In honor of Canada’s recent national legalization of cannabis for adult recreational use, I wanted to take a quick look at the Canadian cannabis industry. Could it become the model for our own national legalization here in the United States? How will American companies adapt to a national consumer landscape when cannabis inevitably becomes legal across all fifty states?
Canada is the first of the G7 nations to legalize cannabis nationally. Medical marijuana was initially approved for use there in 2001 and made available to patients via doctor’s prescription or a patient’s doctor-approved application. Rules regulating medicinal cannabis remained in place until 2014, when Canada’s Health Ministry overhauled the original Medical Marijuana Access Program with a new package called Marijuana for Medical Purposes Regulations (MMPR). The MMPR addressed cannabis production and licensing and provided a way for producers to legally conduct business with approved patients. Full adult recreational legalization was introduced in the Canadian Parliament in spring, 2017, and, now approved, allows for use by all adults (age to be determined by each province) and limits an individual user to possessing no more than thirty grams of cannabis at any given time (sales regulations are also ultimately left to provincial governments to determine).
After fifteen years of success with medical marijuana, and as neighboring populations in America began to enjoy sanctioned recreational use, a majority of Canada’s citizens expressed strong support for a viable, government-regulated national adult cannabis industry. A 2017 MacLeans poll confirmed popular approval, which had swollen to an overwhelming 68 per cent at the time parliament was debating cannabis legislation. The final bill’s passage began a months-long waiting period before going into effect, and as Canada’s National Post reported, a summer, 2018, survey found that “55 per cent of Canadians want legalization delayed, and 69 per cent are worried that the black market will continue to thrive because legal cannabis will cost more”. What happened to public approval over those intervening months? Why did so many want to delay? The answers are moot at this point, as recreational cannabis is now legal north of the border and the cannabis industry there is frenetically working to build itself into the national economy.
On the eve of national legalization, Canada had 116 licensed cannabis producers in the country. Currently only two of those 116 producers are certified organic growers. One of those two is a company called The Green Organic Dutchman (TGOD). TGOD proudly cites in support of its brand and business model the unequivocal results of a 2018 Hill & Knowlton study which found that “57% of Canadian medical cannabis consumers and 43% of recreational cannabis consumers prefer organic cannabis”. With a built in client base representing roughly one-half of all Canadian cannabis users, The Green Organic Dutchman’s certified organic products are well-positioned to capitalize on a supply chain that claims only one other producer.
In addition to its 36 organic flower strains, The Green Organic Dutchman also produces CO2 extracted oil cartridges “derived using a super-critical CO2 extraction process that uses no harmful solvents or additives”, and has detailed plans for expansion into all areas of the Canadian cannabis industry. Products envisioned include “organic cannabis oils & organic capsules, concentrates, including vape pens and cartridges, edibles, including beverages, topical including body butters, sublingual sprays, intensive skin repair, body oils…CBD cosmetics, CBD sports drinks, CBD whey powders, CBD vape pens/oils and CBD topicals”. TGOD is currently seeking patients for their beta testing program, which offers preferential pricing and priority service to customers willing to provide targeted feedback about its products.
The production of so many different cannabis products requires not only start-up capital but also infrastructure. The Green Organic Dutchman is growth-minded and envisions the company’s incorporation of four distinct production facilities, one for oil extraction, another for genetics and breeding, and the last two “for Research & Development, analytical testing and conducting clinical studies on cannabis” in Quebec and Ontario. These facilities are currently part of their long term business vision and will require the company to attract new investors and additional capital while nurturing the commercial growth of its current operation.
The Green Organic Dutchman envisions a global reach for its cannabis production and distribution and in August of this year “signed a definitive agreement to acquire 100% of the issued and outstanding shares of privately-held Hem-Poland”. According to TGOD, Hem-Poland is “a leading European manufacturer and marketer of premium organic CBD oils led by founder and CEO, Maciej Kowalski, one of Europe’s most widely recognized CBD experts”. The Green Organic Dutchman also plans to expand its growing capabilities internationally and will eventually build a third cannabis cultivation facility in Jamaica, where it is a fifty per cent partner with Epican, the island’s premiere vertically integrated cannabis company, controlling means of production, extraction, distribution and retail dispensaries.
Before it can expand in earnest, The Green Organic Dutchman must succeed at home, and to that end has partnered with one of Canada’s largest medical marijuana producers, Aurora Cannabis, Inc. Unfortunately for all, the Canadian cannabis industry is experiencing growing pains and scaring away new investors with week-long stock market losses. Aurora suffered a whopping 12 per cent drop last Tuesday, its first day on the New York Stock Exchange. And in spite of TGOD’s meticulous operational planning, yesterday’s trading took almost eight per cent off of the company’s stock value. TGOD is doing so poorly, in fact, that Aurora has decided to forgo any future contract options and direct its finances elsewhere. The poor performance of these two stocks is representative of the Canadian industry as a whole, as cannabis shares across the board have lost value throughout the first week of recreational marijuana legalization.
The Canadian cannabis industry offers economic opportunity to those willing to take the risk. Investors and users alike share a clear interest in fostering a well-functioning, profitable, growth-oriented industry. Creative and ingenious minds must continue to apply their talents to develop cannabis products and brands that attract investment and build trust and loyalty through customer satisfaction. Let’s hope our Canadian neighbors achieve the kind of success that sets an example worth emulating. These are frenetic and adventurous time for all of us as we watch Canada’s newest cultural phenomenon churning and gasping itself into a viable national industry. America and the rest of the world are taking note.