Fixing the Hashish 2.zero Product Problem

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Companies from across the consumer goods industry want to get into the cannabis industry. Most, however, point to complexity, licensing, and perception as barriers to their participation.

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DR. Kari Kramp TROY, OH - MAY 11: An employee refills a shelf in the grocery section of a Wal-Mart super center on May 11, 2005 in Troy, Ohio. TROY, OH – MAY 11: An employee refills a shelf in the grocery section of a Wal-Mart super center on May 11, 2005 in Troy, Ohio. Photo by Chris Hondros / Getty Images

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The rising demand for cannabis for health and wellness, personal care and non-smokable products is a positive sign that confirms the commercial promise of legalizing cannabis for adults. However, when we look at the legal offerings available, Canadians are faced with a modest range of products to choose from. While the initial offering of cannabis beverages is impressive, limited food choices and topics speak to the challenges of developing new cannabis products.

For the past five years, at Loyalist College’s Applied Research Center for Natural Products and Cannabis, we have helped companies develop cannabis products, technologies, and processes. Loyalist College is ranked as one of Canada’s top 50 research schools and # 1 nationwide for industry-led applied research income as a percentage of total research income. It has played a significant role in the success of the country’s cannabis and natural products sectors. Perfectly located between Toronto, Ottawa and Montreal, Loyalist College has attracted partners of all sizes, from startups to publicly traded licensed producers.

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We have spoken to many consumer goods companies (CPGs), from owner-operated small and medium-sized enterprises (SMEs) to large multinational companies. SMEs from across the consumer goods sector want to get into the cannabis industry. They have the skills and experience necessary to develop consumer-friendly Cannabis 2.0 products. Most, however, point to complexity, licensing, and perception as barriers to their participation.

complexity

The development of Cannabis 2.0 consumer products involves at least four steps: creating or acquiring a cannabis extract; Development of a cannabinoid formulation; Add the formulation to an existing or new product (topical skin cream, shampoo, beverage, etc.) and then manufacture the products in accordance with relevant government regulations.

“When asked to develop a cannabis biscuit, a baker must essentially become an expert in cannabis extraction, formulation development, and chemistry.” Photo by SageElyse / iStock / Getty Images Plus

Let’s use this process to create a consistent cannabis cookie that complies with cannabis regulations. The baker needs to turn an extract (oil) into a formulation for baking and then use the formulation to develop the biscuit recipe. With the recipe in hand, the baker then has to make a biscuit that complies with the regulations. Essentially, when you ask a baker to develop a cannabis biscuit, you need to become an expert in cannabis extraction, formulation development, and chemistry.

If we want more Cannabis 2.0 products, we need to find ways to overcome the complexities of product manufacturing. In the CPG industry, complexity is solved through specialization. Complex tasks are handled by unique and specialized companies that are part of the industry’s supply chain. In the cannabis industry, extraction, formulation development, product development and product manufacturing are in most cases the responsibility of a single company.

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We need to find ways to encourage specialization in making cannabis products.

Licensing

Companies large and small consistently cite licenses as an obstacle to their engagement in the cannabis industry.

Under the current licensing requirements, manufacturers of Cannabis 2.0 products are granted a processing license based on the owner holding raw cannabis and converting it into an extract or formulation. The processor then uses the base formulation to develop the Cannabis 2.0 products – chocolate, topical, beverages, etc.

“The processing license is suitable for cannabis processors, but too demanding for small and medium-sized CPG companies that focus on manufacturing products.” Photo by Chris Hondros / Getty Images

Our experience working with Cannabis 2.0 innovators, SMEs and CPG manufacturers suggests that their expertise lies in making products, not formulations. Your focus is on the product side. The processing license is suitable for cannabis processors, but too demanding for small and medium-sized CPG companies that focus on manufacturing products.

Getting SMEs into the cannabis industry requires a different type of license that relies on product manufacturing.

perception

Perception remains a challenge despite legalization and the increased use of cannabis products in mainstream demographics (e.g. professionals and / or boomers). To be successful in this industry you have to accept this reality and be ready to be part of the solution. Our experience suggests that large CPG companies are closely monitoring the cannabis industry, but their delayed entry into the market segment depends in part on their ability to wait while consumers’ attitudes towards cannabis products change. This approach offers SMEs the opportunity to develop innovative and award-winning products – and to help the industry overcome the barrier to perception.

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SMB participation in Cannabis 2.0 products is more open to risk and less limited by perception. This will lead to more CPG-type cannabis products.

Go forward

With the legal review of cannabis legislation set for October 2021, it is time to examine how a new class of cannabis licenses can respond to the 2.0 product challenge. A license that supports the manufacture of cannabis products and allows for the specialization required to capitalize on the dynamism of Canadian SMEs would be very helpful.

The Bay of Quinte region, to which Loyalist College contributes $ 382 million annually to the economy, is home to many global CPG companies and an ecosystem of suppliers, including many SMEs. Our local economy is testament to the CPG supply chain’s ability to create economic, social and cultural wealth and employment opportunities for people and their communities. Making it easier for SMEs to participate in Cannabis 2.0 paves the way for much greater CPG involvement in Cannabis 2.0 and the benefits it will bring.

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Dr. Kari Kramp, Principal Investigator and Scientific Manager at the Applied Research Center for Natural Products and Cannabis, Loyalist College.

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