CEO Magazine North America - - CONTENTS - BY PAUL IMISON

Chal­lenges await Canada’s le­gal pot in­dus­try.

As le­gal­iza­tion looms, it re­mains to be seen how the fu­ture of the new in­dus­try un­folds. As Canada pre­pares to in­tro­duce land­mark leg­is­la­tion on the mar­i­juana in­dus­try next month, le­gal­iz­ing the drug for recre­ational and com­mer­cial use, ex­pec­ta­tions are over­whelm­ingly pos­i­tive, yet many ques­tions re­main on the fu­ture of the coun­try’s le­gal pot in­dus­try.

“There will be fail­ures. There will be short­com­ings. There will be short ship­ments,” Vic Neufeld, CEO of Aphria, one of the largest and high­est-val­ued cannabis com­pa­nies in the world, told CBC in Septem­ber. Founded in 2014, Aphria is one of the early suc­cess sto­ries, grow­ing rapidly and mak­ing in­vestors rich in the process. And the fu­ture will surely be even brighter. Ac­cord­ing to Sta­tis­tics Canada, Cana­di­ans al­ready spend about $5.7 bil­lion on mar­i­juana an­nu­ally.

Yet there ex­ists a long list of un­knowns as well: Will there be enough sup­ply? Will li­censed pro­duc­ers make good on their prom­ises? Will the re­tail mar­ket be as big as ex­pected?

The cannabis in­dus­try has been awash in the forg­ing of new part­ner­ships over the past few months. First it was pot com­pa­nies com­bin­ing forces; now in­dus­trial giants are swoop­ing in and mak­ing their claim on the sec­tor. Else­where, com­pa­nies are al­ready look­ing ahead to the next phase of the in­dus­try: edi­ble mar­i­juana, and other THC-in­fused prod­ucts and drinks.

Med­i­cal mar­i­juana com­pany Canopy Growth re­cently part­nered with bev­er­age gi­ant Con­stel­la­tion Brands, and one of its ri­vals, Aurora, is re­port­edly ex­plor­ing a part­ner­ship with Coca-Cola. Aphria was tipped by ob­servers of the in­dus­try to form a part­ner­ship with Mol­son Coors, though the beer com­pany even­tu­ally signed a deal with a smaller pro­ducer, Hexo.

Neufeld be­lieves that edi­ble and drink­able mar­i­juana prod­ucts rep­re­sent the real fu­ture of the in­dus­try. “It’s re­cov­ery drinks, it’s en­ergy drinks, it’s util­ity drinks,” he told CBC. “It’s juices. It’s caber­net sau­vi­gnon with­out an al­co­hol, and there­fore no sugar and calo­ries.”

Mean­while, in­vestors have poured bil­lions of dol­lars into the sec­tor hop­ing to cap­i­tal­ize, driv­ing the val­u­a­tion of pot stocks through the roof over the past two years.

Af­ter le­gal­iza­tion kicks in Oct. 17, the mar­ket will show which bets paid off and which com­pa­nies are best able to ad­just when some things in­evitably go wrong.

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