What does cannabis legalization mean for the food industry?

What does cannabis legalization mean for the food industry?


Canada is on the trajectory of becoming one of the largest recreational Cannabis markets in the world. With legalization on the horizon, it is forecasted to reach $2.5 billion by 2020. This estimate is based on the growth seen in the United States such as Colorado and Oregon. And like our American neighbours, a large share of the market will be dedicated to cannabis-infused edibles. Since Colorado legalized the sale of recreational cannabis in 2014, sales of edibles tripled from $17 million to $53 million in 2016. In fact, a study from Dalhousie University found that 46% of Canadians would try cannabis-infused foods and 39% would try it at a restaurant. Knowing this, there is a good possibility that we will be seeing cannabis products such as edibles, topicals and cannabis-infused menus across Canada.

Legalization of Cannabis in Canada
In the proposed bill C-45, it states that edibles will not be available for sale at licenced retailers in the first year of legalization. This is because edibles are difficult to regulate. Edibles like brownies, suckers and gummy bears are likely to be mistaken for regular treats by kids, leading to accidental consumption – which means products must be sold and packaged in a way to make it less appealing to children. These edibles will also be foods or food-like drugs and new policies will be required to oversee production of these products in kitchens and food manufacturing facilities.

If you’re a food entrepreneur, partnering with a licensed producer under the Access to Cannabis for Medical Purposes Regulations (ACMPR) is your best bet to get ahead of the curve, but that’s easier said than done. If you don’t happen to know a licensed producer, you are better off waiting for legalization. At that point you’ll have the opportunity to play around with recipes in your kitchen but not sell commercially. According to Health Canada, edibles will be commercially available no later than 1 year after legalization. 

Opportunity for Functional Foods
But opportunity does not only lie in the baked goods and confectionary industry when it comes to edibles. To many, cannabinoids such as tetrahydrocannabinol (THC) and Cannabidiol (CBD) are therapeutic ingredients. This means there is potential for creating functional products that may be taken for various reasons, such as depression or chronic pain. Currently, these types of products are not available under ACMPR. This means these functional products could potentially be sold under both the medical and recreational streams. There is no way to know for sure where this category of functional edibles will fall under the regulatory framework, but based on existing regulations, it will be difficult to make health claims. This market will definitely be more complicated to penetrate, since the majority of people are still not convinced that cannabis is a healthy ingredient. However, California is already seeing this trend, organic, vegan, gluten-free, and low-dose edibles that are considered better for you are hitting the market.

Capturing a New Market
The cannabis market brings a wealth of opportunities, but when it comes to bringing a product to market, food entrepreneurs should consider their competitive advantage. How will your product appeal to Canadian consumers and retailers? Think about using Canadian or local ingredient inputs to create an authentic Canadian experience. There is also an opportunity to use unique processing techniques to develop truly innovative infused food products that can help you differentiate on the market. Consider the market share of individuals who want to create their own edibles or grow plants of their own. Can you think of innovative ways to serve these markets?

Sources:
New Cannabis Ventures
Forbes
Dalhousie University
Government of Canada
The Cannifornian


Author:
Dana Baranovsky
Analyst, Food & Food Systems
 

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