Canada’s rollout of legal cannabis edibles has been a rocky one, under-performing expectations – but why is this the case? Icicle creator and CEO Steven Burton recently wrote an op-ed in Cannabis Industry Journal about the quality problems with Canada’s cannabis industry. In this follow-up piece, Burton digs into the Canadian edibles market to outline four major (unnecessary) obstacles for edibles manufacturers – and consumers.
The Canadian Edibles Market is Fairly Large
Canada is now the largest national market for cannabis products in the world, and that market expanded in late 2019 when derivative products like edibles and extracts became legal (“Cannabis 2.0”). Burton notes that Deloitte estimates the market for edibles and alternative cannabis products to be worth $2.7 billion, while BDSA predicts that the edibles market will triple by 2025 (to about 8% of total cannabis product sales).
Here’s what we know so far: According to the latest data from the Government of Canada, 20% of cannabis products sold so far have been edibles and 41.4% of Canadian cannabis consumers have purchased them. We also know that Canadian consumers are intrigued by edibles, which are easier to consume more discreetly, with fewer adverse effects (e.g. on lung health), and with greater dosage precision. And yet, just like dried flower, inventory of edibles is skyrocketing while sales lag behind. Burton asks, what is causing this stagnation?
Challenge #1: Regulations are Complex
Burton has already written about existing problems around the conceptualization of cannabis products in a regulatory framework. Are cannabis products pharmaceuticals? Nutriceuticals? Crucially for edibles, are they food products? The answer is really some kind of combination, which means that edibles manufacturers have a big regulatory challenge ahead of them. Some of these questions were answered in mid-2019, when the government released the Good Production Practices Guide for Cannabis, which merged cannabis-specific regulations with food safety-specific regulations, requiring manufacturers to comply with laborious and detailed standards. Burton – who is an expert in food safety – explained that:
“These [requirements] span everything from building design and maintenance, to pest control, to employee sanitation, to traceability – at all levels of the process. Navigating these regulations is a challenge, especially for many smaller producers who lack the necessary resources, like automation technology, to devote to understanding and tracking compliance.”
Challenge #2: Dosage Restrictions are Too Low
A huge obstacle for edibles manufacturers is capturing the illicit market, which has been thriving in Canada for decades and has dominated the market share of the regulated industry. While this trend appears to be reversing, Canadian government officials must balance sensible and safety-oriented regulations with meeting the existing consumer demand, or else surrender market share to illicit actors. So when the dosage limit for THC in edibles was capped at 10mg per package, this was serious cause for concern. Burton pointed out that reporting and analyses consistently show that consumers are turning to the illicit cannabis market because of its better quality selection. For example, 28% of respondents in a Deloitte report said that a higher THC cap would prompt them to switch to the legal market.
Challenge #3: The Cost of Legal Edibles is Much Higher
An edibles consumer who wants to switch to buying legal products faces another challenge: cost. Not only might they have to buy more products to get the effect that they want with the dosage restrictions, but the price per gram of regulated edibles products is significantly higher than that of dried flower.
Part of this is unavoidable – there is a reason edibles and extracts are called “value-added” products, since the extra processing steps add a lot to the final product. However, Burton’s example of a random product from BC Cannabis Store (two five-gram THC gummies for CAD $5.99) and an illicit product (one 300mg THC brownie for CAD $19.00) shows just how gigantic the disparity can be: an illicit product can cost $63.00/gram, while the legal product can be $600.00/gram! It is not surprising, then, that in the Deloitte report, 76% of long-time cannabis consumers cite higher prices as the reason they avoid regulated products.
Challenge #4: Limited Product Selection
So far, the edibles market can seem quite unattractive, especially in contrast to the American market just south of the border. While plagued by inconsistent patchworks of regulations as cannabis remains federally illegal, there is a much wider selection of cannabis edibles and other alternative products on the market in the US. Some of the slow roll-out in Canada can be attributed to the long licensing process, but Burton points out that government regulations like the province of Quebec’s banning of edibles that resemble candies, confections, or desserts is dampening the excitement that was building around legalization. Strict packaging requirements and restrictions on marketing and advertising pose additional challenges to companies that want to break into the industry.
Conclusion: The Government Needs to Help Canadian Edibles Manufacturers
Burton warns against despair, however. It seems like low-dose THC products are actually attractive to Canadian consumers, especially in the rapidly growing sector of infused-beverages that is drawing big brands like Molson Coors (though the dosage limits are a problem when selling larger quantities). The massive inventory of unsold cannabis flower could be economically transformed into extracts and edibles without reducing quality. And the government has shown itself responsive to some industry demands, such as the shift to allow Modified Atmosphere Packaging (MAP), which will help improve shelf life of products.
More recent reporting has also shown that the gap between the legal and illicit markets is closing (legal expenditures overtook illegal transactions in 2021!) as more retail stores open and companies enter into the cannabis space. Burton concludes:
While strict regulatory obstacles remain, challenges will continue to outweigh opportunities and the illicit market will remain a strong player in the edibles market. As regulations become clearer and producers become more accustomed to navigating the legal space, barriers to entry into the regulated cannabis market and specifically the extracts and edibles market, will decrease. Meanwhile, those getting into the edibles market will do well to be wary of the challenges ahead.