The CEO Of A Canadian Medical Cannabis Producer Talks Trump, Ontario And Securing A Supply Chain

By Etan Vlessing

President Donald Trump's support of potential legislation to end the federal ban on marijuana in the U.S. is a prelude to American entertainment brands buying up Canadian assets to exploit an inevitable legalized recreational cannabis market south of the border, according to Aphria Inc APHQF President and CEO Vic Neufeld.

"With that conversation happening in Washington, it's the U.S. market," Neufeld, speaking at the Benzinga Cannabis Capital Conference Friday, said of stepped-up American investment in the Canadian cannabis market. His comments come two days after brewer Constellation Brands, Inc. STZ paid $4 billion for a larger stake in Canadian cannabis producer Canopy Growth Corp CGC

Ontario Delay 'A Bit Frustrating'

Aphria, a Leamington, Ontario-based cannabis producer, is a leader in Canada's Green Rush as the country pushes toward full legalization in October.

Recent investments in Canadian cannabis companies were more a case of American players getting up to speed on consumer habits in a legalized recreational cannabis market, Neufeld said. 

"This is all about the big, bad U.S. market and recreational use. Truly, when you look at global entertainment brands, whether Constellation or others, the end game for them is to look at the beta tests that Canada allows global companies to start the journey with, to really understand the journey of consumers in a small way," he told investors.

Of course, market rules in Canada — the first of the G7 nations to legalize cannabis use — are still being worked out. Neufeld knows this only too well after Ontario, the country's largest market, recently delayed the launch of recreational cannabis sales in bricks-and-mortar locations until April 2019, well after full legalization in Canada starts in October 2018.

"It's a bit frustrating; a lot of plans were laid for a mass rollout on Oct. 17," Neufeld told the Toronto conference.

The delay means it will take longer for Canadian players like Aphria to launch and expand their retail footprints and embed their product brands before, as Neufeld predicts, an industry realignment sees Big Alcohol, Big Pharma and Big Tobacco entering, or further penetrating, the North American market.

Securing A Supply Chain

The Aphria boss also discussed product innovation, as his company and others look to distinguish themselves in an increasingly crowded market with branded products, customer experiences and product quality and consistency.

Licensed producers need to secure a supply chain with cultivation yields, quality and low-cost producers so that, when cannabis becomes a packaged, branded commodity in a legalized recreational market, companies have control of input materials, Neufeld said. 

"It's the technology that's important. You got to get it right. If you don't have the input materials, it will be very costly," Neufeld said of partnering with brands to sell disruptive products like tea bags, K-Cups, edibles and eventually beverages.

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