What legalised cannabis could mean for business in Canada
New legislation being introduced in Canada for 1 July, 2018 will legalise, regulate and restrict access to cannabis, and allow Canadian provinces to decide how the drug will be distributed and sold, which presents huge business opportunities for growers, distributors and manufacturers.
Medical marijuana is already legal in Canada and business is booming with the industry bringing in CA$869 million in legal sales in 2016. Taking this into account, Deloitte estimates the current cannabis market has a base retail value between $4.8-$8.7bn, which would rival the size of the Canadian spirits market, which is $5bn. Vivien Azer of Cowen & Co. said in a recent report: “When you consider ancillaries such as growers, testing labs, security, etc., the economic impact could range from $12.7 to $22.6bn. These numbers do not include the impact of tourism, business taxes, licensing fees and paraphernalia sales, which could drive the economic impact higher.”
It's clear that there is a lot of opportunities for businesses in Canada that want to capitalise on this new legislation. This is being led by those already in the industry who are keen to see proper regulation of the drug for recreational purposes, but also understand that it will bring increased investment, innovation and new jobs too.
Just after the announcement of the legislation, stocks in publicly traded marijuana businesses spiked. Shares of Canopy Growth Corp. were up 11% in trading, Aurora Cannabis rose 10%, Aphria rose 7.9%, SupremePharma jumped 6% and OrganiGram holdings rose 10%. The rapid rise has dropped off since, but as we move towards July next year an overall upward trend is to be expected.
In order to meet the low end of the estimates for the adult-use market, Canada would have to produce over 600,000kg of cannabis a year, representing a significant increase over current levels that has sparked a rush to build new grow facilities.
Alberta-based medical marijuana producer Aurora Cannabis has been lobbying for these new rules and isn’t surprised by the new legislation. In fact, it's confident it can meet demand. In a statement, CEO Terry Booth said: “The legislation and anticipated timeline for legalisation validates Aurora’s business strategy of building and acquiring the capacity to produce high quality cannabis on a massive scale, with low per-gram cost of production; establishing what we believe is the industry's leading e-commerce and customer care platform.
“With our existing purpose-built production facility in Alberta, and construction well underway at our new 800,000 sq ft facility at Edmonton International Airport as well as the recent acquisition of a third production facility in Pointe-Claire, Quebec, we anticipate being one of the largest suppliers to both the rapidly-growing medical cannabis sector and the much larger newly-legalised consumer market.”
Existing cannabis producers have been looking ahead to this kind of legislation change and have made plans to scale up their operations. Health Canada is also helping by speeding up the licensing process for the production of legal medical marijuana, in an attempt to ramp up cultivation ahead of July.
The winners are most certainly going to be those who can produce the most grams to be sold onto consumers, as the demand is going to surge when July 2018 rolls around.
If producers can meet demand, there’s a chance that recreational cannabis use could hurt sales of alcohol. You only have to look to the US to see signs of this. Recent reports show domestic beer sales fell in Colorado, Washington and Oregon after cannabis was legalised, with sales of Coors Light and Bud Light dipping as much as 4.4%. The beer market, which is worth about $9.2 billion, is anticipated to take a $70 million hit from in the first year of marijuana legalisation, the Anderson Economic Group says.
It’s not just producers who are set to benefit from the legalisation of cannabis. Plenty of investors have done well investing directly in the cannabis industry, but there are other opportunities out there too. It’s likely that Amsterdam-style coffee shops will start to appear in Canada, offering recreational marijuana to locals and tourists alike. The boom is tourism is likely to come from the US, where only a handful of states have legalised cannabis.
Not only that, but under the new legislation, it'll be legal for cannabis users to grow up to four plants per household. This means there will be increased demand for seeds, growing equipment and hydroponics.
The makers of paraphernalia are also set to benefit as there will be the increased need for the practical products surrounding the smoking and cooking of cannabis.
Finally, there's likely to be a boom in the amount of ecommerce websites being set up to sell seeds, cannabis, equipment, paraphernalia and more. To sell cannabis legally, these websites will need to be federally licensed, but would mean users can get the drug and any other equipment delivered directly to their door. This could also be a potential expansion route for already established websites that want to expand their offering.
At this stage, the legalisation bill doesn't say how those involved in the cannabis industry will be taxed. It's likely that in the early stage tax will be kept low in the hope that legal manufacturers will soon elbow out anyone still dealing the drug illegally. A balance needs to be found that allows Canada to benefit from a newly-legalised industry, while ensuring the retail price of cannabis isn’t pushed so high that people still look to acquire it cheaply and illegally.
There’s no doubt that this new legislation is going to benefit both new and existing businesses, but a lot of that rides on meeting demand when the new regulations come into effect.
Marketing matters: from IBM to Kyndryl
Prior to joining Kyndryl as Chief Marketing Officer, Maria had a 25-year career at IBM, most recently as the tech giant’s CMO where she oversaw all marketing professionals and activities across North America, Canada and Latin America. She has held senior global marketing positions in a variety of disciplines and business units across IBM, most notably strategic initiatives in Smarter Cities and Watson Customer Engagement, as well as leading teams in services, business analytics, and mobile and industry solutions. She is known for her work with teams to leverage data, analytics and cloud technologies to build deeper engagements with customers and partners.
With a passion for marketing, business and people, and a recognized expert in data-driven marketing and brand engagement, Maria talks to Business Chief about her new role, her leadership style and what success means to her.
You've recently moved from IBM to Kyndryl, joining as CMO. Tell us about this exciting new role?
I’m Chief Marketing Officer for Kyndryl, the independent company that will be created following the separation from IBM of its Managed Infrastructure Services business, expected to occur by the end of 2021. My role is to plan, develop, and execute Kyndryl's marketing and advertising initiatives. This includes building a company culture and brand identity on which we base our marketing and advertising strategy.
We have an amazing opportunity ahead at Kyndryl to create a company brand that will stand apart in the market by leading with our people first. Once we are an independent company, each Kyndryl employee will advance the vital systems that power human progress. Our people are devoted, restless, empathetic, and anticipatory – key qualities needed as we build on existing customer relationships and cultivate new ones. Our people are at the heart of this business and I am deeply hopeful and excited for our future.
What experiences have helped prepare you for this new opportunity?
I’ve had a very rich and diverse career history at IBM that has lasted 25+ years. I started out in sales but landed explored opportunities at IBM in different roles, business units, geographies, and functions. Marketing and business are my passions and I landed on Marketing because it allowed me to utilize both my left and right brain, bringing together art and science. In college, I was no tonly a business major, but an art major. I love marketing because I can leverage my extensive knowledge of business, while also being able to think openly and creatively.
The opportunities I was given during my time at IBM and my natural curiosity have led me to the path I’m on now and there’s no better next career step than a once-in-a-lifetime-opportunity to help launch a company. The core of my role at Kyndryl is to create a culture centered on our people and growing up in my career at IBM has allowed me to see first-hand how to prioritize people and ensure they are at the heart of progress in everything Kyndryl will do.
How would you describe your leadership style?
I believe that people aren't your greatest assets, they are your only assets. My platform and background for leadership has always been grounded in authenticity to who I am and centered on diversity and inclusion. I immigrated to the US from Chile when I was 10 years old and so I know the power and beauty that comes from leaning into what makes you different from other people, and that's what I want every person in my marketing organization to feel – the value in bringing their most authentic self to work every day. The way our employees feel when they show up for themselves authentically is how they will also show up for our customers, and strong relationships drive growth.
I think this is especially true in light of a world forever changed by the pandemic. Living through such an unprecedented time has reinforced that we are all humans. We can't lead or care for one another without empathy and I think leaders everywhere have been reminded of this.
What’s the best leadership advice you’ve received?
When I was growing up as an immigrant in North Carolina, I often wanted to be just like everyone else. But my mother always told me: Be unique, be memorable – you have an authentic view and experience of the world that no one else will ever have, so don't try to be anyone else but you.
What does success look like to you?
I think the concept of success is multi-faceted. From a career perspective, being in a job where you're respected and appreciated, and where you can see how your contributions are providing value by motivating your teams to be better – that's success! From a personal perspective, there is no greater accomplishment than investing in the next generation. I love mentoring younger professionals – they are the future. I want my legacy as a leader to include providing value in work culture, but also in leaving a personal impact on the lives of professionals who will carry the workforce forward. Finding a position in life with a job and company that offers me a chance at all of that is what success looks like to me.
What advice would you give to your younger self just starting out in the industry?
I've always been a naturally curious person and it's easy for me to over-commit to projects that pique my interest. I've learned over years of practice how to manage that, so to my younger self I’d say… prioritize the things that are most important, and then become amazing at those things.