First Movers’ Advantage: Head Start for Canadian Cannabis Manufacturing, Processing and Product Development

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How is Canada positioned in the global cannabis economy and what must we do to increase our competitiveness?

The cannabis economy in Canada has evolved and is growing not only as a medical industry but as a legal recreational industry since 2018. The industry has created tens of thousands of jobs over that time through license producers (LP) like Organigram, retail distribution channels, test lab facilities and associated industries. As the first G7 country to legalize recreational cannabis, Canada is uniquely-positioned to create homegrown companies that scale globally.We have a first mover advantage, which can give us a clear head start in manufacturing, processing and product development. We also have the opportunity to develop and export our intellectual property (IP) and know-how globally.

Since we are just in the first inning with legal recreational cannabis, the product offering in the market is extremely low. That will change dramatically by December 16^th 2019, as edibles and derivative-based products come to market. Furthermore, we are still in the process of building up the retail distribution channels across the country. Some provinces like New Brunswick, Prince Edward Island, Nova Scotia, Alberta, and some other western provinces have been proactive in building their cannabis retail infrastructure. On the other hand, provinces like Ontario and British Columbia have taken a more conservative approach and have added stores slowly. I am optimistic that the growth of the cannabis economy will speed up as product lines and retail infrastructure are expanded.

“As the first G7 country to legalize recreational cannabis, Canada is uniquely-positioned to create homegrown companies that scale globally.”

On the innovation side, we are seeing the regulatory framework around cannabis open up. As a result, Canadian companies have a lot more freedom to explore and commercialize unique aspects of the cannabinoid experience.For example, Cannabidiol (CBD) is growing dramatically in the health and wellness market, and it is a more nutraceutical-type product because it is non-psychoactive.

It is critical for companies like Organigram to continue to invest in innovation and technology. We have access to capital and a robust investor base, so we can be pioneers in research and innovation around cannabis. For example, we have invested in a Montreal-based biosynthesis company called Hyasynth that produces cannabinoids from a genetically modified yeast. We are also investing in unique delivery forms such as a fast-acting, dissolvable powder that could be added to beverages. A typical beverage or edible would take 60 to 90 minutes to have an effect, whereas this product only takes 5 to 10 minutes to kick in, so it offers a safer and more consistent experience compared to what currently exists in the illicit market.

“We are seeing the regulatory framework around cannabis open up. As a result, Canadian companies have a lot more freedom to explore and commercialize unique aspects of the cannabinoid experience.”

I am also excited about the product development around edibles. I would include edibles in a broader category of derivative-based products, that is, products that are created using extract from the cannabis plant. Edibles, vaporizers, cannabis vaporized products, topicals, beverages and other products can all be categorized as derivative-based products. The cannabis industry in Canada started out as a medical program with only dried flower, and smokable and vaporizable products. Then, there was an expansion to allow oils for oral ingestion, which was the first range of products available for adult recreational use in the Canadian market. Edibles will be the next frontier.

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Why did you choose to establish a cannabis company in New Brunswick?

Organigram is based in Moncton and is one of the largest private sector employers in the city with over 700 employees. The company is expanding rapidly, and we currently have between 250 and 300 contractors on site every day. We decided to set up shop in Moncton, New Brunswick because the founders of the company recognized the strong government support available for companies in the cannabis industry. There are a lot of advantages of starting a company in this province. To name a few, companies have access to a large skilled employee base, are part of a strong manufacturing and call centre economy and can thrive in a diverse bilingual community. On our part, we have also been able to repatriate key professionals back to Moncton as we have grown.

“The provincial government and other institutions have also fostered innovation and growth in the cannabis industry by attracting investors, businesses and researchers to New Brunswick.”

The provincial government and other institutions have also fostered innovation and growth in the cannabis industry by attracting investors, businesses and researchers to New Brunswick.Moreover, Canada’s largest test lab for the cannabis industry, The Research & Productivity Council (RPC), is based in Fredericton, New Brunswick. We have also been able to access shared research funding to partner up with Genome Canada. The government of New Brunswick has considered cannabis legalization as an opportunity of economic growth from the start. For the last four to five years, it has supported the medical cannabis industry and has also embraced recreational cannabis after its legalization.

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How will cannabis legalization in the USA affect the Canadian cannabis industry?

I see cannabis legalization in the USA as a great opportunity for Canada. The American CBD and THC markets have grown significantly and the Farm Bill that was recently passed allowing for hemp-based CBD production. However, Canadian companies have a unique global advantage because we are operating in a federally legal jurisdiction both medically and recreationally. We can develop ideas and products on a national scale, and eventually take them abroad.Since cannabis is still illegal in most American states, companies in Colorado or Washington will not be able to reach the same scale. While there may be multi-state operators, they probably run distinct companies within each state, for all intents and purposes. So, they cannot take advantage of the scale of innovation that their Canadian counterparts can. They may be able to transfer some knowledge and learnings, but they do not necessarily operate as national players. So, I think Canadian companies can develop expertise in cannabis as they scale nationally, and eventually expand to the USA as more states legalize cannabis.

“Canadian companies have a unique global advantage because we are operating in a federally legal jurisdiction both medically and recreationally. We can develop ideas and products on a national scale, and eventually take them abroad.”

A number of global jurisdictions today have medical cannabis programs and many European countries like Germany, Italy, the UK and Australia are working to expand or start their programs soon. Canadian companies like Organigram are investing in and participating in those markets. For example, we have already been exporting our products to Australia for the last two years and have also invested in two companies in Europe. The US market is especially important because it dictates the global trends in social attitudes, business policies and banking. It is a positive sign that US banks are now financing Canadian cannabis companies looking for capital.For example, Organigram and a number of Canadian companies are now listed on the NASDAQ as well as the TSX.

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What opportunities will the cannabis industry provide for Canada’s bioeconomy?

The cannabis plant offers a lot of opportunities for Canada’s bioeconomy. For example, biosynthesis is the process through which insulin, aspirin and many vitamins are produced globally. As I said earlier, Organigram has invested in a Montreal-based biosynthesis company called Hyasynth that produces precursor molecules to cannabinoids like CBD and THC, and converts them into the final products using enzymes. This isone of the many exciting Canadian innovations in the cannabis industry. There are also companies that are focused on creating products from waste material such as biomass that has a certain level of cannabinoids. One of them is a company that is looking to create beverages from cannabis waste. There is tremendous environmental and economic opportunity in creating viable products from secondary cannabis waste.

“There is tremendous environmental and economic opportunity in creating viable products from secondary cannabis waste.”

In addition, hemp cultivation and the demand for hemp fibre are growing dramatically. Canada has also been a leader in the hemp industry in both the food and fibre forms. But now that the amount of hemp being cultivated is growing exponentially, more products are being created using fibre as a secondary by-product of CBD production or food. That is exciting because hemp is a very straightforward product to grow and produce since it is cleaner, less time-consuming and simpler to process than traditional fibre products like cotton.

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What are the biggest challenges that Canada’s cannabis industry faces and how can we overcome them?

Firstly, Canada has taken a very cautious approach to cannabis legalization, especially when it comes to marketing. Our marketing restrictions are quite strict, although I am optimistic they will evolve over time. The second challenge is that there is still a thriving illicit market in Canada. I think the average Canadian may not be able to differentiate between the legal and illegal market in all cases. So, in order for Canada’s legal cannabis industry to compete with the black market, the government and industry need to educate people more about the quality and safety of the products the legal industry produces. While I do agree that health and safety regulations are important, it is important to point out that opening up the legal market to new recreational products will allow us to compete with the illicit market. Derivative-based products will also offer consumers an opportunity to use products that do not require smoking or vaporization. This is a huge portion of the market and represents 50-55% of the American market, according to US state data.

“In order for Canada’s legal cannabis industry to compete with the black market, the government and industry need to educate people more about the quality and safety of the products the legal industry produces.”

Moreover, there is stigma associated with cannabis use around the world, which potentially limits our access to global markets.In North America, we have seen a dramatic change in the social acceptance of cannabis in the five years since I joined the industry. Even staunch Republicans such as John Boehner are now on the advisory boards of cannabis companies. While people use alcohol or drugs more for self-treatment – to relax and to reduce anxiety and stress – the vast majority of medical consumers and adult recreational consumers use cannabis as a health treatment. One of the opportunities with cannabis is to create innovative products and delivery systems that can replace opiates. Many treatment centers in Canada are turning to cannabis as an alternative to opiate dependency because it does not have the mortality and morbidity associated with opiates.It is physiologically impossible to overdose on cannabis no matter how you use and consume it. You would basically have to smoke 6,000 cannabis pre-rolls in one day for it to have a potential lethal effect. We need to promote this side of cannabis around the world, which will not only help Canadian companies, but also improve users’ health.