Marrying Up Cannabis Regulations & Business Opportunities

Published: September 19, 2022

Author: By Shahin Khazai

The evolving Canadian cannabis market provides many opportunities for a variety of products and services that support the cultivation, processing and distribution of cannabis-related items. What’s more, the legal market has fostered a suitable environment for attracting the talents and expertise of legacy market employees and devotees, thus increasing the market’s ‘potency’.

The fledgling Canadian cannabis market has been growing steadily since its inception in 2018, with new and ever-evolving regulations coming into play. The rules since then have shaped the market, as well as the types of products permitted. Whether directly, indirectly, or induced, it’s estimated the Canadian cannabis industry has provided more than 150,000 job opportunities, according to a recent publication by Deloitte. In this article, we’ll look at the relationships between cannabis regulations and the opportunities they’ve provided for business development in Canada.

Not surprisingly, regulated industries are shaped and directed by the law, as well as market forces. Depending on the scope of the new/revised regulations, they can have significant effects on the market. For example, the guidelines over cannabis extracts that came into effect in 2019 were a pivotal moment in the industry, with a variety of consumable extracts and edibles becoming available, in addition to just the flower.  The market saw a 188% growth spurt from 2019 to 2020, spiking from $1.19 billion to a whopping $2.6 billion (with projections of up to $8.62 billion by 2026!), according to Statista.

The physical and digital security requirements of the Canadian cannabis industry have given rise to partnerships with companies that provide not only security measures and systems, but also standard procedures and training for personnel. Similarly, licence applicants now have access to contractors and builders that specialize in cannabis facility construction and maintenance, ensuring all security and other regulatory requirements are met.

Another blooming example of such inter-industry partnership is in the development and implementation of software and other electronic tools by the industry, helping licencees stay compliant and profitable. We’re witnessing new platforms cropping up that support the industry, both licence holders and retailers alike, in all their operations.

The tech sphere has certainly enjoyed partnering with the Canadian cannabis industry in developing seed-to-sale platforms and systems, such as enterprise resource planning (ERP), customer relationship management (CRM), and quality management systems (QMS).

With only a handful of choices available just a couple of years ago, this competitive niche has grown to offer dozens of options, some of which can be integrated with other systems such as environmental monitoring, accounting and other features that make tracking ROIs and key performance indicators (KPIs) seamless, and even enjoyable. Due to their remote-friendly natures,  software development and maintenance have also created jobs abroad that ultimately benefit the Canadian cannabis market.

The advent of Farmgate licensing is another promising development in the industry, allowing the formation of closer and deeper relationships between producers and consumers, both of whom can enjoy lower costs as a result of reduced logistics. Another recreational feature of the industry is the development of cannabis tours that allow consumers to enjoy the scenery while sampling cannabis products. This is an obvious boone to the tourism sector. Along the same lines, there is talk of permitting cannabis lounges, which would be an interesting expansion that delivers on the social aspects of cannabis consumption.

The possibilities for growth and the industry’s demands for a wide range of professionals have also prompted several post-secondary institutions and private enterprises to offer certified courses and programs. The graduates come as diverse as the industry’s needs, including regulatory affairs and quality assurance professionals, master growers and budtenders, among others. Strengthening and fine-tuning the connections between educational resources and the ever-changing industry helps create jobs and makes it easier to fulfill the industry’s demands with qualified candidates. Additionally, such connections are conducive to performing scientific/clinical studies on the short- and long-term effects of cannabis or specific cannabinoid use, which will have regulatory and business ramifications, as we will discuss in a later example.

Last but not least, a huge field that supports the cannabis industry is the consulting aspect. Consultants in legal, financial, regulatory affairs and quality assurance matters are critical in such a highly-regulated and legalistic industry like cannabis.

Each branch satisfies a key niche area of the needs of pre- and post-operation cannabis companies. Hiring competent and experienced regulatory affairs/quality assurance professionals can certainly save you time, money and a legal headache, thereby creating a smoother road ahead. In this field, large and small consulting companies, as well as independent consultants, have a chance to flourish and help companies optimize/streamline pre- and post-licence operations, leading to greater profits.

Speaking of regulations and their effects on the industry, one of the hotter topics these days is an ongoing debate on CBD use in the preparation of some Natural Health Products (NHPs). After discovering the public’s keen interest in CBD for health benefits following public consultations in 2019, Health Canada formed a science advisory committee to make recommendations on the safety and efficacy of CBD use, and recently published its report.

Although the general tone of the report points towards a favourable likelihood for using CBD in NHPs, the recommendations are presented in a rather specific and strict way. That is, the report applies only to oral ingestion of 20-200 milligrams of CBD per day, for a maximum of 30 days, in generally healthy adults. A major obstacle in reaching the end of this potential path is the lack of a CBD monograph. This is the result of an absence of scientific and clinical data that would uncover more on the effects of long-term CBD use in both healthy and vulnerable populations. Deeper connections between the industry and post-secondary education organizations will be more conducive to carrying out the studies needed to shine a light on better options moving forward.

From a business standpoint, it would not be surprising to see some resistance from those in the Canadian cannabis industry if such an undertaking would cause interruptions or downtime in their operations, or, if a licensed facility had to seek new licences after already having gone through the application process. The industry and other stakeholders are invited by Health Canada to provide their input in the process as a potential regulatory framework is being developed.

The debates and consultations on the matter are ongoing. For now, CBD-rich products with little to no THC are the counterparts of the high THC products, which together comprise the two best-selling formulations in the Canadian market, with lower THC products and mixes occupying a small percentage of total sales.

As new applicants enter the field, a few recommendations could help them navigate the hurdles of the industry. An important aspect of starting any business is the drafting of a sound business plan. Calculating a budget and timelines will take a while before anything can happen at a licensed facility. Also having a knowledgeable team is an asset, to mind the multifaceted nature of the business, both in pre- and post-operations. It is essential to divide the responsibilities and be cognisant of the turnover rate and the needs of the business at every stage. For example, the managing RA/QA professionals are needed throughout the entire scope of operations, while associates and other lower-ranked staff change more frequently.

Another success factor in the Canadian cannabis industry is the proper understanding and careful implementation of the regulations at every step of a business’s life. The regulations also dictate the scope of the business. For example, while licensed producers are not required to hold a Good Manufacturing Processes (GMP) certification to sell their products in Canada, any plans for exportation would prompt the need for such certification, among others, to ensure domestic and global trade and regulatory agreements are met.

Since different requirements kick in at different stages of the project, having a qualified consulting group by your side can dramatically increase the probability of success in your pre- and post-licence operations. At the end of the day, a good understanding of the regulations and policies will help optimize the cost-effectiveness of your business. You will also avoid the financial penalties that arise as the result of violating the regulations (e.g. missing important deadlines for submitting financial and inventory reports, as well as licence/permit renewals).

The other big advantage of proper implementation of the regulatory requirements is the strengthening of relationships between the business and its auditors/inspectors. Such relationships are of the utmost importance in retaining existing clients, acquiring new ones, and remaining in the good graces of the regulatory authorities and inspectors.

The Canadian cannabis industry has been growing rapidly, and shows promising projections for the future. This consistent growth has given rise to a myriad of interconnections with other industries and businesses, such as security companies, software developers, and post-secondary education institutions among others.

As in other regulated industries, the cannabis market’s opportunities and operational frameworks are shaped by its laws and regulations. That said, the success of a business hinges on its being able to properly implement such regulations. The role of competent RA/QA professionals in this context is pivotal. Companies that invest in hiring such individuals and/or external consulting firms are better equipped at staying operationally compliant, and for taking advantage of new and revised regulations that result in new market opportunities.  

Contact Cannabis License Experts today to take full advantage of these opportunities.

Shahin Khazai is the Regulatory Affairs Specialist at Cannabis License Experts.