Cannabis Executives Discuss Future of the Industry

- August 22nd, 2018

Three panelists at MJBizCon INT’L shared their thoughts on where the cannabis market is headed, covering Canadian legalization, developments south of the border and even artificial intelligence.

As the first official day of the MJBizCon INT’L convention began to wrap up, major players in the cannabis space spent an hour debating and discussing what’s next for the industry.

Attendees quickly filled the room for one of the conference’s biggest panels, as three cannabis executives offered their predictions and input on the next year in the cannabis market.

Mike Gorenstein, CEO of Cronos Group (TSX:CRON,NASDAQ:CRON); Brad Rogers, president of CannTrust Holdings (TSX:TRST); and Jeannette VanderMarel, president and co-founder of Good & Green, were the panelists for this anticipated talk.

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Starting the panel off was a question about where the three cannabis experts predict the next C$5-billion deal will be, referencing this month’s major investment from Constellation Brands (NYSE:STZ) into Canopy Growth (TSX:WEED,NYSE:CGC).

According to Gorenstein, the move from Constellation will encourage alcohol and tobacco companies to step their games up. “It’s no secret that for quite some time a number of the large alcohol companies have been pretty aggressively diligent in figuring out where exactly they fit in, so I think this is just a push and now they feel the heat,” he said.

The Cronos executive said the the most significant aspect of the agreement is its strategic implications, rather than the size of the investment.

How are companies and LPs preparing for the emergence of edibles in Canada’s legal market?

The panel also covered the eventuality of edibles in the Canadian market. Legalization is set for October 17, but will not include ingestible or infused products, which are likely set for legalization next year.

Rogers is excited about the upcoming opportunity and described some of the products his company is whipping up in preparation.

“That’s the best part of the business right now. I can’t wait for this,” he said. Rogers explained that his company has a zero-taste profile that can be formulated into any beverage. “Right now we’ve got a single-serve brewing technology … so when you think of doing your coffee, that’s really wake ‘n bake.”

During the panel, Gorenstein addressed the many different factors that play key roles in the production of edibles, such as varying levels of medicinal ingredients, how the body absorbs and processes the edibles and even branding.

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“There’s a bunch of pieces of the puzzle; there’s the molecular complexity you have on the pharmaceutical side, there’s the formulation and delivery system. And then you’re still getting into food, so picking what psychoactive state and what consumer you’re targeting,” he said.

“There’s really a lot of parts in the value chain. I think that its starting point certainly is the … technology, and the end point really is the brand and the community you create with your consumers.”

How can a TSX- or TSXV-traded company prepare for the US market to open up?

While the legal status of cannabis in Canada will soon be cleared up, much of the US is still in limbo with regards to its legality.

Cannabis remains an illegal substance on a federal level in the US. However, as more states jump on the cannabis bandwagon, investors and experts alike are trying to prepare themselves for tapping into a new audience south of the border.

Rogers raised a flipside point as he discussed using Canada as a place for US brands to safely conduct test runs with regard to varying aspects of the market.

“We can bring brands north, test the market here in a real nationally distributed, federally regulated system, to be able to go chain to chain, mirror market them within the states, get some real feedback on the regulated market,” he explained.

Find out what experts are saying about the future of cannabis edibles

 
Read our new report on the 2019 Lift Cannabis Business Conference
 

“Bring brands up and when US regulation rolls over, we can go back down with a formulated product with what we know works in market.”

During the panel, Gorenstein discussed the strategy Cronos has been implementing over the last few years, as the company has been attempting to get its ducks in a row leading up to legalization.

“Before this craze even started and over the last few years, we’ve been strategically creating an ecosystem … building relationships that [fit] each part of the value chain state to state,” he said. “Once it’s federally legal, we’re just moving in and connecting all the dots, and that’s something we’ve been working on for quite some time.”

Will a privately owned sector in Ontario be better for the legal market in the long run?

While adult-use cannabis will become legal in Canada in October, Ontario sales will be done online only until the spring of 2019. Overall the market has responded with less-than-positive reviews to the lack of physical retail stores.

However, the three panelists all echoed the same sentiment of seeing good in the long term for Ontario’s privatization plan.

“I’m a big fan of responsible retailing; we’ve all seen jurisdictions like in the states, it’s kind of [the] wild west,” VanderMarel said.

She added that the new Ontario retail plan is a better one than the heavily criticized 48 stores approach from the previous provincial government. “I’m also glad that we’re going to have the oversight and restraint that we’re going to have rather than a store on every corner.”

Gorenstein agreed with VanderMarel, following up with a point about how having a physical retail location doesn’t make a major difference in sales or profits.

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“I’m in no way bothered by it at all, I think it really doesn’t change things. The idea that you need a brick-and-mortar store — don’t get me wrong, brick and mortar is certainly important — but the largest distributor in the world is an online ecommerce platform,” he said.

Where will the cannabis industry and the AI industry merge?

During the Q&A session of the panel, an attendee asked about potential relationships between artificial intelligence and the cannabis industry, and whether the two advancing sectors could come together.

Gorenstein said in response that technology can usually be industry agnostic, allowing it to “disrupt every area of the value chain.”

He explained, “I think it depends on what specifically the artificial intelligence can do, but there’s no reason that you can’t apply it to any of the R&D, any of the production methodologies that you’re doing in cultivating, extracting, research or in marketing. So I think it would affect cannabis the same way it would affect any other CPG (consumer packaged good) or pharmaceutical industry.”

Don’t forget to look for our coverage of MJBizCon INT’L, with show notes from the floor and exclusive interviews on INN. You can also follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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