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HIGHLIGHTS
  1. An increasing number of companies are generating millions of dollars in annual revenues by selling packaging to cannabis producers
  2. Sustainability has been a key challenge in the sector as producers struggle to make recyclable or compostable products that still comply with regulations
  3. Imminent arrival of new cannabis products such as edibles and vape pens complicate the packaging debate even further

In the gold rush world of legal cannabis, one company north of Toronto fancies itself the largest supplier of picks and axes.

Markham, Ont.-based PharmaSystems has been packaging pills, ear plugs, thermometers and just about any other retail pharmacy product you can imagine for nearly 45 years, and is Canada’s largest supplier of behind-the-counter pharmacy supplies. Five years ago, the family-owned business launched a new division, CannaSupplies. As the name suggests, it makes packaging for the legal cannabis industry and already accounts for one fifth of the company’s total revenue.

“In terms of percent growth, we are in the thousands,” said Mark Finkelstein, the company’s vice-president of sales, noting he took 42 flights last year pitching his company’s products to licensed producers across the country. “I was everywhere.”

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An increasing number of companies are generating millions of dollars in annual revenues by selling packaging to cannabis producers in a sector estimated to be worth somewhere between $60- and $75-million a year.

PharmaSystems makes at least some of the packaging for most of the LPs in Canada, Mr. Finkelstein said. Yet, as the industry evolves, more competition is entering his niche and debates are raging over how to reduce packaging waste, what packaging might work best for new form factors such as infused foods and drinks, and how cannabis ultimately should be treated versus existing consumer packaged goods.

Pharma product or a fine cigar?

“A lot of companies jump into this space that are coming from other areas, but they do not have an understanding of what the plant’s requirements are,” said Eric Marciniak, co-founder of British Columbia-based NitroTin, which uses modified atmosphere technology to remove all the oxygen from its packages (similar to a soda can or bag of potato chips) that resemble tuna cans.

The company began life as the Kelowna Pain and Cancer society in 2001 under Canada’s original Medical Marijuana Access Regulations (MMAR) and in the last two years has shifted specifically to packaging.

“Over the last 20 years in this business, we have learned that no matter how good people are at growing cannabis, when it comes down to packaging it that has always been an issue,” Mr. Marciniak said. “The cannabis plant is very reactive, it can react to certain plastics and the public really hasn’t been educated about that.”

NitroTin works with InPlanta Biotechnology, which was awarded the country’s first cannabis nursery license in May, to produce coatings formulated to avoid reacting with plant matter.

“That specialized coating allows the plant to be completely inert so it can last almost forever inside that canister until it is ready to be opened… we look at cannabis as a fine cigar,” Mr. Marciniak said. “Our containers are lockable, child-resistant, they cut out all [ultraviolet] light and most importantly, they are 100 per cent recyclable and honestly, we have been pretty disgusted about what we have seen in the past 10 years with the advent of plastics in the cannabis industry.”

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Mr. Finkelstein strongly disagrees with the “fine cigar” characterization of cannabis products. “The early generation LPs and almost all of them still to this day want to follow some sort of pharmaceutical guidelines,” he said, adding “a lot of our competitors have no idea, they cannot understand the complexity of what the Health Canada regulations require.”

Compliance vs climate

PharmaSystems has an in-house creative division that focuses on fitting brand elements such as logos and slogans in the tiny space Health Canada regulations allow producers to include what are effectively marketing materials. That means packaging design and production for legal cannabis works the opposite way as other consumer goods.

“In most cases you would design the package to fit the product properly,” Mr. Finkelstein explained, “but in the cannabis business we have to design a package to fit the regulated label, so it is kind of going backwards because there is no denying that there is a lot of packaging used in that system right now.”

He says CannaSupplies is working on “a ton of environmental things right now, it is by far our most important task.” In a recent visit to the Globe and Mail newsroom in Toronto, Mr. Finkelstein showed off greener products the company has in development; one package was 40 per cent rice-based (though the rest was a difficult-to-recycle plastic called polypropylene), and another was 33 per cent hemp.

Plastic code 1Plastic code 2Plastic code 4Plastic code 5
Polymer namePolyethylene terephthalateHigh-density polyenthylnes (HDPE)Low-density polyethylene (LPDE)Polypropylene
Is it recyclable?YesYesOnly at certain facilitiesMany recycling programs do not accept
Common repurposed for:Textiles, like: carpet, pillow stuffing, life jackets, winter coatsPicnic tables, plastic lumber, waste binsPlastic lumber, landscaping boards, garbage can linersIce scrapers, brooms, battery cables

Ontario Cannabis Store

“This is our first hemp product that is built for mass production,” he said, removing the cap of the small brown cylinder to reveal an interior that, despite being empty, unleashed a strong aroma of hemp and cloves. “And this is the first hemp-based child-resistant cap in the world.”

Criticism over the packaging for individually pre-rolled joints has been especially intense as regulations require most of those products to be sold with two packages: a cylindrical plastic tube containing the actual pre-roll inside a cardboard rectangular prism that is large enough to affix a government excise stamp to the outside.

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“Now we are trying to design everything so that we don’t need that secondary carton,” Mr. Finkelstein said, showing off a prototype plastic pre-roll container that is rectangular so one or two joins can go inside and an excise stamp can fit directly on top. “But we still haven’t gotten to anything that is completely 100 per cent recyclable yet.”

Asking for the wrong kind of recyclable

Of course, whether packaging is recyclable or not depends largely on how one defines the term and where the product ends up. That is why Chris Bromley argues the cannabis packaging sector needs to be more specific about its environmental goals.

“One thing that is going around in the industry right now is everyone is talking about biodegradable plastics, but people need to be aware that biodegradable is not the terminology we should be asking for,” said Mr. Bromley, senior director of child-resistant packaging for Winnipeg-based ColorAd. “Those packages never get put in the right environment to biodegrade and even if they do, they only partially biodegrade.”

“The term is misleading when what we really need is to find a compostable solution,” Mr. Bromley said.

ColorAd has been working with the food and confectionery industry for 20 years but recently started serving the cannabis industry as well. The company’s full-time workforce in Winnipeg has expanded by 50 positions to accommodate the increased demand, Mr. Bromley said, with cannabis-related revenues now accounting for between 10 and 15 per cent of total revenue, but competition is intensifying quickly.

“Over the past two years it has gone from basically no competition to a ton of competition,” Mr. Bromley said, “that is something that we have seen a huge change in, even just from October of 2018 to now.”

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ColorAd’s main cannabis offering is a sealable plastic pouch, which Mr. Bromley argues is an environmentally-friendly option for cannabis producers because of its smaller footprint than plastic pharmaceutical bottles or tin cans.

“When you consider how much less material we use, we are talking about a lot less space required to move so a lot less emissions overall,” he said, “but one downside to our pouch, there is no ignoring the fact that it has an end-of-life environmental impact. It is a number seven recyclable, that means it is not one type of plastic but multiple types of plastics combined.”

None of Canada’s major cities have recycling programs that can process number seven plastics. ColorAd is working on a compostable version of its pouch, but Mr. Bromley says finding a way of making it compliant with Health Canada regulations remains a problem without a solution.

“They just don’t really exist right now in terms of the shelf life stability required so that oxygen and moisture transition rates are within the rules,” he said. “And in the cannabis industry specifically, that child-resistant requirement is a doozy.”

Urgent demand for new form factors

Health Canada released its final regulations in June governing how cannabis-infused foods, drinks and vape products must be packaged once they become available later this year. However, cannabis packaging makers have been forced to spend the past several months developing products they believe will be compliant in order to have them ready on time.

“The sense of urgency has somewhat leveled off for traditional dried flower, oil and pre-rolls,” PharmaSupplies’ Mr. Finkelstein said, “but what has leveled off there has been replaced by this urgent demand for new form factors, which would be your topicals, your edibles and your vape pen cartridges.”

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“We have been designing towards a worse-case scenario, and by worst-case I mean the most heavily regulated,” he said in an interview before the final regulations were published while showing off the company’s recently completed child-resistant plastic lid that can be placed on top of carbonated beverage cans. “Nothing the government has done to date has been any less than that.”

Pharma-style packaging

  • Pro

    • Versatile (can be modified to be used for many different products)
    • Already widely used in health care, thus generating consumer trust more easily
  • Con

    • Difficult to recycle
    • Potentially reactive
    • Often requires additional packaging

Pouches

  • Pro

    • Least expensive
    • Takes up less room (costs less to transport)
  • Con

    • Least recyclable (#7 plastic)
    • Closest resemblance to illegal market packaging

Tin cans

  • Pro

    • Most environmentally friendly option
    • Lack of oxygen makes product inside last longer in an optimal state (i.e. no mold!)
  • Con

    • Expensive (roughly 8x the cost of least costly rivals)
    • Limited versatility (only certain products can fit in a tin can)

The packaging problem “everyone missed”

Demand for new packaging products goes beyond just a need to contain new cannabis products, NitroTin’s Mr. Marciniak argues. His company is working with Alex Abellan, co-founder of cannabis retail chain National Access Cannabis, to provide Canadians who grow their own cannabis with direct packaging options.

“We are going to be setting up in stores across Canada where the general public can come in and they can take cannabis they have actually grown themselves and they will be able to bring it into one of those facilities where they can get it packaged,” Mr. Marciniak said.

As for his main business, NitroTin has signed letters of intent with five major licensed producers, though he wouldn’t name them specifically. The challenge, Mr. Marciniak argues, comes down to cost.

“People are used to putting this stuff in a ten-cent plastic baggie and our program is about a dollar all-in with your can and your label and child-resistant lid,” he said. Mr. Marciniak says NitroTin can make up for that higher cost of materials by being more efficient – “we can run at 35 finished cans per minute with four operators instead of having 30 people in a room doing packaging manually” – but the lack of attention being paid to cannabis packaging makes it difficult to even have the necessary conversation.

“The packaging aspect is the last part of legalization,” Mr. Marciniak said, “it is the part that everyone seems to have missed.”

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