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- Canada legalized cannabis in 2018, but only recently has the country allowed products like vapes, edibles, and beverages to be sold on store shelves.
- US-based edibles companies are either gearing up to launch products in Canada or waiting to see how other brands fare. But regulations like strict dosing limitations and rules that put restrictions on colors or images on packaging make brand awareness a difficult feat.
- In a recent Brightfield survey, 35% of participants said they were unsure which cannabis brands they purchased and 50% said they were unsure which dosages they preferred.
- Business Insider talked to five edibles companies that are thinking about how to approach the Canadian market to understand what is making them consider taking the leap and why some think the pros outweigh the cons.
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The packaging on Canadian cannabis edibles is far from attractive.
It’s plastered with yellow health-warning labels and prohibited from having images or fluorescent colors. Nor can it include cutout windows to show the inside of the container, meaning consumers can’t even see what the edibles look like before purchasing them.
The idea is to make it clear that “there are risks associated with cannabis use,” Ginette Petitpas Taylor, who was then Canada’s health minister, told reporters in March 2018 when regulations for cannabis packaging were first proposed.
But according to the cannabis consumer-insights company Brightfield Group, the restrictions on advertising and packaging make it difficult for consumers to know which brands they’re buying. Because of this, companies may find it harder to keep customers coming back to their products.
In its recent Canadian Cannabis report, Brightfield said 35% of surveyed consumers said they were unsure which brands they purchased and 50% said they were unsure which dosages they preferred.
Each package can also have no more than 10 milligrams of THC. Compare this with, say, California, which has a limit of 10 mg THC per serving and 100 mg of THC per package.
But that hasn’t stopped some of the most popular US edibles brands from saying they still find the market attractive.
As Canada’s cannabis program ramps up, and products like vapes, edibles, and beverages are beginning to hit the shelves, US edibles companies are debating whether they should enter the market or wait out the kickoff rush to see how the field plays out.
Despite the restrictions, Brightfield predicts the Canadian adult-use market will double this year to $2.8 billion from $1.2 billion in 2019, making it a lucrative target market for cannabis companies looking to expand.
By 2025, the market is expected to boom to a substantial $7.4 billion.
Business Insider contacted some of the top US-based edibles companies, based on a list provided by BDS Analytics as well as others known to be prominent in the field.
We talked to CEOs at five edibles companies in the midst of setting their strategies. They range from Bhang, a decade-old edibles company that has already launched two chocolate products in three provinces in Canada, to Cann, a California-based beverage brand that says it wants to focus on expanding into more US markets right now and wait to make sure the Canadian market is moving smoothly before venturing up north.
Bhang is the only US edibles brand sold in Canada.
Bhang is the only brand selling edibles in both the US and Canada, according to the cannabis-data company Headset (though many others we talked to were seeking partnerships to reach both markets). The brand rolled out its milk and dark chocolate edibles in four provinces in February and plans to expand into other provinces this year through its joint venture with the Canada-based cannabis company Indiva Limited.
Bhang CEO Jamie Pearson told Business Insider that the company made its decision to be in the market in 2017, even before regulations surrounding edibles were announced.
“Before edibles were even allowed in Canada, we knew the market was going to be big,” Pearson said.
A big factor that helped Pearson decide was federal legalization in Canada. Despite the strict regulations on packaging, as well as the dosing limits per package, Pearson describes Canada’s cannabis regulations as “a little farther along in evolution” than the US, which operates under a patchwork of cannabis laws in different states.
Though Pearson said Canada’s strict packaging and marketing regulations were frustrating, she told Business Insider she believed the company’s experience and analysis on pricing would give its brand an edge.
“We’ve been at this 10 years — we know what we’re doing,” Pearson said.
Cann is focused on the US market for now and wants to “give Canada a bit of time to figure out exactly who it wants to be and what it wants to allow.”
Jake Bullock, a cofounder of Cann, a California-based cannabis beverages company, told Business Insider that at the moment his company was focused on expanding in the US and wouldn’t enter Canada.
The company’s products are available throughout California, but the brand is looking to start operations in Michigan, Nevada, and Massachusetts this year.
California has roughly the same population as Canada, but Bullock said he felt the geographic dispersion in Canada would make the customer base far more difficult to serve. Additionally, because the country is in the early stages of allowing edibles and beverages, Bullock said he wanted to “give Canada a bit of time to figure out exactly who it wants to be and what it wants to allow.”
“There’s a world in which we may seriously consider — not this year but maybe the following year — doing something small around Toronto, testing out that market, taking it slow,” Bullock said. “But at least for right now we’re being kept pretty busy managing the challenges in California and also opening a handful of new US states.”
District Edibles hopes to have edibles on Canadian shelves by the third quarter of this year.
District Edibles is a US-based edibles company that operates under Slang Worldwide, a cannabis consumer-packaged-goods company.
Slang CEO Peter Miller told Business Insider that District was looking to enter the Canadian market and hoped to have products on shelves by the third quarter of this year.
District plans to partner with a Canadian company that can help execute the launch and already has a shortlist of partners that Miller said had the ability to scale out a national rollout.
Though joint ventures require companies to rely on a partner, Miller told Business Insider that they “work really well” because they allowed parties to focus on their own roles and share risk and capital.
And though Slang is a consumer-packaged-goods company, and the marketing restrictions in the Canadian market remain strident, Miller said he didn’t feel as if his company needed to wait until the regulations were exactly how he wanted them before diving in.
“I’ve observed being in the Canadian market since 2013 that the regulations are constantly evolving so we don’t need to wait until everything is perfect,” Miller said. “I’d rather work within the evolving regulations to deliver something that consumers like within the parameters of those regulations.”
Miller added: “We don’t need it to be an all-or-nothing in terms of our participation.”
Sunderstorm is talking to Canadian producers and hopes to launch edibles in Canada by the second half of 2020.
Sunderstorm is a California-based brand that sells edibles, vapes, and tinctures that has been looking at the Canadian market since last summer but has yet to enter it, according to Sunderstorm CEO Cameron Clarke.
Clarke said that the Canadian market was a “great opportunity” but that the restrictions on dosage and branding made the situation difficult. Despite this, Clarke said Sunderstorm had been in talks with several Canadian companies and was in deep discussions with one company in particular that could set in motion a product launch in the second half of this year.
The most attractive aspects of the Canadian 2.0 market? They’re threefold, according to Clarke:
- The capacity to roll out products on a national scale
- The ability to mail products
- The benefits of partnering with a Canadian company that would have the ability to export products to other countries
Despite the restrictions, Clarke told Business Insider the pros of entering the market outweighed the cons.
Wana Brands expects a rollout of its edibles in Canada in the second or third quarter of this year.
The Colorado-based edibles company Wana Brands told Business Insider it’s been in talks with companies in Canada for two years. Today it announced a partnership with Canadian company Indiva Limited.
CEO Nancy Whiteman told Business Insider that she expects a rollout to happen in the second or third quarter of this year.
Wana Brands said it’s approaching Canada like a “long play,” stepping in while it’s still new and there are relatively few brands available.
“We’re going in with the intention of being in there for a long time,” Whiteman said.
“Obviously if I could wave a magic wand, I would like to have our products and packaging look the same in Canada as in the US, but that’s the price of playing in the Canadian market,” Whiteman told Business Insider. “They’re not ideal but not game-breaking.”
And the same goes for the dosage limitations, which make products more expensive to produce because of the added costs of packaging.
The Canadian market is still exciting and large despite some stricter regulations, Whiteman said. “I think we would be foolish not to be getting our toe hold in now,” she said.