Article – Calgary Herald

19 September 2019

News Article – Calgary Herald

Legal Edibles, other derivatives should add 3 million consumers to cannabis market

Original article published 15 Sept 2019

By: Bill Kaufmann

The second great Canadian cannabis rush is nearing the starting line, with pot entrepreneurs looking to stand out amid an onslaught of soon-to-be-legal edibles on the market.

Legal cannabis edibles and other derivatives are expected to grow Canada’s cannabis market by three million consumers, or 65 per cent, according to a poll commissioned earlier this year by a leading industry data collector.

The survey, conducted with 3,000 respondents last May by Lift & Co. and Ernst and Young, suggests the country’s 4.6 million adult cannabis users will grow to about 7.6 million after a wider variety of non-smokable licensed products go on store shelves at year’s end.

If so, that would see the percentage of adult Canadians consuming the drug grow to at least 23 per cent.

“I think it will be transformative — it will bring a significant cohort of consumers who were not consuming due to stigmatization or the consumption delivery,” said Jon Kamin, Lift & Co. chief revenue officer.

Numerous licensed pot producers and confectioners have been eyeing the market and preparing for the Oct. 17 second phase of legalization, though the products aren’t expected to be available en masse until December or January.

“The race to win legalization 2.0 is on,” said Kamin.

A profit margin that’s expected to be higher among derivatives than the dried flower that’s been legally available since last October is driving that momentum, he said.

That’s because it’s easier to develop premium brands among edibles and other distillates, said Kamin, than it is among smokable weed.

“Differentiation is very challenging when they’re all coming up with versions of the same flower but once you move into the other forms, it’s about what tastes good or smells the best,” he said.

Retail staffers, also known as budtenders, in Calgary and in the survey have said customers have been asking about edibles for some time, though the only ones currently sold are oil capsules.

The survey found baked goods, food additives and confectionary forms are the most preferred delivery methods for edibles among current users.

Most of those long-term users prefer higher-THC content products, something noticed by most retailers, said the study.

But Kamin said there’s room in the market for producers of lower-THC derivatives, particularly for “entry-level” consumers.

Calgarian Evan Mah is counting on just that and is moving ahead with Friendibles, an operation selling kits for homemade cannabis-infused gummies, brownies and cookies with THC of under 10 mg per piece, which is the maximum federal guideline content limit.

“Most people I talk to think (10 mg) is too high, I think it’s too high,” said Mah, who’ll begin running the business with co-owner Ciprian Georgescu out of a West Hillhurst home.

“We see lots of potential.”

Too much of the existing marketing is being done by those whom Mah considers “insiders,” whose connoisseur approach doesn’t appeal to many consumers, especially newer ones.

“That doesn’t speak to most folks — we’re hoping to produce something more down-to-earth,” he said.

The business will raise capital by crowdfunding, with investors receiving an instructional cannabis consumption tool kit.

Alberta Gaming, Liquor and Cannabis said it’s been working with its more than 30 licensed producers to determine what type of derivative products they’ll be offering.

The Lift & Co. survey found many consumers are still put off by the comparatively high price of legal cannabis compared to its illicit counterpart.

“The ability of the legal market to match illicit prices will be a challenge that may never be achieved,” it states.

It also found many consumers view the legal product as inferior to its black market counterpart, that the former is too dry and lacks aromatic qualities.

“If prices are higher, the value add of quality must match such premiums,” states the report.

The group is launching a more comprehensive online effort to collect consumer and retail data on the still-emerging industry that’ll cover ground that’s been largely ignored, said Kamin.

“The data available on cannabis today is really limited to retail sales, it doesn’t tell you who is buying,” he said.