First it was Nortel Networks Corp., then Research in Motion Ltd. – two behemoths that exemplify recent Canadian brushes with global industrial dominance.
Both companies spawned support ecosystems, led the way in research and development and seemed indestructible – remember when the BlackBerry was the business community’s smartphone of choice? – until both saw their competitive advantage quickly erode.
Indeed, it would be easy to characterize Canada as the boxer who “could have been a contender," and was, only to lose its crown in key sectors as more dynamic innovators emerged to overpower our most promising players.
Then along came legalized cannabis.
While licensed producers in this country have already established their leadership in medical marijuana production, in less than a week Canada will become one of the few countries in the world to decriminalize cannabis for recreational use. The growth potential could be exponential.
Canadians spent about $5.6-billion on cannabis last year, according to Statistics Canada, while a recent analysis by the Canadian Imperial Bank of Commerce predicted sales could reach $6.5-billion by 2020, exceeding the sum we spend on spirits each year.
According to a report from San Francisco-based Grand View Research Inc., the worldwide legal cannabis market may be worth up to US$146-billion by the end of 2025.
Could cannabis be Canada’s chance to finally dominate an industry over the long term? The sector may be in its infancy, but an influx of top executive talent from mature global industries, not to mention investments from outside the cannabis business, bode well for Canadian producers.
This year, for example, the alcoholic beverage producer Constellation Brands Inc. – owner of the Corona and Kim Crawford labels – announced it would make a multibillion-dollar investment in Smiths Falls, Ont., cannabis firm Canopy Growth Corp.
Atlanta-based soft-drink giant Coca-Cola Co. is reportedly in talks with Edmonton’s Aurora Cannabis Inc. to develop a beverage infused with cannabidiol (CBD), the cannabis component that delivers medical benefits such as pain relief.
So, how can the domestic cannabis industry avoid the pitfalls that compromised the long-term success of other Canadian corporate success stories?
Industry players and watchers offer their take on what legal marijuana producers can do next to become global powerhouses.
Cam Battley, Aurora Cannabis Inc.’s chief corporate officer, on why speed to market is so critical
“Because cannabis remains illegal on a federal level in the United States, we have a lead, and I don’t know how long that window of opportunity will remain open. Remember, it could change with a single tweet in the U.S.
"But right now, the leading Canadian companies like Aurora and Canopy and a few others have notable advantages. We have the proven ability to cultivate, we understand the process, we’ve operated under tight regulation for four years and we have a track record. That means we have a reputation and a certain level of trust with governments internationally. There’s no time to be lost, and speed is of the essence.”
Brad Poulos, lecturer in the Business of Cannabis course at Ryerson University’s Ted Rogers School of Management, on the sector’s growth potential
“If you take a look at the entire world and ask what’s going to happen to the cannabis industry over the next 10 to 15 years, I think it’s poised for huge growth. There will be a lot of jurisdictions loosening their restrictions and representing a cannabis market for Canada, or at least for the technology and all the other things that Canadian companies will develop over the next decade or so.
"If we’re going to build a meaningful business here in Canada, it has to be around brand and technology.”
Ashley Dumouchel, lawyer with Aventum IP Law LLP, Ottawa, on the need to build globally recognizable brands
“The cannabis industry is very heavily regulated in terms of branding, labelling and packaging. I think the success of individual companies is going to rely on avoiding regulatory issues. The industry players need to manage their businesses within those branding regulations, but explore where the boundaries are.
"I think licensed producers can operate within the regulations and still distinguish themselves in the marketplace. If they can build strong brands now – and I think that is possible even with the regulatory hurdles – then they can eventually become known worldwide and export to other countries.”
Monica Chadha, accounting firm Ernst and Young LLP’s national cannabis leader, on the obstacles facing Canada’s industry
“Canadian cannabis companies operate with many unknowns. Their current key challenge is scaling up to meet projected retail demand while adapting to different provincial and territorial approaches for retail and distribution. As they scale production, Canadian companies must build the competencies and operating models to be low-cost producers with the highest quality standards.
"As the retail cannabis market evolves and competition increases, the other challenge is to develop high-performing organizations with top talent to deliver the right business model. If it’s done right, this should position Canadian players to effectively expand geographies, and extend their competencies in cultivation and research and development – momentum that’s already starting to occur.”