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Canopy Growth Details Plans For Legalization 2.0

October 15, 2019

This Thursday marks the one-year anniversary of recreational legalization in Canada. It also marks what’s come to be known as Legalization 2.0, in which important new product categories like oils, edibles, and topicals join the market. Canadian regulators held these categories back last year in order to craft regulations around dosage limits and packaging, leading to a market dominated in its first year by conventional cannabis flower due to a lack of alternatives.

Leading companies have felt the squeeze as a result. According to Canopy Growth, the new categories will combine to account for 50% of the market once launched. These value-added products have the potential to appeal to new consumers and provide greater margins compared with flower. Beverages have generated particular interest from major producers for their potential to bring cannabis consumption to new social contexts and use occasions.

Canopy Growth in particular is hoping to make beverages a major part of its portfolio. “We’re taking a bolder stance on beverages, with the belief that we can execute them better than what we’ve seen previously in other markets,” says Canopy vice president of communications Jordan Sinclair. “Elsewhere we’ve seen drinks make up about 2% of market demand, but we think we can do a lot better than that.”

The company can’t submit its beverages for state approval until Thursday and thus declined to share any specifics on product mix, names, or branding, but Sinclair confirmed that Canopy is planning “over a dozen beverage SKUs across a number of categories.” Both of Canopy’s house brands, Tokyo Smoke and Tweed, will be represented. “Some of these 2.0 products are coming out under the Tokyo Smoke brand,” Sinclair said. “We will have Tweed beverages. We’ll have new brands launched in the beverage category that we haven’t introduced to the market yet. We will also have new brands that will be launched in the edible space and new brands in the vaporizing space. So the strategy is going to be an expansion on the existing host.”

Sinclair also told SND that Canopy’s overall approach is not to create alcohol analogs. Instead, the company hopes to pioneer new beverage categories native to cannabis. “If we succeed here, this is going to be like Red Bull—where there wasn’t anything like it before, and now it’s ubiquitous.”

Canopy is also planning a major push into chocolate, having acquired a former Hershey factory in Smiths Falls, Ontario, for the purpose. They have partnered with chocolatiers Drew and Erica Gilmour, known for their Hummingbird chocolate brand, to produce high quality, bean-to-bar chocolate edibles under an undisclosed brand.

Canopy is looking for the rollout to significantly bolster sales in a Canadian market that’s proved challenging in the early going. Once the new categories are established, the company hopes to achieve an annual run rate of C$1 billion ($756m), or quarterly revenue of C$250 million ($189m). Canopy reported C$90.5 million ($68.4m) in revenue in the quarter ended June 30.

Elsewhere in the Canadian market, details have finally emerged about the long-gestating partnership between Tilray and Anheuser-Busch. First announced in December of last year, their joint venture is called Fluent Beverage Company and now expects to launch CBD-infused beverages by this December. Jorn Socquet, a 14-year A-B InBev veteran who most recently held the position of global vice president of marketing strategy, is leading the joint venture as CEO.—Danny Sullivan

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