Canadian cannabis firms have developed a taste for edibles
CALGARY—Entering the legal edibles market in Canada come October will be more complicated than just cooking up some “magic” brownies in your kitchen, but it won’t stop some chocolate makers who say they have the know-how and the equipment to make it happen.
Brad Churchill, owner of Choklat, a Calgary-based chocolate manufacturer, recently led a tour around the cool interior of a 5,000 square foot facility he once used for making conventional chocolate. His branded bars are currently sold in grocery stores across Western Canada.
In just a few months, the space will be a Health Canada-approved site capable of making cannabis-infused bars. The first batches should be available for sale by mid-December.
Retrofitting this facility hasn’t been cheap. Churchill says he is already on the hook for more than a million dollars in cannabis regulation-related upgrades. Then there’s the cost of running universal grinders and other equipment needed to handle chocolate production on an industrial scale. If Choklat had been a fledgling company, Churchill said he couldn’t have afforded to get into the edibles business.
“Even if you have deep pockets, it’s still a seven-figure number,” he said.
Despite the cost of entry, extremely strict federal regulations and modest edibles sales data from states that have legalized, industry representatives in Canada are excited about the sheer variety of new products that will be available to customers who may have shied away from joints or vaporizers.
Josh Lyon, vice-president of marketing for Toronto-based Tokyo Smoke Brands, said the second wave of legalization that begins on Oct. 17, 2019, will prove to be similar to last year’s excitement and media hype. He said Tokyo Smoke is already fielding plenty of questions from interested potential consumers and intends to offer its own range of products — but wouldn’t disclose what they’ll look like yet.
“It’s going to be a new sense of discovery,” he said. “It’s this whole new legal world of products that people haven’t had access to before.”
These products aren’t just valued for their variety, but also their appeal to curious potential customers who might be turned off by pungent joints or bongs. When it comes to edibles, non-smokers, health-conscious cannabis lovers, or those who have tried weed in the past but quit are all firmly in the crosshairs of Canadian cannabis companies.
“The lion’s share of the market is the consumer that’s never tried it before,” Churchill said.
According to cannabis research market firm BDS Analytics, optimism from Canadian edibles producers may be overstated. Edibles sales in the U.S. states of California, Colorado and Oregon are just a fraction of that of conventional weed purchases — known in the industry as dried flower. Data collected between January and May of 2019 showed about $768 million in conventional weed sales compared to $147 million for gummies and $33 million for cannabis-infused chocolate.
This also holds true in Washington State, where recreational cannabis of all types has been sold out of government-sanctioned cannabis stores since July 2014. Unlike Canada, Washington legalized all forms of cannabis at the same time. Brian Smith, spokesperson for the Washington State Liquor and Cannabis Board, said traditional dried flower cannabis remains their most popular option.
“Dried flower is by far the biggest category of sales at retail stores,” he told Star Calgary. “Edibles are somewhere less than 10 per cent.”
However, the firm said gummies in particular remain highly popular among users who prefer to eat their weed, rather than smoke, vape or apply a topical. Part of this is due to their portability and the fact that they don’t melt like cannabis-infused chocolate. But the firm warned that demand for gummies has slowed down in more established cannabis-friendly states like Colorado.
“Will gummies growth slow down within individual states? Most likely,” the firm said in a report posted to their website.
But legal Canadian goodies will be quite different from their American counterparts — and they’ll be far less potent than those on the black-market. Under Canada’s relatively strict edibles regulations, a single package, which may hold several brownies or cookies, can’t contain more than 10 milligrams of THC — a tenth of the limit in Colorado, California and Washington. Critics have warned such strict regulations won’t kill black-market edibles in Canada.
Strict regulations and modest U.S. sales data haven’t stopped prospective Canadian sellers from eying soon-to-be-legal edibles and concentrates.
Troy Dezwart, the executive director and founder of Alberta-based Freedom Cannabis, said they’re focused on building an extract laboratory to get into the market. Its first phase will encompass about 50,000 square feet and it will have about 10 to 15 staff. Once fully online, their main production facility will have around 125 employees.
Dezwart said it was clear to him that, one day, the Canadian government would legalize edibles, topicals, and concentrates — derivatives, in his words — given their high demand elsewhere. He also disputed figures suggesting traditional dried flower remained the most popular form of cannabis, saying the elegance and simplicity of using derivatives make them more attractive.
“I’m not sure that dried flower is that much more popular than the derivatives today in those other markets,” he said.
Churchill believes the industrial scale processes he uses for conventional chocolate bars at Choklat will also solve a long-standing problem in the black-market edibles business — consistency.
It isn’t unheard of for part of a homemade batch of infused treats to contain very little cannabis at all, while other parts are far too potent. Baking is a complicated science and Churchill said small-batch recipes for illegal edibles simply won’t translate into the world of large-scale food production.
“Every chef and pastry chef in the world has managed to get his hands on some black-market cannabis somewhere and thinks he’s going to duplicate his process from his 20-quart mixer in his kitchen to an industrial scale,” he said. “It’s not going to happen. Guy doesn’t have a clue.”
Even if edibles don’t pan out, Churchill doesn’t expect to go broke. His backup plan is selling conventional, weed-free Choklat bars in the U.S. through Whole Foods. After all, at the end of the day, Choklat’s 5,000 square foot edibles production facility is — more or less — still a chocolate factory.
“We can fire up this equipment, make chocolate bars, and ship,” he said.