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Cannabis Beverage Producers Alliance Wants Fair/Rational Regulations

Jeff Nielson Jeff Nielson, Stockhouse
0 Comments| April 25, 2019

A Canadian Press article has provided two pieces of news that will be of interest to cannabis investors and cannabis consumers alike.

A group of alcohol and cannabis companies have formed an industry alliance to push for changes to proposed rules governing pot-infused beverages before edibles become legal in the coming months.

Click to enlarge

The (Canadian) Cannabis Beverage Producers Alliance is currently composed of 10 member companies, including Truss Beverages (the Molson Coors-HEXO Corp joint venture), CanBev (a WeedMD/Phivida Holdings JV), and Hill Street Beverage Company. The Alliance includes both industry professionals and manufacturers.

The Cannabis Beverage Producers Alliance is led by former Nova Scotia premier, Darrell Dexter. It plans to lobby the Canadian government with respect to proposed (and scheduled) amendments to the Cannabis Act, with these amendments due to come into force no later than October 17, 2019.

In addition to lobbying for improved access to cannabis-infused beverages, the Alliance also intends to be active in examining consumer and public safety issues. At present, the primary focus of the Alliance is to eliminate the proposed requirement that cannabis-infused beverages be produced at a separate facility from non-cannabis beverages.

The proposed regulation is yet one more example of the cannabis phobia that still permeates the Canadian government with respect to both its laws and attitudes toward cannabis. Despite having fully legalized cannabis consumption, the federal government continues to bombard cable channels with taxpayer-funded commercials that stigmatize cannabis usage.

Cannabis is non-toxic and non-addictive. Cannabinoids, the active ingredients in the cannabis plant are produced naturally within the human body. What scientific or legal justification is there for imposing the rule that cannabis-infused beverage production be quarantined from the production of other beverages? None.

What such a rule will do is to dramatically escalate the cost of producing cannabis-infused beverages. By artificially raising production costs (without justification), the Government of Canada continues to undermine the development of the legal cannabis industry – and continues to provide large economic incentives for cannabis consumers to obtain their cannabis from black market sources.

A previous Stockhouse article noted that 72% of recreational cannabis sales in 2019 are still expected to take place on the black market. This is despite the fact that cannabis was fully legalized in Canada in October 2018, and despite the fact that the government’s self-declared objective in cannabis legalization was to put an end to black market cannabis commerce.

Yet again and again, we see both the federal and provincial governments obstructing rather than assisting the legal cannabis industry in expediting cannabis commerce away from the black market. At the provincial level, most Canadian provinces and Territories continue to provide grossly inadequate retail access to cannabis for Canadian consumers.

As with cannabis-infused beverages, the problem here is excessive regulation and the deliberate imposition of business costs on legal retailers. This discourages entrepreneurs from entering this market, delays the launching of new retail outlets, and imposes punitive costs of doing business (such as excessive taxes) that further undermine the legal cannabis market.

This isn’t like the production of (toxic) alcohol products or (toxic) tobacco products. These are dangerous drugs that exact an enormous toll in terms of both health problems and the huge economic costs of treating those health issues. Segregating the production of these products can clearly be justified in health and safety terms.

Click to enlargeThe Alliance is also opposed to restrictions on the language that companies are allowed to use in describing and marketing these products. Specifically, the Alliance questions the proposed legal restriction to prohibit the makers of cannabis-infused beverages from calling these beverages “beer” or “wine”.

One company with a particularly strong (and informed) viewpoint on this subject is Hill Street Beverage Company (TSX: V.BEER). Hill Street already has an established business producing award-winning non-alcoholic beers and wines. The Company plans on infusing these products with cannabis, once this is legalized (in the October 2019 amendments).

Yet as regulations stand today, not only would Hill Street need to construct or purchase a second, separate facility to produce these infused beverages. It also would not be allowed to call them “beers” or “wines”. Stockhouse reached out to Hill Street’s CEO, Terry Donnelly for his thoughts on these restrictions.

“We believe that the safest route for consumers to understand the right amount of beverage to consume is to mimic the intoxicating beverages we have been drinking for thousands of years. We inherently know and understand exactly how intoxicated we will get from one, two, or three beer or glasses of wine. With cannabis beverages being a completely new experience, how are consumers going to be able to know and understand how much and how often they should consume a cannabis beverage? How will they know how to remain in control of the level of intoxication they desire, unless we give them familiar benchmarks to guide them? Using terms like "wine and beer" gives consumers familiar formats and flavours that allow them to ensure they don't overindulge.”

Sounds reasonable.

A company that already produces non-alcoholic beverages that it is legally allowed to call “beer” and “wine” wants to infuse cannabis into these same beverages. But (under proposed regulations) it will not be allowed to call them “beer” or “wine”.

Donnelly went further in pointing to the seeming absurdity here.

Click to enlarge“How does one describe a cannabis infused wine without using any of the alcohol related terms, such as cabernet sauvignon or wine? Would you inherently understand what a cannabis-infused fermented seven year-old grape drink made from red skinned grapes from California is worth? How about if it was a 2012 Napa Cabernet Sauvignon?

The former is likely a commodity. The latter is a likely a premium experience. We need these distinctions so we can properly educate consumers about what our products are, what to expect from them, and why they are priced the way they are.”

It’s another example of capricious and overly restrictive government regulations concerning the consumption of cannabis. Both cannabis investors and cannabis consumers will look at this and question how serious Canada’s government is about fulfilling its own objective of putting an end to black market cannabis consumption.

Canadians (and people around the world) have been forced by government to purchase and consume cannabis from black market sources for nearly a century. Today, despite claims to the contrary, our government continues to push cannabis consumers toward the black market.

Cannabis legalization is a genie that cannot be put back into the bottle. There was never a legitimate reason to criminalize cannabis usage. As enormous volumes of empirical evidence have emerged on the medicinal and health benefits from cannabinoid consumption, a majority of Canadians now clearly understand this.

At the same time, government intransigence in opening up this industry so that it can fully commercialize its potential is the primary obstacle in accelerating the normalization of cannabis. Cannabis is already legal in Canada. Now Canadians (and Canadian businesses) need fair and rational cannabis regulations for this legal market.

FULL DISCLOSURE: Hill Street Beverage Company Inc. and HEXO Corp are paid clients of Stockhouse Publishing.

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