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B.C. wants regions to win economically from marijuana edibles: solicitor general

British Columbia’s solicitor general says the province wants to see as much small-scale production as possible for marijuana edibles to allow for regional economic development.

“I don’t want it to be dominated by one or two large-scale variety of producers,” Farnworth said Friday. “I think there’s room in this market for a considerable variety or product and a considerable variety of producers.”

He said that while provinces are responsible for retail operations and enforcement, licensed production of cannabis, including edibles, is decided by the federal government and any changes to regulations will become apparent if a new government takes power after next week’s federal election.

“What we want to do is work with the federal government,” he told a news conference. “We’ll be watching very closely after Monday to see whether in fact the landscape as it relates to cannabis is going to change.”

Given the size of B.C.’s longtime marijuana industry in many small communities, particularly in the Kootenay area of the Interior, Farnworth said he’d like to see regional issues considered when it comes to licensing of producers.

He said edible products will be not sold in liquor stores, but the province is interested in considering farm-to-gate sales, particularly involving small-scale producers.

While edibles, oils, topicals, hash and other cannabis goods became legal on Thursday, Farnworth said they would not be available in retail outlets until January.

The delay is based on 60 days’ notice that producers must provide to Health Canada of their intention to sell the products.

At least 36 marijuana stores have been closed in the province for illegally selling their products since the legalization marijuana a year ago, Farnworth said.

He said a 44-member community safety team based in various parts of the province, including Prince George, Surrey and Kelowna, have been cracking down on retailers.

“We were very clear right from the beginning that as more and more legal stores are open enforcement by the community safety team will clearly be ramping up,” he said.

“After all, it’s only fair that those stores that are abiding by the rules, that are paying their fair share of taxes, don’t have their competitive advantage undermined by stores that are operating illegally.”

He said the government has been working hard to transition away from the province’s “well-entrenched” illegal marijuana industry.

One year after legalization, Farnworth said 144 private cannabis retail store licences have been issued and 33 are approved in principle, while 10 government-owned stores will be operating by the end of the year.

He said officers in the Community Safety Unit have helped reduce the availability of illegal marijuana by following up with unlicensed retailers to raise awareness about the regulations, penalties and consequences of breaking the law.

Chantal Vallerand, executive director of Drug Free Kids Canada, said it’s important for youth to know there’s a danger in overconsuming marijuana cookies or brownies because there’s a delay in feeling the buzz of the drug with edibles versus the immediate effect of smoking pot.

“A kid who may be eating a cookie may not start feeling the effects for two hours and the peak may not happen until four hours later,” she said.

Vallerand suggested parents approach conversations about edibles out of a sense of curiosity instead of judgment and have ongoing conversations while considering potential scenarios where baked goods may be available, including at parties, where alcohol may also be consumed.

“It’s always been available for people to bake with,” she noted of marijuana. “Now (goods) are going to be readily packaged,” she said, adding it’s a good idea to educate children to look for the number of milligrams of THC, the psychoactive ingredient in cannabis, on the labels of products that will soon be available in stores.

Health Canada has set a 10-milligram limit of THC per package in edibles, including food and beverages.

Marijuana extracts are limited to 1,000 milligrams of THC per container. A bottle could contain 100 THC capsules of an extract that each has 10 milligrams of the psychoactive ingredient of cannabis, for example.

Topicals such as lotions must have no more than 1,000 milligrams of THC in a container.


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The convenience industry is ground zero for cannabis-infused product innovation

“Greenfield” refers to a virgin market yet to be commercially exploited. From a business perspective, it’s elusive and appealing because of how infrequently it occurs, as well as the potential for windfall results.

Greenfield opportunities are generally not for lack of foresight, but rather a function of structural, technical, regulatory or other barriers. When circumstances change, competing parties typically scramble for prime positioning. 

The passing of Bill C-45, The Cannabis Act, in 2018 ushered in a new age of cannabis legalization in Canada. Legal sales of cannabis via retail outlets, as well as limited personal production, opened up for the first time, setting the stage for future cannabis-related innovation. 

On Oct. 17, 2019, the commercial sale of cannabis-infused edibles (baked goods, drinks etc.) became legal, however there was already much work ongoing to define a framework for what many see as the next greenfield opportunity. For instance, CBD-infused products will start hitting store shelves before the end of of the year.

This is no doubt of interest to the convenience industry and c-store operators, who may be uniquely positioned to grab a piece of this greenfield market.

Screen Shot 2019-10-18 at 3.45.57 PMIt’s also welcome news to consumers. According to a study out of Dalhousie University in Halifax, of the 68% of participants who were in favour of legalizing cannabis in 2017, 93% were also very likely to try at least one edible product, while 46% of all Canadians would try cannabis-infused food products if they were available. 

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Consumers have a taste for cannabis

Earlier this year Deloitte surveyed 2,000 adult Canadians regarding cannabis and edibles consumption, concluding that edibles and cannabis-infused beverages represent a multi-billion dollar opportunity. 

The Arcview, a cannabis investment and market research company, projects the cannabis edibles market will be worth more than $4 billion in Canada and the United States by 2022, with Canada representing nearly 40% of the opportunity.

 As a means of projecting the potential of cannabis for the Canadian food industry, Sylvain Charlebois, professor of food distribution and policy at Dalhousie University, examined data from U.S. states that have already implemented legalization. The data pointed to rapid market penetration in Canada, with edibles sales expected to account for more than 10% of total cannabis sales within two years of opening the market.

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CBD: The first wave

The first wave of change will be food and beverage products that reference cannabis, but include non-hallucinogenic cannabidiol (CBD) derivatives and/or hemp-based products.

Hemp and CBD products became legal in the U.S. with the signing of the Farm Bill at the end of 2018. In its annual Chef Survey, The National Restaurant Association and the American Culinary Federation found that 75% of the 650 chefs surveyed said CBD and cannabis-infused food would be a hot trend in 2019.

In the U.S., legalization has sparked innovation and, ultimately, consumer demand.

Screen Shot 2019-10-18 at 3.47.46 PMThough, it is still early in the adoption process for CBD-infused foods and beverages, there are many examples of both emerging and global drink companies aligning to prepare for the coming market gap. 

For instance, L.A.-based Kickback Cold Brew offers coffee and tea-based CBD-infused beverages made with organic ingredients, 100% single origin and shade grown coffee beans, and high-grade hemp.

In the QSR segment, Carl’s Jr., a burger chain with 1,500 locations, including more than 20 in British Columbia, Alberta and Saskatchewan, recently tested a CBD Burger in Colorado. The limited edition $4.20 Rocky Mountain High: CheeseBurger Delight featured a Santa Fe sauce infused with CBD, a non-psychoactive hemp derivative. It was a nod to consumers’ pent up desire for cannabis innovation and may yet find a place on Carl’s Jr. permanent menu.

 “(It) ties back to our core strategy of being the first to bring bold and unexpected flavours, that are at the forefront of hot restaurant trends, to a quick service menu,” says Patty Trevino, Carl’s Jr. senior vice-president of brand marketing.

Cannabis express

Last year, convenience operator Kohanoff Affiliated partnered with Swissx Oil & Confectionary to distribute its Swissx CBD products in more than 500 convenience stores and gas stations across Southern California. 

 Earlier this year, Canada’s Alimentation Couche-Tard Inc. entered into a multi-year agreement with Canopy Growth Corp. to open a Tweed-branded cannabis store in London, Ont. “Alimentation Couche-Tard is excited about taking a leadership role in the development of cannabis retailing excellence,” says Brian Hannasch, president and CEO of Couche-Tard, adding Couche-Tard is looking at this venture as a vital entry opportunity to a new market.

Then, in July, the convenience giant announced a partnership with cannabis retailer Fire & Flower. “Couche-Tard is excited to make this strategic investment in one of the fastest growing cannabis ‘pure-play’ retailers,” said Hannasch. “This investment in Fire & Flower, with a path to a controlling stake, will enable us to leverage their leadership, network and advanced digital platform to accelerate our journey in this new and flourishing sector.”

With the legalization of cannabis, we are in the midst of a revolutionary paradigm shift. Having lived in The Netherlands during the 1990s, I was first exposed to a tolerant attitude towards cannabis: Legalization blows open the door to normalization, commercialization and potentially explosive growth. It promises to be one of the largest “land rushes” in modern memory and the time to get your claim flag in the ground is now.

 

Darren Climans is a foodservice insights professional with close to 20 years’ experience partnering with broadline distributors, CPG suppliers, and foodservice operators. His practice is to understand issue-based decisions by taking a data-driven approach to strategic decision making.


Edibles, other pot products, will hit shelves after mid December: Ottawa

Canadians looking to buy cannabis-infused brownies or lotions will find a “limited selection” in legal stores in mid-December at the earliest, the federal government says, but industry players expect the full rollout of next-generation pot products to come in 2020 or later.

Health Canada on June 14 released its final regulations governing the new classes of cannabis-infused goods, including topicals and vaporizable concentrates, and indicated the rules will come into force on Oct. 17—exactly one year since the legalization of recreational pot in Canada.

However, the Ottawa-based agency noted that after the law takes effect, federal cannabis licence holders must provide 60 days notice to the agency of their intent to sell new products.

That means that they will hit legal retailers’ shelves no earlier than mid-December.

“As with any new regulatory framework, federally licensed processors will need time to become familiar with and prepare to comply with the new rules and to produce new products,” Health Canada said in a statement.

“Provincially or territorially authorized distributors and retailers will also need time to purchase and obtain the new products and make them available for sale.”

The final regulations, which will be formally published in the Canada Gazette on June 26, have been highly anticipated by pot industry players as well as a flurry of food and beverage companies that have announced plans to cash in on the anticipated demand.

For example, Toronto-based Greenhouse Juice Co. said it plans to develop beverages infused with cannabidiol, or CBD, helped by an investment by Canopy Growth Corp.’s venture capital arm. Quebec-based Hexo Corp. has also partnered with alcohol giant Molson Coors to form a joint venture called Truss to make and sell cannabis-infused, non-alcoholic beverages.

A recent report by Deloitte estimated the Canadian market for these pot products is worth about $2.7 billion annually, with edibles contributing more than half of that amount. That’s on top of the roughly $6-billion estimated domestic market the consultancy had already estimated for recreational and medical cannabis.

The major rollout of this next wave of pot products will likely happen further into 2020, said Jefferies analyst Ryan Tomkins in a note to clients before the government announcement.

“We are likely to only see the first products launched late into December… with regulators likely to review numerous details of proposals including testing, manufacturing and packaging procedures as well as product data and ingredient specifications.”

Ottawa-based cannabis lawyer Trina Fraser expects a “handful” of these new cannabis products from the bigger industry players to hit the market in December, with more in 2020. She notes that there is a broader licensing backlog, and companies will need to get amendments approved before being able to produce these goods.

“There will be lots more new products coming onto the market in 2021, mostly due to regulatory delays,” she said.

Health Canada in February wrapped its public consultation on the draft rules for these additional cannabis products, and the final version is largely in line with what the agency had proposed.

Edible cannabis, whether food or beverage, will have a cap of 10 milligrams of tetrahydrocannabinol _ the high-inducing compound known as THC _ per package. Cannabis extracts for inhalation or topicals, such as pot-infused lotions, will have a cap of 1,000 milligrams of THC per package.

These products cannot contain nicotine, caffeine or alcohol. As well, no elements on these products would associate them with alcoholic beverages, tobacco products, or vaping products. All packaging must be plain and child resistant, and must not be appealing to young people.

Whether an edible cannabis product is reasonably considered to be appealing to kids would depend on various factors including its shape, colour, flavour, scent and how it is packaged, a government official said on a media briefing on Friday.

The determination of whether a product does violate the guideline will be made on a case-by-case basis, the official said.

The intent is the “protection of our kids,” Organized Crime Reduction Minister Bill Blair said last week.

“Gummy bears, for example, or things that represent cartoon characters… is clearly aimed, at a younger market or a younger audience – our children,” he told reporters. “And we are very much putting restrictions in place to ensure that does not happen.”

Omar Khan, a vice-president with Hill and Knowlton Strategies who advises several clients in the cannabis industry, said there were few surprises in the final regulations.

Health Canada continues to take a cautious approach which focuses on harm reduction, he added.

However, “there needs to be room for legal brands to develop consumer loyalty if the illicit market is to be eliminated,” Khan said. “This is something government needs to consider as the Cannabis Act regulations come up for review in a couple of years.”

Hill Street Beverage Co.’s chief executive Terry Donnelly had hoped that the final regulations would not require separate manufacturing facilities for cannabis-infused goods, but he was pleased to see the final regulations will now allow for the sale of multi-pack drinks.

A six-pack of cannabis-infused beverages would be permissible, for example, as long as the overall package has no more than 10 milligrams of THC.

This change is “allowing us to create products that kind of mirror what people are used to buying,” said Donnelly, who is also co-founder of the Cannabis Beverage Producers Alliance.

Hill Street, which plans to launch a line of cannabis-infused, non-alcoholic beverages, may have some products ready by December but is aiming for next spring, he said.

Greg Engel, the chief executive of licensed producer Organigram, said he had hoped each individual container in a multi-pack could have five or 10 milligrams of THC each, as is available in other markets such as Colorado.

Still, the regulations were in line with what he expected, he said. The licensed producer expects to have vaporizable products ready by December, and pot-infused chocolates by then or early next year, he said.

Engel expects a staggered rollout of Cannabis 2.0 products, which are more challenging to produce at scale than the initial classes of cannabis that hit the market on legalization day last October.

“The reality is that these forms are going to come to market in a more measured fashion.”