With both feet firmly planted into legalization, there wasn’t a lot of dwelling on the could-haves and should-haves at the Lift & Co. Cannabis Business Conference Toronto 2019. While acknowledging the hard work and sacrifices of those who chipped away at cannabis prohibition in Canada, the theme of forward-looking momentum was a steady thread throughout the day of panels — and all the challenges and possibilities that still lay ahead for the first G7 country to legalize recreational cannabis.
Now in its fourth year, the sold-out conference drew hundreds of professionals to the Metro Toronto Convention Centre on June 6 for a day of networking and discussions around the critical issues facing the Canadian cannabis industry, from the nitty-gritty of branding and retail to broader concerns around health care and global politics. With a who’s who of big names in the Canadian cannabis industry on one stage, the event addressed a few big issues.
The building blocks of consumer profiles: data
With tight regulations on how cannabis producers can talk to consumers, data is key to understanding the customer — who they are, what they’re buying, where they’re buying it and how much they’re spending. Cannabis doesn’t have any historic data points after 95 years of prohibition, but distinct consumer segments are starting to emerge across age, gender, region, experience level and desired outcomes.
“As we learn this data, we’re building that consumer profile — one of hundreds that will emerge over time,” said Lift & Co. CEO Matei Olaru. Olaru was joined by Cy Scott, CEO of cannabis market intelligence firm Headset, to present the companies’ combined data insights and outlook for the Canadian market.
Read a full recap of their presentation on early consumer profiles and learn how data can help cannabis companies craft a message around how consumers will engage with the products.
The world’s largest cannabis market will be up for grabs — and it’s not the U.S.
There was a lot of talk about “invasions” at the conference — between Canada and the U.S., but also stretching across the pond to the burgeoning European market. When it comes to a northern invasion down south, there’s still a lot of uncertainty around the federal legalization of cannabis and the ramifications of the Farm Bill, which legalized hemp as an agricultural commodity, paving the way for CBD and low-THC products.
Underpinning political uncertainties and legal red tape is the difficulty of tapping into a foreign market. The U.S. market is certainly larger, but some parts aren’t as mature as Canada’s — however, it has the potential to mature very quickly. Brands in the U.S. are also very regional, which Tahira Rehmatullah of T3 Ventures sees as an opportunity to develop three distinct market segments: pharmaceutical, adult-use consumer packaged goods, and wellness products.
“Products will look and feel different and be established in very different markets,” she said.
One advantage the U.S. has over Canada: regulations around marketing and advertising are looser, so brands can speak more directly to consumers. CannTrust CEO Peter Aceto said there’s still a lot of uncertainty to clear up before Canadian companies understand how easy it will be to cross borders with brands. While Canada has a first-mover advantage, there’s a small window of time before others catch up to that head start.
“I worry about our U.S. counterparts — some of these larger [multi-state operators] running fully integrated businesses but in 11 different states,” he said. “We have to be active about leveraging knowledge, knowhow and brands, but at the same time concerned about their entry into our marketplace.”
Looking beyond Canada’s southern neighbour, opportunities across Europe — a region Deepak Anand of Cannabis Compliance Inc. said will be “the largest cannabis market in the world, period.” With countries such as Greece, Italy, Malta and Germany at varying stages of medical legalization, Anand said what Canada brings to the table is real expertise on compliance.
“The largest advantage we have over the U.S. is we did this on the scale of a federal level,” he said. “It’s a real opportunity to springboard ahead in Europe learning from the mistakes we’ve made at home.”
Some countries present more risk than others, so understanding the nuances of highly regulated yet different regions is key.
“Europe opens up Israel and Asia and the Pacific Rim,” said Amanda de Freita, director and senior vice president international markets at Redfund Capital Corp. “There are opportunities if you can get the right foothold in the right region and build globalization really quickly.”
A ‘renaissance’ of medical research, data and treatments
At the forefront of medical cannabis is an important patient-facing issue that received applause as it was brought up throughout the day: the call to remove tax on medical cannabis so it’s treated the same way as all other prescription drugs. To reinforce the necessity of cannabis as a therapeutic option, panelists agreed there needs to be much stronger data to make the case to governments and insurers.
“What we’re doing at the clinical level is collecting data and generating a database of observations from patients,” said Dr. Michael Verbora, chief medical officer of Aleafia Health. “The faster we can take data and translate it into effective decision making, I think it will benefit the patient.”
As a family physician in Calgary, Dr. Richa Love said she sees a double standard between how doctors view cannabis vs. pharmaceutical drugs, with many dismissing cannabis-based treatments as anecdotal.
“I have seen over 10,000 patients for cannabis — that’s not anecdotal,” said Love, who is also the chief medical officer for VIVO Cannabis. “We can do case reports, we can do observational studies. We hold cannabis to a standard that many pharmaceuticals would never pass.”
To legitimize and advance the use of cannabinoids in clinical practice academics need to be presented with real-world data and specific formulations that stand the test of medical trials, said Dr. Danial Schecter, director of global medical services for Canopy Growth. While Canada is engaged in a “renaissance” of medical research around cancer, dementia and Alzheimer’s, seizures and pain management, the panelists agreed delays in regulations and approvals for clinical trials could cause the country to fall behind.
“If we continue to take advantage of our position, we’ll be able to be the leaders and we’ll be able to export this intellectual property for many years to come,” Schecter said.
Among the next challenges: changing the top-down approach to medicine to empower patients to figure out what works for them and what doesn’t, genetic testing and using cannabis in combination with other therapies.
Cannabis historically hasn’t been covered by insurance plans because it lacks a Drug Identification Number (DIN), but Phillippe Lucas, vice president, global patient research and access at Tilray, predicted more Canadians will get insurance coverage for medical cannabis in 2019 — even without a DIN for specific registered products, insurance companies also won’t want to lose big accounts if the demand is there.
“If enough patients and plan sponsors want cannabis coverage, companies will figure out a way to do it.”
New products will change the game
There’s as much palpable excitement as there is uncertainty in the industry around Canada’s second phase of legalization: cannabis edibles, beverages, topicals and concentrates. Alongside planning for new operational infrastructure and establishing R&D, it’s an exercise in brand building — the opportunity to go beyond cultivating dried flower and craft distinct cannabis-infused products that cultivate a loyal customer base.
With final regulations yet to be released, panelists understandably kept their companies’ exact plans close to the vest. But there were snippets of what’s to come: When Ace Valley releases its line of vape pens and edibles, it will be curated in a way that “makes it both premium and accessible — mainstream craft,” said CEO Mike Wagman. 7ACRES plans to stick to its mandate of small batch and “focusing on the flower” to make products, said CEO John Fowler. Indiva CEO Niel Marotta said the licensed producer is pursuing licensing agreements with established companies that make infused chocolate, sugar and salt. Beverage company Province Brands is developing a cannabis drink to fill the need to consume in a way that’s more social, like beer or wine.
“Think of the ways we consume with flower — in a social setting, you have to go outside 20 feet from the building,” said Province co-founder Jennifer Dianne Thomas. “There’s an opportunity to consume cannabis in a way that’s accessible to everyone in the market.”
One thing to note: don’t expect to be able to shop for second-wave products exactly on Oct. 17, 2019. That’s the deadline for regulations to be in place, but several industry players predicted throughout the day that sales wouldn’t start until 2020. While companies are well underway with planning and R&D, it’ll take a little longer for them produce their products according to Health Canada’s finalized regulations.
Retail can be a touchstone of trust for consumers
With a patchwork of provincial regulations and government vs. private models, rolling with the punches has become the norm for Canadian cannabis retailers. Entrenched in a much more conservative regulatory regime than other controlled substances, brands have to be agile and clever — and it’s a steep learning curve for even the most experienced retailers.
“I wake up in the morning and eat regulations for breakfast,” said Abi Roach, owner of Toronto’s long-standing HotBox Lounge + Shop, about keeping up-to-date with the changing landscape and working with city and provincial officials on next steps.
For Delta 9, a vertically integrated licensed producer with its own chain of shops in Manitoba, the in-store experience is a way to establish trust and build relationships with customers in a strict regulatory environment.
“As an LP, we’re restricted in what we can say and do in terms of marketing and branding our product,” said CEO John Arbuthnot. “Retail is one of the few opportunities that we can actually market our brands.”
TerrAscend Canada’s Greg Smith said he sees an opportunity for cannabis brands to showcase their master growers’ skills in the same way master brewers or sommeliers carry prestige with alcohol.
“Where are the growers? Can we put them front-and-centre so they can talk about their craft? It would be interesting to see if growers get to that status.”
To build a better customer experience and put a dent in the black market, the panelists agreed on their biggest wishes: a longer leash on regulations, and more licensed stores to serve the wider population.
“People don’t actually want to purchase illegal cannabis, but there’s no access,” Roach said. “There has to be a level of trust. Once you get past that trust, then the consumers will start purchasing.”