Edibles legalization fraught with hurdles, companies say

From the classic pot brownie to cannabis-infused cotton candy, there is no shortage of options for edibles at an illicit dispensary in downtown Toronto.

Among the people lining up to browse and buy, one 34-year-old IT worker chooses gummy bears for what he says is his first-ever edibles purchase. The Toronto man, who did not want to be named, said he preferred edibles over smoking cannabis because he can avoid the pungent smell and partake indoors.

"These are more convenient," he said, adding that among his friends who are cannabis users, half of them say edibles are their form of choice even though they aren't legal in Canada yet.

Cannabis companies, as well as food and beverage makers, are looking to tap this expected demand as they gear up to roll out their own pot-infused edibles when the next wave of the green rush is legalized later this year.

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Canadians can legally purchase cannabis-infused goods and vapes once the government rolls out the final edible pot regulations, which Ottawa has said must be brought into force no later than Oct. 17, 2019.

However, like the rush towards the initial wave of legalization on Oct. 17 of last year, the process is fraught with obstacles and the parameters are unclear.

From obtaining specialized research licenses to potentially building new and separate manufacturing facilities and developing new products to comply with yet-to-be-finalized rules--there are numerous hoops to jump through before edibles can grace store shelves.

"It's a challenge," said Jeffrey Zietlow, vice-president of innovation at licensed producer CannTrust Holdings Inc. "Everyone is running for the October deadline, and we're trying to develop multiple products at the same time. The more certainty you have, the easier it is to innovate products."

Health Canada published its proposed edible pot regulations in December and wrapped up its public consultation period on Feb. 20. The federal health agency is now reviewing the responses before finalizing the regulations.

Meanwhile, a flurry of companies from various sectors including cannabis, alcohol and consumer-packaged goods sectors have announced imminent plans for edibles.

Toronto-based Greenhouse Juice Co. plans to develop beverages infused with cannabidiol, or CBD, helped by a $9-million investment by Canopy Growth Corp's venture-capital arm. Licensed producer Organigram also recently partnered with food product developer Canada's Smartest Kitchen to develop edibles, initially focusing on the chocolate confectionery market. Quebec-based Hexo Corp. has teamed up with alcohol giant Molson Coors to form a joint venture called Truss to make and sell cannabis-infused, non-alcoholic beverages.

Edibles spending was estimated at US$1 billion in the U.S. and Canada in 2017 and is forecast to grow to more than $4.1 billion by 2022, according to a recent report from BDS Analytics.

While companies are full-steam ahead on development, many do not have the ability to have people try the products they are creating to see if they taste, and perhaps more importantly, feel good.

Under the licensing system enforced prior to Canada legalizing recreational cannabis on Oct. 17, companies conducted various forms of cannabis research under what was called a "dealers' licence."

With the new cannabis regulations, holders of a processor licence can engage in many of those same research and development activities, except administering cannabis to a test subject, Health Canada says. That requires a specific research licence for each specific project, said Health Canada spokeswoman Tammy Jarbeau in an email.

As of March 11, 36 research licences have been issued under the Cannabis regulations and another 122 applications are at various stages of review, though not all of them are specific to palatability testing, the health agency added.

While Health Canada aims to process research licences within two to four months, application processing times vary and depend on a number of factors such as the complexity and completeness of the application, Jarbeau said.

So-called palatability tests are not required to produce and sell edibles and some who are simply introducing products into Canada already on offer in some U.S. states may not feel the need to do them, said Brenna Boonstra, director of quality and regulatory at Cannabis Compliance Inc. But it's a good idea to taste-test edibles before launch, she added.

"People are certainly interested in doing this, but the research licences to do so haven't been issued yet," she said.

Another complicating factor is manufacturing, as the proposed regulations require companies who are already making non-cannabis infused goods to establish a separate manufacturing facility for edibles.

The Hill Street Beverage Co., which plans to roll out a line of cannabis-infused non-alcoholic beverages, expected to be churning out its product by now. Those plans changed when the proposed regulations were released, Hill Street chief executive Terry Donnelly said.

"All of a sudden, our whole plan to use the existing facility is out the window and now we have to build a whole new facility," he said.

Hill Street is examining its options and will likely co-locate its manufacturing facility at a licensed producer with which it has an existing relationship, he said. The maker of a line of alcohol-free wine and beer already has the equipment and he anticipates it will take about four months to build the new facility, he said.

Another wrinkle is the lag time after the final edible pot rules are finalized.

Once the regulations are published and take effect, companies must amend their processing licence to add the edibles class before they begin manufacturing products for sale, Boonstra said. Currently, the only classes of cannabis that are legal are dried and fresh cannabis, seeds, and oil, she said.

Companies can't apply for this amendment until the edible pot rules come into force, Boonstra said.

From that point, getting the green light for edibles could take anywhere from three to nine months, a process that may involve a couple of test batches of product and final facility inspection, she added.

Organigram chief executive Greg Engel remains optimistic that the Moncton-based licensed producer will have edible products ready in time, and that legal sales will be possible by the fall.

He said his research licence application was among the first, and he expected to receive it by next month. In any case, Organigram has been testing products through its partner in the U.S., Green Solutions, which has made some batches stateside and is soliciting feedback on taste and effect south of the border, he added.

Engel is more concerned about having enough product at launch, in order to avoid the shortages seen in the wake of legalization last year, he said.

Organigram may launch with a limited number of offerings, depending on the supply situation, he added.

"We don't want to launch a product and then not have it available a week later.''