At the Benzinga Cannabis Capital Conference Friday, Trent MacDonald, CFO of Hexo Corp (NASDAQ: HEXO), Niel Marotta, co-founder and CEO of Indiva Ltd (OTC: NDVAF) and Kevin McLaughlin, director at Centri Business Consulting, participated in a panel discussion of the ways early stage cannabis companies can translate their focused growth strategies into expanding market shares.
McLaughlin said the ability to expand cannabis product portfolios without overextending a young company is a critical balance for cannabis companies looking to gain market share.
“If you’re expanding into some of these other areas, there’s rising demand if we’re talking about edibles, beverages, candies, things like that. That area’s going to be 25% of the market in the next five years or so,” he said.
Regulatory Challenges For Cannabis: One of the major challenges for U.S. cannabis companies looking to expand their footprints is the patchwork of state-by-state and municipality-by-municipality cannabis laws that create a regulatory mess for retailers.
MacDonald said the regulatory environment in Canada has seemingly stabilized for now, making expansion less of a headache from a legal perspective.
“We’re all getting used to working within the regulations as they stand today. There are still some things that we’re trying to do from a government lobbying perspective within certain categories like beverages, where you’re only allowed to have five individual beverages, which makes no sense if you think about it from the perspective of THC milligrams compared to say a one-ounce bag of high-potency THC strained flower,” MacDonald said.
US Expansion: The challenging and unpredictable U.S. regulatory environment is one of the reasons Indiva has yet to dip its toes into the U.S. market. Meanwhile, the company is pushing for changes to Canadian edible laws.
“We’ve got this not-so-intuitive 10-milligram limit on the amount of THC that can be put in a package of edibles. We do face sort of the same type of gram equivalency where you’re limited to how many edibles you can buy before you have to leave the store, put them in your trunk, come in and buy some more, which is very silly,” Marotta said.
MacDonald said the cannabis industry is no different than any other business in that the first step in growing market share is developing a clear, consumer-centric growth strategy.
“You have to understand the consumer and you have to understand retail, because that’s ultimately where your products are going to be sold. So you have to understand what brings products to life in retail, what a consumer is going to want in retail. You have to understand what your brands are and what they represent,” he said.
Why Partnerships Are Critical In Cannabis: Partnerships are also a key part of expansion, such as Hexo’s beverage partnership with Molson Coors Beverage Co (NYSE: TAP).
Marotta said Indiva’s partnership strategy has been primarily to license top-tier U.S. cannabis brands and bring them to Canada.
“Our view was let’s find great partners where not only would we have something award-winning that we knew was good ... but let’s also gain the knowhow from these partners. How do you make the best cannabis chocolate? How do you make the best cannabis gummies?” Marotta said.
To see more of this panel discussion or any of the other presentations at the Benzinga Cannabis Capital Conference, access on-demand video recordings of the event at this link.
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