The federal government is hog-tying Canada’s pot companies when it comes to new rules around edible products, which are set to come on market later this year. That’s according to Mike Gorenstein, CEO of Cronos Group (Cronos Group News, Stock Quote, Chart TSX:CRON), who claims that Canada could very well lose out on its first-mover advantage in the emerging cannabis sector thanks to the overly restrictive regulations.
“I think that you need to build your base first and it’s really difficult with these advertising restrictions and plain packaging to build a global brand. If Canadians aren’t sure which brand is what, why would the rest of the world recognize them?” said Gorenstein, in conversation with BNN Bloomberg on Friday.
Last month, Health Canada released regulations to govern edibles, beverages, topicals and extracts, all of which could be available for legal purchase as early as mid-December. The rules include strict packaging and la belling requirements along with guidelines for products to avoid making them enticing or attractive for children.
“Our motivation is, and will always be, to protect our kids, protect health and safety of Canadians, to keep our communities safe and displace that illicit market that has developed over decades in this country,” said Border Security and Organized Crime Reduction Minister Bill Blair, the federal government’s lead on cannabis legalization.
Along with requiring child-resistant and child-proof packaging, the regulations call for limits on THC content to mitigate adverse reactions from accidental consumption or over-consumption, putting the package limit at 10 mg THC.
That’s too restrictive, according to Gorenstein, who spoke to BNN Bloomberg’s David George-Cosh on the topic.
“[Gorenstein] is pointing at things like this 10-mg cap for edibles that he says is going to create a lot of waste and really drive a lot of consumers away from that particular product, an area of the market on which a lot of people have been really bullish, said George-Cosh.
“Compared to what we see in the United States and in the black market where these products will have a lot more THC, so it’s really the consumer that’s going to be driven off,” he says.
On the potential business impact of the new regulations, Blair has been circumspect, saying, “I’ve heard from the industry and people say, ‘You know, we could make more money if you did this or relaxed these regulations.’ But quite frankly, that’s not our motivation,” said Blair.
Cronos is pushing to become a leader in the vape products market through Altria, the tobacco giant who took a 45-per-cent stake in Cronos last December.
“There’s a lot of tech on the shelf that Altria has developed and what Cronos is able to do is go to that R&D and look at what is available to them to really make a strong impact on the market,” said George-Cosh, “[Cronos] hopes that it will differentiate it from the other players that will launch these vape products this year and have a hopefully compelling product.”