KANSAS CITY — Canada is scheduled to legalize the recreational use of marijuana on Oct. 17. At that time, adults over the age of 18 will be allowed to purchase fresh or dried cannabis and cannabis oil. Cannabis edible products and concentrates will be legal for sale approximately one year after the law takes effect. How legalization plays out and how consumers and the market react may provide a roadmap for legalization in the United States and abroad. Canadian legalization will have significant ramifications for a variety of industries, including food and beverage.
Bloomberg estimates the Canadian cannabis industry currently has a value greater than $60 billion. Canopy Growth Corp., which is traded on the Toronto Stock Exchange under the ticker symbol WEED, has seen its market capitalization surge to the exorbitant height of $11 billion (on sales of approximately $60 million). By comparison, George Weston Ltd., one of Canada’s largest food companies, has a market capitalization value of approximately $9.5 billion (sales, $37 billion).
Canada’s decision to delay the approval of cannabis-infused edibles gives food and beverage manufacturers an opportunity to assess the pros and cons of participating in the emerging market. The strict regulatory framework the Canadian government is establishing and the cultural stigma associated with cannabis will give many executives pause. Dirk Van de Put, chief executive officer of Mondelez International, recently told Bloomberg, “We don’t think it’s our place to play in that market.”
To the degree probiotics are an indicator, the market for cannabis-based health and wellness products could be considerable.
How other food and beverage companies perceive the risk/reward profile of the cannabis market remains to be seen, but the large role food is likely to play raises the stakes. The authors of a report published in June by the consultancy Deloitte predicted 6 in 10 likely Canadian cannabis users will choose edible products. Applications of choice will include baked foods such as cookies and brownies, chocolate, hard candy, beverages, honey, and frozen items, including ice cream and popsicles.
Beyond Canada, interest in many other countries in cannabis legalization is on the rise, including the United States. Nine U.S. states currently allow the recreational use of cannabis (many others allow medical use), and voters in six states will decide this fall whether to approve legalization.
In addition, while much of the focus on cannabis is on its recreational psychoactive effects, there may be potential health benefits from compounds other than T.H.C., the principal psychoactive constituent of marijuana. More clinical research needs to be done, but there is anecdotal evidence compounds from the cannabis leaf may provide pain relief, reduce anxiety or alleviate the symptoms of Parkinson’s disease. To the degree probiotics are an indicator, the market for cannabis-based health and wellness products could be considerable.
Canada is the first of the world’s leading industrialized countries, also known as the G7, to legalize the recreational use of cannabis. Other nations will be watching Canada’s experience closely. Food and beverage leaders must do the same because the market may hold significant potential for those willing to accept the risks of entering such a highly regulated and controversial category.