Canada's Cannabis GCs Discuss Life After Legalization

Canadian flag with marijuana leaf.

As of Wednesday, adult Canadians can legally buy recreational weed—but GCs in the country's cannabis industry can't relax just yet.

Francesco Tallarico, general counsel of The Flowr Corp., said the first day of legal recreational cannabis has been busy. Canada is the largest country to legalize cannabis on a national scale and the first Group of Seven country to do so. Uruguay was the first, in 2013.

"There's a lot going on," Tallarico said. He joined the company, which makes cannabis products, less than a month ago. Since then, he's spent his time negotiating supply arrangements, forming partnerships and working with the marketing team.

One of the biggest challenges for Canadian companies in the space has been around marketing, he said.

According to the Cannabis Act, companies can't promote cannabis products or services using words or other things "that there are reasonable grounds to believe could be appealing to young persons" or things "associated with a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring."

Tallarico said that poses a challenge—cannabis companies need to promote a product that consumers have never (legally) tried before but without using common marketing techniques.

"The marketing side and the sales side is where I think there is going to be a revolution. ... the regulations are very very robust in the sense of what you can and can't say and what you can and can't market. The labeling and packaging is very plain vanilla," he said.

Because of the strict rules around marketing, Tallarico said the industry may have to rely strongly on word-of-mouth and people passing along reviews of high quality products, at least for now.

Christelle Gedeon, the chief legal officer of Canadian cannabis producer Aphria Inc., said marketing and advertising has also been her company's largest legal challenge.

"We don't know what consumers are going to like, and we don't know how far we can go to get consumers to like us and get some buy-in. That has been the biggest struggle, and I think it's going to be the biggest struggle for the next couple of weeks, until everyone readjusts and falls in line with what the regulator wants us to do," she said. "We just don't know what that is. We have the general regulations, but they're so broadly drafted that it gives the regulator the most leeway. And so what we're trying to figure out is: How will they apply it?"

Gedeon said she is expecting more regulatory clarity in the coming weeks, with regulators pointing out what marketing is compliant and what needs to be fixed.

She and Tallarico said Canadian cannabis companies  also are watching to see whether regulators will expand the scope of what can be sold. As of Wednesday, distributors can sell the cannabis bud, but not products such as edibles, oils or cannabis-infused drinks, according to Tallarico.

"One of the primary objectives of the recreational legalization of cannabis was really to get rid of the black or grey market, and we’re still not allowed to have all the formats, such as edibles and drinkables, that are available in the grey market," Gedeon said. "So we’re competing on some products, but we’re not able to compete on all the products yet, because those regulations haven’t comes out."

As Canada's legalization laws play out, Gedeon said she'll also keep her eyes on the international market. Cannabis legalization has been a hot topic in the U.S., with recreational use legalized in a number of U.S. states, including California.

The majority of U.S. states also have legalized the use of medicinal cannabis. Meanwhile, the use of cannabis for any purpose is still illegal on the federal level in the U.S. But Gedeon said she believes that could change.

"We see this as a movement throughout the world as one that goes from a medical access followed by recreational access," she said. "I think everyone is looking to Canada as a model, but we're also looking out from here to see what each of those countries is doing."