Producing pot gummies a challenge amid hazy regulations

Chewy, colourful cannabis-infused gummies in bright colours and in the shape of animals or creatures are among the best-selling edible pot products on the black market--but Canadians shouldn't expect them on legal shelves.

Regulations that will make edibles legal come into force Oct. 17, exactly a year after Canada legalized the sale and purchase of dried and fresh cannabis, oil, seeds and plants. The rules laid out so far are aimed at keeping the new pot products out of the hands of kids and stipulate they can't be seen as "appealing to young persons"--but Health Canada has yet to provide additional details on exactly what crosses the line.

That leaves companies grappling with how to market gummies--an already popular adult product based on a children's treat--without being too much fun.

THC-infused gummy bears are unlikely to be among the new products set to hit legal shelves as early as December, but companies are pushing ahead with pot gummy plans they believe will allow them to eventually cash in on consumer demand without resorting to colourless and flavourless blobs.

READ: B.C. firm selling do-it-yourself gummies kits at grocery

Licensed producer Zenabis said it was prioritizing the edible gummies category because of its demonstrated and growing appeal south of the border, said Kyrsten Dewinetz, its program manager of food and beverage services.

"It's popular with many different demographics... We're probably going to forge ahead a little bit more quickly in this category," she said, adding Zenabis aims to launch its line of gummies by early 2020.

The earliest new goods can be sold legally will be mid-December, due to the required 60-day notice companies must provide to Health Canada of their intent to sell them.

A recent survey of Canadians conducted by Deloitte showed that current users' most-preferred edible format was a gummy at 26%, followed by cookies at 23%, brownies at 22% and chocolate at 16%.

Gummies are appealing to consumers for a variety of reasons, including portability and the ability to conceal them easily in public, said Rishi Malkani, a partner focusing on cannabis mergers and acquisitions for Deloitte.

"They're tiny, they're easily ingestible, you could do it quite discreetly... It's a little easier to transport or take with you to an event than brownies or other edibles, or even beverages for that matter."

READ: Canadians have become less enthusiastic about edibles (Survey)

The Canadian market for the soon-to-be-legalized goods is worth an estimated $2.7 billion annually, with edibles amounting to $1.6 billion alone, according to Deloitte.

In the U.S., where edibles are already available in several states where recreational pot is legalized, gummies are more popular than ever, according to BDS Analytics.

During the first four months of 2019, 17 of the top 20 selling ingestible products in California, Colorado and Oregon were gummies, according the U.S. firm.

And despite similar rules requiring that edibles makers not appeal to kids in various states, cannabis gummies and candy ripping off well-known brands continue to pop up.

In July, confectionery giant Mondelez Canada launched a lawsuit in a California court against a company called Stoney Patch Kids, whose products look virtually identical to its Sour Patch Kids product.

The risks to children of such products were outlined in recent research by the Canadian Paediatric Society, which found that a "significant number of young children" required medical care after ingesting cannabis in the months surrounding legalization last October.

READ: Study suggests ‘significant’ number of kids at risk from edible cannabis

The preliminary research found 16 reported cases involving recreational pot between September and December 2018.

And in late July, the Quebec government decided to unveil its own more stringent rules for pot edibles that would ban the sale of cannabis candies, confections and desserts including chocolate and "any other product that is attractive to minors."

The provincial government said Ottawa's measures to regulate so-called Cannabis 2.0 products would not allow Quebec to "achieve its public health and safety objectives." Quebec's rules are subject to a 45-day public consultation before they take effect.

If Quebec's stricter edibles come into force, that could result in a $300-million annual drop in Quebec's cannabis market--and $40 million lost on gummies alone, according to Deloitte.

"It will be a significant impact," said Malkani, noting that gummies are expected to account for roughly 8% or 9% of edibles in Quebec.

Health Canada has said edibles must not be "reasonably considered to be appealing to a young person" but has not stipulated which colours, flavours or shapes will be allowed.

The level of appeal to children of a given product will be determined on a case-by-case basis, and the factors used include shape, colour, flavour, name, packaging and how it is presented, agency officials told reporters on a briefing in June.

"If a gummy bear is appealing to a young person, would that be permitted? The answer is no," one Health Canada official said.

The federal agency said it would publish guidance that would outline the factors to be considered, but the additional details have yet to be released.