to making Canada the single pre-eminent leader globally in medical cannabis. A combination of first-mover advantage, rigorously strict quality controls, a future overabundance of supply and export access will position Canada as a dominant player in the global medical cannabis marketplace.
Why is Canada set up to be the global leader in cannabis? We are emerging— and being recognized—as the gold standard in cannabis growing, processing, formulation and distribution. In most sectors, traditionally, industry abhors overregulation. In the emerging cannabis industry, it is a strength. Medical cannabis was first legalized in Canada in 2001 by court ruling. Initially, the federal government allowed prescription-bearing patients to grow their own supply, or for designated growers to cultivate on their behalf. As of 2014, the government started to license private companies to produce cannabis. By the end of that year, Canada’s production marketplace went from a single third-party grower to twelve private cultivators. Today, three years later, there are more than 90.
Yet, as the cultivation industry exploded in anticipation of significant demand, the industry has grown within a culture similar to pharmaceuticals, not an agricultural one. All of the producers operate according to and are governed by controlled- substances, pharmaceutical and health regulations, and not agriculture ones. It is a function of the high degree of regulation in Canada’s cannabis space: the complex web of rules and quality controls mean the lay farmer looking “to grow pot” simply cannot get approvals to cultivate at the enhanced Canadian standard.
Canada’s cultivation and processing is characterized by lab coats, scientists, and rigorous environmental controls. In short, as the industry has grown, it has immediately adopted the cultural traits of a medical market. That, in turn, yields high-quality, precision products in terms of the balance of the known cannabinoids like THC, CBD, as well as the over 100 cannabinoids that still require further analysis. Different strains are being painstakingly cultivated and hybridized to achieve very specific and differing results.
Canada will never be able to compete with low-cost production environments like Portugal or Colombia. Our advantage will lie in our high-quality, precisely-tested and measured products that we produce and formulate. In any drugstore, Canadians have a choice between regular acetaminophen, extrastrength, or special formulations for cold or fever. Alternatively, they can turn to ibuprofen options, and ASA— again, with variable labelled degrees of strength and effect attributes. Because of the stringent controls governing Canada’s cultivation, our cannabis products will offer similar nuanced selection. This will be of immeasurable use for physicians—knowing exactly what and how much to prescribe. It will also be helpful for importers— knowing exactly what they are buying, and therefore how to market their product.
But our advantage goes beyond compound precision. Canada’s strict additive controls offer an additional advantage. We all know that pesticides and chemicals can be harmful in horticultural products. Not only do many Canadian consumers choose to avoid them (fuelling an explosion in organic produce sales in Canada), but chemicals can be outright harmful for individuals with sensitive or compromised systems. In medical products, immuno-suppressed patients with conditions such as such HIV and cancer, the risk profile can skyrocket with chemically-treated products. The potential combustive method of cannabis consumption leads to even greater caution in the cannabis space, in terms of products allowed to use on our soils and plants.
Canadian regulations are emerging as the most stringent in the world in relation to chemical additives, to the degree that many general horticultural products—for example, Myclobutanil, an anti-mildew agent used on tomatoes and other produce—are outright banned in cannabis cultivation. This is a higher safety threshold than we have yet to see emerge in many other jurisdictions developing their own cannabis cultivation regimes.
In fact, Canadian regulation allows only 13 very specific additives in cannabis cultivation. Moreover, our harsh outdoor growing climate makes it challenging to cultivate a medical grade product outdoors without either going beyond this prohibited list or producing a sub-pharmaceutical grade product. This, in turn, further reinforces the profile of our industry as an indoor or quasi-indoor, environmentally-controlled process led by specialized scientists.
Global markets are already recognizing Canada for our superior (and greener) products. European markets, in particular, tend to be very cautious with new regimes, gauging quality of product as a top consideration. In Germany, domestic law does not permit irradiation of products. Given Canada’s growing environmental controls and strict regulations, the Canadian cannabis industry has established itself as one of the only acceptable sources of supply for that large market and other cautious jurisdictions. In Germany, almost all the pharmaceutical distributors are buying product from Canadian companies. We are their default supply.
Canada also has one of the only federally regulated cannabis regimes, meaning universal product and quality standards across Canadian cultivators. With foreign import controls tending to be country-level standards, a Made in Canada stamp has significant meaning in navigating those controls. We avoid the uncertainty created by a patchwork of subsovereign regulatory standards, each of which have to be assessed separately by the receiving country.
Federal regulation also allows for a common quality-derived brand to emerge, based on country of origin— when Canada exports its medical cannabis, it will be a known commodity with a known and uniformly recognized high standard. Several U.S. states may have had a jump on Canada in medical cultivation and product varieties, but American cannabis suffers from a standards patchwork, impacting the overall national brand and consistency of product. Moreover, the U.S. does not permit export of cannabis products, opening the market wide for a Canadian marketplace advantage. Canada is, in fact, the first country in the world to be able to federally export worldwide with a competitive producer landscape—this is a significant edge.
Global import demand for quality cannabis is rising. The global market in 2017 for legal cannabis was estimated at $7.7 billion USD. By 2021, it is expected to reach $31.4 billion, and these are conservative numbers.
We are already the prime country exporting cannabis, with Canadian companies exporting to numerous jurisdictions across multiple continents. Germany is our number one market; Australia is number two, and Canadian cannabis products are also already going to New Zealand, the EU, and South America. With production ever-increasing, and analysts predicting significant over-supply for the internal marketplace in the medium term, Canada will have the export-ready commodity volumes to continue supplying this global demand for quality Canadian cannabis.
While Canada is already legalizing outright, most other countries are still only in the process of developing medical cannabis regimes. That means they are looking for existing, stable, quality supply chains—at least until they develop internal capacity. And, as it takes several years to develop that domestic competence, our first-mover status means a several-year head start in the market over the competition.
New jurisdictions, such as Thailand and the Netherlands, are already using Canada’s regulations as a template for building their own frameworks. This is a recognition that the fruits of such a regulatory environment are a top-quality and export-friendly commodity. Thailand in particular could easily opt for an open-air cultivation regime, yet they see our framework as yielding a superior product, and one that is better for export.
The final piece of the puzzle is export promotion. Our cultivation and processing infrastructure is already positioning Canada for significant oversupply relative to domestic need. We are built for surplus. It would be a logical next step for the Canadian government to actively endorse cannabis as an export commodity. While government policy is not presently opposed to export, there is no framework designed to harness and synthesize all our export abilities and actively support this new industry in a concerted manner. Doing so would also be in keeping with the Barton panel recommendations, which see more to be done in making Canada an agri-product export superpower.
Cultivation and processing volumes are not yet even close to peak production, yet we are already the dominant global exporter. Imagine the opportunities if governments harnessed the power of all our export promotion and facilitation agencies within a Cannabis Export Promotion Framework. We could fully seize the advantages of our high-quality, firstmover market position, and leverage strategically by helping producers identify markets, map partners and navigate import rules. Canada has what it takes to be for medical cannabis what Switzerland was for pharma. Let’s not squander the opportunity.
Global import demand for quality cannabis is rising. The global market in 2017 for legal cannabis was estimated at $7.7 billion USD. By 2021, it is expected to reach $31.4 billion, and these are conservative numbers.
Michael Nashat is the President and CEO of TerrAscend. Based in Mississauga, TerrAscend is a Canadian company focused on creating and delivering quality cannabis products and services that meet the evolving needs of patients. info@terrascend.com