Opportunities for food and drink as Canada legalises cannabis

Canada’s food and beverage industry faces a new world of opportunities after the country voted to legalise recreational use of cannabis.

The C-45 Bill, which gives Canada’s regional provinces and territories the power to sell and distribute cannabis, passed in the Canadian senate by 52 votes to 29. It makes Canada only the second country after Uruguay to fully legalise recreational cannabis use and fulfils a long-time manifesto promise of Liberal prime minister Justin Trudeau.

It also marks a slow shift in both public and regulatory attitudes towards the drug, with Trudeau saying that Canada’s previous approach was ineffective.

“It’s been too easy for our kids to get marijuana and for criminals to reap the profits,” he tweeted after the vote was confirmed yesterday evening. “Today, we change that. Our plan to legalise and regulate marijuana just passed the senate.”

The move also creates opportunities for the food and beverage industry, as consumers could be less reluctant to try cannabis if it’s incorporated into edible formats.

The first sign of intent came in October last year when, amid continuing discussions over legalisation, Constellation Brands invested CAD 245 million ($191 million) in Canopy Growth Corporation, a Canadian supplier of medicinal marijuana.

Constellation, the owner of vodka brands like Svedka and the importer of US beers like Corona and Modelo, said the deal falls in line with its “long-term strategy to identify, meet and stay ahead of evolving consumer trends and market dynamics”. It emphasised that it would not develop cannabis products for markets where the drug is not currently legal, as is the case in most US states.

But Canopy Growth Corp. is likely to be well-positioned to take advantage of legalisation, and of changing perceptions among consumers.

 

What does the new law say?

As part of the legislation, Canada will give its provinces and territories the choice over how cannabis is sold and distributed. A similar model is used in Canada – and several Scandinavian countries – to control the sale of alcohol. Each province and territory has its own alcohol monopoly, which controls all retail sales of beverage alcohol throughout the region.

In New Brunswick, the local alcohol authority NB Liquor has already announced plans to launch a chain of stores called Cannabis NB, which will serve as the state-sanctioned dispensary for cannabis. Under the new laws, Canadians are permitted to grow a small amount of cannabis at home for personal use and can be in possession of up to 30g of dried marijuana.

Canada’s ten provinces and three territories – from Yukon to Nova Scotia – will be given between eight and 12 weeks to prepare themselves for the change.

It isn’t exactly clear whether cannabis as an ingredient – such as for the food and drinks industry – would be regulated and distributed in a different manner.

How did the law change come about?

Medical marijuana was already permitted in Canada and prime minister Trudeau – at one time caught out by revelations about having smoked the drug while an MP – initially called for an “evidence-based approach” to cannabis and advocated for it to be legalised in January 2015. In May that year, five months before a federal election that Trudeau won by some margin, he reiterated his intention to decriminalise recreational cannabis use “immediately”. He later set a timescale of this summer to achieve the promise, and the passing of C-45 yesterday means his government has delivered on that timescale.

Canada’s statistics agency has previously suggested that the value of the country’s cannabis industry could be between CAD 5 billion ($3.76 billion) and CAD 7 billion ($5.27 billion).

Many inside the food and drinks industry will hope that legalisation paves the way for greater innovation, and for food and beverage companies to create a lucrative new niche.

But the law change is unlikely to ease tensions between Canada and the US, which had already been at blows over milk tariffs. In the build-up to legalisation, Canada had called on the US to no longer turn away Canadians who declared to having smoked cannabis.

Those differing cultures will now be accentuated post-legalisation; according to Business Insider, nine US states – along with Washington DC – have legalised marijuana use to some extent. As with Canada, the issue is devolved. But tensions between the US and Canada are likely to be heightened, as just three of the US’ 12 border states – not including Alaska, where adults over 21 can possess up to an ounce of marijuana – have introduced some form of ‘softer’ legislation, while Canada’s relaxed laws are likely to be at odds with US border procedures.

But, for the food and beverage industry, the change could be telling.