As legal cannabis consumers become acquainted with each new producer and product to hit their shelves, how those offerings are presented is becoming a bit of a controversy. The result has been a mixed reaction, both proactive and reactive, with an array of producfts from leading producers such as Plus Products Inc. (OTC:PLSPF) (CSE: PLUS), Canopy Growth Corporation (NYSE: CGC) (TSX: WEED), CannTrust Holdings Inc. (OTC:CNTTF) (TSX:TRST), Tilray, Inc. (NASDAQ: TLRY), and KushCo Holdings, Inc. (OTC:KSHB).
While Canada’s cannabis buyers have to wait until October 2019 for cannabis edibles to become legal, California’s market is already getting its packaging laws in order. Leading the way in California is Plus Products (OTC:PLSPF) (CSE: PLUS), which now dominates the state’s edibles sector with 3 of the Top 5 cannabis products. As a market leader, the company is now being proactive in its move to roll out child-resistant (CR) tins across the state, well in advance of a January 2020 California deadline.
In the Canadian market, the proposal for responsible packaging has been met with some resistance by producers—citing waste and other concerns.
“Most cannabis consumers care very much about the environment and we’ve already gotten a lot of flak from the public,” said Allan Rewak, executive director of the Cannabis Council of Canada a group that represents licensed producers in an interview with Post Media.
“You’re going to see plastic containers piled up outside stores with people putting (edibles) all in one container.”
At the moment, the Canadian restrictions are primarily limiting to quantity per package. In California, the restrictions are focused on the appearance and function of the containers.
According to the California Department of Public Health’s FAQ website:
“Cannabis product packaging cannot resemble traditionally available food packages and must be tamper-evident, re-sealable if the product includes multiple servings, and child-resistant. In addition, packaging for edibles must be opaque. All manufactured products must be packaged according to regulatory standards before they are released to a distributor.”
EMBRACING THE PACKAGING CHALLENGE
In a release this week, Plus Products Inc. (OTC:PLSPF) (CSE: PLUS) has gotten out ahead of the new law, announcing the redesign of its signature tins, to deliver its popular gummies in new CR packaging—in compliance approximately one full year ahead of the state’s deadline.
“The convenience of our packaging is an important part of what has made PLUS successful. We are proud that we were able to keep the best elements of that experience while bringing to market a new tin that is child resistant, convenient, and still completely recyclable,” said Jake Heimark, CEO of Plus Products Inc.
“We believe the top cannabis brands have a responsibility to lead the industry in a safe direction. We searched the globe for the best child resistant packaging and found it in these tins. It is difficult to achieve child resistance without compromising the portability and practicality of the consumer experience. We believe the tins we are launching this week are an elegant solution to a difficult problem, and are an important step in PLUS continuing to make cannabis safe and approachable.”
The company’s new tins going forward are made of recyclable tinplate steel with a polypropylene insert, and are already available at select outlets in California. The tins are certified according to the Code of Federal Regulations 16 CFR § 1,700.20, and are opened with a press and twist method, similar to a prescription medicine bottle.
It’s doubtful that the new packaging will impact the company’s sales, which lead the state according to BDS Analytics during Q4 2018. PLUS currently produces 3 of the top-5 best-selling branded products in all product categories including flower, vaporizers, edibles and topicals. PLUS “Uplift” and PLUS “Restore” remained the #1 and #2 best-selling SKUs. PLUS “CBD Relief” was the #5 best-selling SKU, and the top CBD-only SKU.
CALIFORNIA LEADING THE PACK
The importance of the edibles market cannot be stressed enough. In a recent BDS Analytics report, the research firm projected sales in the edibles market to surpass $4.1 billion by 2022.
California is currently the largest and most important cannabis market in the world—larger even than the entire country of Canada. In comparison, Canada is only expected to yield $2.7 billion in 2019 legal sales, whereas California already hit $2.5 billion in sales in 2018, and is expected to grow rapidly.
Over the course of its long history since legalizing medical marijuana, California has grown its product selection to more than 250 brands of edibles.
While the California edibles market grew steadlily, Plus Products Inc. (OTC:PLSPF) (CSE:PLUS) managed to get itself to the top of the sector with its premiere cannabis gummies products.
Since hitting the California scene ranked #43 in Q2 2017, less than two years later the company now has 3 of the best-selling branded products in all product categories, including flower, vaporizers, edibles and topicals—Over that time, Plus increased its market share 24x.
Now the company’s best-selling SKUs are PLUS “Uplift” ranked #1, PLUS “Restore” ranked #2, and PLUS “CBD Relief” ranked #5 (which also took the top CBD-only spot, according to BDS analytics). The company has since grown its revenue to a $10 million run rate, with growth coming every month—and now it’s expanding its operations into more states.
GROWING OUT ORGANICALLY
Since launching in 2017, Plus Products Inc. (OTC:PLSPF) (CSE:PLUS) rapidly grew its presence in California from #43 to #1 ranking. By producing an array of products made with high-quality ingredients, PLUS has developed a brand, entirely produced in the Company’s dedicated 12,000-foot, food-safe cannabis manufacturing facility in Adelanto, California. PLUS products are now sold in over 200 licensed dispensaries as well as to delivery service customers, through a distribution partner.
Backing the company is the successful hedge fund Tiger Global Management—known for turning small companies in rapidly growing industries into multi-billion-dollar businesses.
Tiger was recently responsible for the build out of an e-cigarette product known as JUUL. Over 40 months under Tiger’s involvement, JUUL grew to the point where tobacco giant Altria paid $12.8 billion for a 35% interest in the company—giving JUUL a $38 billion value. Now the hope is that Tiger and PLUS can repeat this level of success through the PLUS brand story.
Next up is a planned expansion from the current 12,000 sf manufacturing facility in Adelanto, CA to a 40,000 sq ft space. The Adelanto operation has an annual production capacity of $50 million. The expansion is set to boost Plus Products’ current production line capacity of two lines, with an additional three lines.
EDIBLES AND PACKAGING DEVELOPMENTS
Canopy Growth Inc. (TSX: WEED) (NYSE: CGC)
In the lead-up to the legalization of cannabis-infused edibles and beverages, Canopy Growth plans to release a wide range of products in various forms. These include non-caffeinated chocolate, five different kinds of beverages, and vape pens with new cartridge technology, all ready to roll once Health Canada formally legalizes them. Canopy is set to team up with recycling outfits such as TerraCycle to ensure that their packaging doesn’t end up in landfills.
CannTrust Holdings Inc. (OTC:CNTTF) (TSX:TRST)
Unhappy with the upcoming packaging regulations, CannTrust CEO Peter Aceto has voiced concern, stemming from feedback from clients. The main concern is that the edible legislation will bring with it a lot of packaging, which CannTrust would like to actively reduce. As it stands, Aceto has expressed that much of the existing container surface is used to host government excise stamps and warnings, which he’d like to see reduced, instead to be used more for CannTrust’s branding.
Tilray, Inc. (NASDAQ: TLRY)
Through a recent $419 million deal signed to acquire Hemp Hearts maker Manitoba Harvest, Tilray is looking to team up to launch CBD-infused products where permissible in the US. The acquisition helps to accelerate the pot grower’s entry into the US market, as Manitoba Harvest’s products are already on the shelves of retailers such as Wal-Mart, Costco, and Whole Foods, in both Canada and the US. Tilray is looking to leverage the food maker’s manufacturing facilities and supply chain that touches roughly 16,000 stores, where their products are already sold. Together, they’re looking to take advantage of the recent US farm bill that legalized hemp-derived CBD products.
KushCo Holdings, Inc. (OTC:KSHB)
Unlike most major names related to the cannabis industry, KushCo Holdings entered through the niche of packaging and being in compliance with each jurisdiction. The packaging solutions specialists provide an unglamorous but important service to the cannabis industry. Since entering the market, however, KushCo has since expanded into the sector to create a one-stop shop for cannabis products. The company has secured long-term supply arrangements with three large companies, expected to be worth $75 million.
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