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Ready, Set, Go: Food Entrepreneurs High On Cannabis

June 20, 2018

By Mingki Choi, Food Starter

A year ago no one talked about business opportunities in the cannabis industry at food business conferences. Things have changed. Edible cannabis initiatives were the hot topic at the 9th annual Speaking Food Conference hosted by the Food Processing Skills Council (FPSC) on May 16, 2018, in downtown Toronto where Food Starter sponsored. It was a unique event where four of the foremost Canadian experts on the cannabis industry identified future opportunities for the Canadian food business under the theme of Looking to the Future.

Food Starter also participated in the Grasslands Party: O’Cannabiz 2018 Toronto organized by Lifford Cannabis Solutions and Ricardo Baca, the founder of the Cannabist on June 7. This pop-up private event gathered a lot of thought leaders in the legal cannabis industry. Distributors, chefs, food and beverage manufacturers and legal advisors are ready, set, but waiting for the time.

In Canada, cannabis for medical purposes became legal in 2001, and Prime Minister Justin Trudeau announced on June 20 that recreational cannabis will become legal in Canada on October 17, 2018. This announcement came after a vote in the Senate on June 19 to pass the federal government’s bill legalizing the recreational use of cannabis. From here, anyone over the age of 18 will be able to purchase cannabis products from local retail stores licensed by the government. Here are important insights from those events for food and beverage entrepreneurs exploring future markets.  

Edible cannabis business was the hot topic at the 9th annual Speaking Food Conference hosted by the Food Processing Skills Council (FPSC) on May 16, 2018.

Blue Ocean Opportunities

The value of the recreational cannabis market (estimated between $5 billion to $7 billion) is set to explode in 2018 according to Ivan Ross Vrána, Vice President of Public Affairs, Hill + Knowlton Strategies, at the Speaking Food Conference. Some estimates put the recreational population at approximately 600,000, which could require 500 metric tons. There are currently 270,000 medical cannabis users in Canada.

Edible products could be the most preferred way to consume recreational cannabis. Hill + Knowlton Strategies’ survey conducted in March 2016 reported that customers are interested in consuming cannabis in the following ways: ingesting an edible product (51%), smoking dried cannabis (44%) and ingesting an oil in a pill or gel cap (36%).

The research from Hill + Knowlton Strategies showed that 36% of Canadians would consume recreational cannabis once it becomes legal (21% somewhat & 15% very), while 63% would not consume it at all. They would buy it from retail stores (56%), friends and family (12%), grow it (10%) and purchase online (5%).

Consumers would buy bakery products (brownies and muffins), ready-to-eat products (including candy), oil, spices, drinks, butter, creams and sauces and salads at a grocery store according to Pierre Killeen, Vice President at Hydropothecary, at the Speaking Food Conference.

Cannabis Edibles Commercialization

Understanding how to produce safe products in both cannabis industry and food and beverage manufacturing will be a key success factor in cannabis edibles commercialization.

“There is a huge opportunity in this market. A lot of licensed producers are looking for partners in both food and beverage manufacturing,” said Lisa Campbell, Cannabis Portfolio Specialist, Lifford Cannabis Solutions.

Lifford, one of Canada’s leading wine and spirits distributors, has created Lisa Campbell’s position in January 2018. “We will work with licensed companies to bring products including edibles, extracts and beverages to the market. Once it’s ready, we will make sure that they will get a place at retail stores and educate employees,” said Lisa.

Lifford Cannabis Solutions and Ricardo Baca, the founder of the Cannabist hosted the Grasslands Party: O’Cannabiz 2018 Toronto on June 7.

“A lot of the licensed producers have just started now to work for chefs and cannabis makers because they know they will have to create cannabis edibles too (in the future). It will be great to start building those relationships,” said Antuanette Gomez, an international speaker and cannabis business consultant.

There are three options for food and beverage entrepreneurs to enter this cannabis edibles market: partner with existing licensed producers, become a licensed producer or become a micro-producer.

The number of the licensed producers has been increasing almost weekly. There are 109 producers licensed by Health Canada, mainly in Ontario (59) and British Columbia (23) currently. Today, the market capitalization of the 5 biggest companies are Canopy Growth (CA$5.9 billion), Aurora (CA $4.7 billion), Aphira (CA $2.3 billion), Cronos Group (CA $1.2 billion) and CanniMed (CA $830 million) based on Ivan Ross Vrána’s report.

Jeff Purcell, Vice President of Operations from Organigram said, “as an operator of a cannabis facility, we have the same challenges as any other (food) manufacturing processing facility from safety and quality to cost.”

Studying the cannabis market closely is important, as it’s still a very complex marketplace. It would take at least two years to get a license to work with Cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR).

“It’s a grey area industry that’s so difficult. Make sure that you have a lawyer who can help and guide you to make sure that it doesn’t become a high-risk business but can be as legitimate as possible,” said Antuanette Gomez. 

To be a global powerhouse

There is a high hope for international cannabis markets. The ACMPR allows for the controlled importation and exportation of cannabis for medical purposes in Canada.

“Canada is going to be one of the global powerhouses in the cannabis industry, as we are already exporting medical products into Europe and South America,” Antuanette Gomez said.

The Netherlands permits the import and export of cannabis for medical purposes, and Germany, Italy and the Czech Republic are importers of cannabis for medical purposes according to Ivan Ross Vrána’s presentation. Uruguay legalized the production, sale and use of cannabis, and Uruguayan officials reportedly are considering the importation of cannabis from Canada. Israel is reported to become an importer of cannabis in the next three years.

Pierre Killeen forecasted the growing cannabis market in Canada learning from Colorado, where its population of over 5.5 million represents the number one state for cannabis edibles in the US. In Colorado, cannabis edibles represented 14% of all sales ($186 million) in 2016; 45% of edible sales are candies and 20% of them are chocolate.

Cannabis business continues to skyrocket in Oregon, which became the third U.S. state to allow recreational cannabis sales in 2015. The state of Oregon reported that the amount of total monthly sales increased from US$2.5 million in Oct 2016 to US$ 53.5 million in May 2018 (see below). 

“We’re relatively new, but the market is growing and our Cannabidiol (CBD) products are definitely taking off,” said Christina Sasser, the founder of Vital Leaf™ located in Portland, Oregon. Vital Leaf™ is a craft cannabis company featuring CBD infused edibles, chocolates, elixirs, body balms and herbal formulas sourced from only the finest organic, fair trade and regenerative ingredients to ensure high-quality products.

Christina’s advice for new cannabis entrepreneurs is to ensure getting legal advice and having people who have a high level of experience in financial planning, accounting, quality control, operations and food safety to go through a long licensing process.

“Food entrepreneurship in Toronto is growing by leaps and bounds. Everyone it seems, has a food business idea and increasingly, these ideas include cannabis. It’s so important for aspiring edibles entrepreneurs to understand how the food sector works in Canada, but also how to scale up a food product safely and learn how to produce it a health inspected facility. That’s where we come in,” said Petra Kassun-Mutch, Executive Director, Food Starter.

Vital Leaf™ is a craft cannabis company featuring CBD infused edibles, chocolates, elixirs, body balms and herbal formulas.

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