One potential cloud on the horizon for the wine trade is the competition that will come from the creeping legalisation of cannabis. But in Canada, which recently became the first G7 country to legalise cannabis for adult use, a leading Ontario wine agency is taking advantage of this new business opportunity..
Cannabis is now legal in nine US states (Colorado and Washington 2012; Oregon, Alaska and Washington DC 2014; California, Nevada, Massachusetts and Maine 2016; and Vermont 2016) but it remains illegal federally. This is why it is significant that in June 2018 Canada made the decision to legalise recreational cannabis nationally from October 17. Surveys suggest one-third of Canadians plan to use it, making the potential market enormous. Respected Ontario distributor Lifford is one of the first wine companies to enter the cannabis market. A land grab of sorts is in process.
A new product
“Everyone is trying to put a flag on the moon,” says Steven Campbell, managing director and owner of Lifford. He has hired his daughter, Lisa, to head up Lifford’s cannabis arm, Lifford Solutions. She has a background in drug harm reduction and cannabis advocacy, and is well placed to steer a wine company into this new area. “The world is finding itself in the midst of an opiate crisis and looking for solutions,” says Lisa. “Cannabis is harm reduction, and I’m so happy Canada is the first G7 country to legalise it.”
Lifford Solutions will be the manufacturers’ representative for licensed cannabis processors, similar to the way it represents wineries. “The route to market for cannabis is almost identical to alcohol,” she says. “Cannabis must go through a government control board before making it to retail outlets.” It will be sold using a recently launched national tracking system, which allows producers to apply online and track their harvest from seed to sale. Distribution will vary by province. Some provinces will sell only through government stores, some through a hybrid of public and private, while others will opt for completely private retail.
“Cannabis cafes, lounges and restaurants have been a topic of discussion,” says Lisa Campbell, “especially as buzz is building internationally over the potential of cannabis beverages.” Currently, though, it remains illegal to mix alcohol and cannabis, ruling out weed-infused wine. “The first year of legalisation will only include cannabis flower and oil,” she says, “as Health Canada drafts regulations for edibles and beverages.” These will be available in 2019. “It remains to be seen whether cannabis consumption spaces will be regulated, but municipalities will have a huge say. Ontario will have private retail in April and government retail online for the first half a year of legalisation.”
So will cannabis be branded, as with wine, or just generic? “Cannabis advertising regulations are plain packaging with health warnings similar to tobacco. It’s still classified as a narcotic in Canada, so advertising is subject to millions in fines with potential for jail time.” Nevertheless, she says it is rapidly becoming a branded space. “Cannabis companies are ignoring the regulations and turning from sponsoring music festivals to corporate social responsibility campaigns. Celebrity endorsements are against the regulations but Snoop Dogg has his own brand of cannabis and so do Canada’s famous The Trailer Park Boys.” And some products will command a premium because of perceived high quality: “Many quality products will be small batch limited edition cultivars by award winning master growers,” she says. “As well, cannabis extracts, edibles and beverages will have a premium category for artisanal products.”
The price
In terms of pricing, wholesale flower is on average C$4.00 ($3.09) per gram. Because of a 10% federal excise tax, plus local taxes, retail should be C$5.00 to $12.00 per gram. This compares with black market prices that can be as low as C$3.60 per gram. “The goal is for the government to set prices that will compete with the black market,” says Campbell. “Financial analysts are predicting lower sales due to the black market competing with the licit market. Prices in the black market are dropping as legalisation draws nearer.”
Several wine companies have added cannabis products to their portfolios. Constellation Brands has purchased Canopy Growth Corporation, which is the largest cannabis company in the world, while in August marijuana stocks spiked after the market caught whiff of rumours that Diageo was looking to buy a Canadian company. In contrast, US wine companies have been shy to get involved with distribution as cannabis is federally illegal.
It will be interesting to see the impact of legalisation as it rolls out over the next couple of years, but as it stands it seems that wine agencies have a lot to gain by expanding into this new market. How much, though, will legal cannabis impact the wine market? One barrier that may slow the advance of cannabis is the lack of recognised social situations where it will easily fit – as opposed to wine’s established social settings – but its emergence is likely to upend the wine trade.
