This article originally appears in The London Free Press on January 10, 2020 and is written by Dale Carruthers.
Inside a nondescript south London building, a worker in a white lab coat and purple latex gloves packages squares of high-end chocolate. He puts the packaged chocolate on a stainless steel table, where another worker seals the small bag and drops it onto a blue conveyor belt that deposits it into a large plastic bin.
The bins, each packed with hundreds of the treats, are carted off to be stored in a nearby vault.
It may look like a normal confectionery factory, but it’s not: This one is in the business of making cannabis-infused chocolate. The operation at London-based Indiva has been running since October, when Health Canada gave cannabis companies the green light to begin making marijuana-infused foods, drinks, concentrates and topicals.
Welcome to Cannabis 2.0, the next wave in the rollout of legal marijuana products in Canada.
Recreational marijuana use became legal in the fall of 2018, triggering a massive new industry to grow cannabis – one that quickly made Southwestern Ontario, with more than a dozen major producers from Windsor to Brantford and north beyond London, a significant pot belt.
Cannabis companies nationwide, including many in Southwestern Ontario, are salivating at the chance to sell edibles, concentrates and ointments and creams. Those products were legalized Oct. 17, but aren’t expected to be available for sale until this month at the earliest because of federal health regulations and delays getting the supply chain up and going.
The timing could not be more critical for an industry that took a pounding in the first year of legalized marijuana sales, building out far more capacity to grow pot than could be sold in the limited number of legal stores. Shares in what were then Canada’s 10 largest pot producers by market capitalization lost an average of more than half their value, stinging many investors.
The growing pains were especially acute in Ontario, the nation’s largest market, where the government has so far approved only 25 pot stores, a fraction of the number operating in some other provinces.
In the fallout, the industry has shelved expansion plans, laid off workers and had trouble securing credit, increasing the heat on edibles to help the bottom line.
“There’s a lot of pressure on regulators here to get this stuff out,” lawyer Eric Foster, who heads the cannabis practice at Dentons Canada, said of the new products.
“The companies are going to be pushing really hard on it, because a lot of them are expecting this to be really important for driving revenue for them.”
Indiva has been laying the groundwork for its chocolate-making since 2017, chief executive Niel Marotta said.
“We were very early in pursuing this. We signed this agreement with Bhang two years ago,” Marotta said of the American chocolate maker with which Indiva partnered to bring its sweet treats to the Canadian market.
Each bar contains 10 milligrams of tetrahydrocannabinol (THC), the maximum amount of the psychoactive component in cannabis allowed by federal regulators, but can be divided into four pieces.
“We think cannabis is a social experience . . . When you break it up and share it four ways, everyone is going to get the same amount of cannabis,” Marotta said.
Marotta acknowledges his company can’t compete with other producers in supplying dried cannabis, the nation’s most in-demand cannabis product, so Indiva is trying to carve out a niche with its marijuana-infused chocolate, sugar and salt.
South of the Canada-U.S. border, in states like Colorado and California, where edibles and concentrates have been legal for years, the products’ total market share has steadily grown to nearly half of total marijuana sales.
In Canada, the market for cannabis edibles and other 2.0 products is expected to be worth more than $2.5 billion, according to a 2019 report by Deloitte, a global professional services firm.
Canadian cannabis companies enjoy a significant advantage over their American and international counterparts because of government support, access to capital markets and a unified market, unlike the fragmented regime in the U.S., where marijuana is still illegal at the federal level, the report said.
But Canadian companies still need to innovate to secure a strong, sustainable competitive position as legislation evolves in other countries, the report said.
Cannabis industry insiders have long complained that the black market has thrived, in part, because it has been the only place for consumers to buy edibles and concentrates.
Indiva has been laying the groundwork for its chocolate-making since 2017, chief executive Niel Marotta said.
“We were very early in pursuing this. We signed this agreement with Bhang two years ago,” Marotta said of the American chocolate maker with which Indiva partnered to bring its sweet treats to the Canadian market.
Each bar contains 10 milligrams of tetrahydrocannabinol (THC), the maximum amount of the psychoactive component in cannabis allowed by federal regulators, but can be divided into four pieces.
“We think cannabis is a social experience . . . When you break it up and share it four ways, everyone is going to get the same amount of cannabis,” Marotta said.
Marotta acknowledges his company can’t compete with other producers in supplying dried cannabis, the nation’s most in-demand cannabis product, so Indiva is trying to carve out a niche with its marijuana-infused chocolate, sugar and salt.
South of the Canada-U.S. border, in states like Colorado and California, where edibles and concentrates have been legal for years, the products’ total market share has steadily grown to nearly half of total marijuana sales.
In Canada, the market for cannabis edibles and other 2.0 products is expected to be worth more than $2.5 billion, according to a 2019 report by Deloitte, a global professional services firm.
Canadian cannabis companies enjoy a significant advantage over their American and international counterparts because of government support, access to capital markets and a unified market, unlike the fragmented regime in the U.S., where marijuana is still illegal at the federal level, the report said.
But Canadian companies still need to innovate to secure a strong, sustainable competitive position as legislation evolves in other countries, the report said.
Cannabis industry insiders have long complained that the black market has thrived, in part, because it has been the only place for consumers to buy edibles and concentrates.
Earlier this year, WeedMD converted its indoor growing facility in Aylmer into an extraction and processing lab that will have the capability to process up to 200,000 kilograms of biomass a year.
“We don’t believe that rushing and being first to market with a given product for 2.0 is necessarily the way the game is run,” Merker said.
Setting its sights on the cannabis vaping market, the company plans to produce cartridges filled with distillate, a cannabis concentrate that can be vaporized, Merker said.
“We already located and locked down the hardware that’s required. And we have the capability to produce the distillate . . . to ultimately fill the cartridges themselves on site. We’ve got all the pieces put together,” Merker said.
While many firms are focusing on edibles and concentrates, Strathroy-based producer Eve and Co. has set its sights on topicals.
Billing itself as Canada’s premier female-focused cannabis brand, the company plans to roll out a line of CBD- and TCH-infused bath products and even a personal lubricate.
“For all of these products, we’re going to be working with partners,” Kelsey Jobson, the company’s head of product management, said.
The products will be made in-house at the Strathroy greenhouse, which now spans 93,000 square metres after a recent expansion, Jobson said.
Eve and Co. also forged a tentative deal with Colio Estate Wines, the company behind the popular Girls’ Night Out brand, to develop a cannabis-infused drink. The rosé-style beverage will contain equal parts THC and cannabidiol (CBD), the non-psychoactive component of marijuana touted for its therapeutic benefits.
A few kilometres away, at WeedMD’s Strathroy operation, the company harvested its first outdoor crop of cannabis in October, becoming one of only a handful of legal Canadian growers to do so.
When the government announced last year it was lifting its ban on outdoor cultivation, many industry insiders predicted marijuana grown outside would be used only for extracting THC and CBD.
But WeedMD’s outdoor cannabis, grown on a 10-hectare plot previously used to grow asparagus, will be used to make concentrates and also be sold as dried flower, Merker said.
“We’re slowly but surely chipping away at all those myths,” he said.
Despite all the excitement about Cannabis 2.0, Merker said his company isn’t abandoning its focus on producing a wide range of high-quality dried cannabis.
“It’s important not to ignore the fact that more than half the market is still dominated by the traditional, good old-fashioned dried flower,” he said.
