One of the most common incoming questions from our partners is “How do I get my American CBD brand into Canada”. With CBD prices in Canada often reaching $0.15/mg, the appeal of the Canadian market is obvious! There are, however, some significant challenges to bringing a brand north.
The first challenge that American companies should be aware of is that, under the current regulations, importing hemp or CBD products for sale in Canada is not allowed. This has driven the price of both hemp and distillate on the Canadian market to nearly ten times the price of similar American products. While this is partly offset by the higher sales prices, it does make initial cash flows very challenging!
Why is CBD so difficult to find in Canada? There are three main factors. Firstly, hemp farming in Canada has a limited list of cultivars which can be used, most of which will not produce CBD in levels higher than 6% at best. Much of the hemp stock that we see is <2% CBD. Our pesticide and heavy metals limits are significantly lower as well, limiting where and how extraction grade hemp can be grown. Lastly, there is a bottle neck in our supply system with extraction capacity. Our supply of extraction grade hemp vastly outstrips the ability of the extractors to process it.
Why is extraction capacity lacking? Currently, cultivation of hemp requires an Industrial Hemp license. Extraction, however, requires a processing license under the Cannabis Act. The regulatory hurdles, time and expense to get this license are daunting, especially to new businesses. This regulatory divide also means that hemp farmers are not able to take possession of, or sell, the extracted products. Once the CBD extract has been created, it must stay in the cannabis system to be sold as there is no distinction between regulations for CBD and THC. An American hemp company would need to obtain a cannabis license, or rely on a third party to both produce and sell their products. These products can only be sold through a licensed cannabis retailer and cannot be sold through independent online sales.
Finally, American hemp brands have built their customer base using unique marketing strategies. In Canada, the marketing of CBD products is severely restricted. All packaging must be plain with limited branding options and large warnings. Think child proof version of tobacco packaging. This leads to all products looking nearly the same and makes brand recognition nearly non-existent. Nearly all forms of advertising are prohibited and brand distinction is very difficult to achieve. All marketing that was successful in building a strong customer base needs to be thrown out and redesigned.
While bringing an established hemp brand to Canada can be incredibly lucrative, the challenges associated with this process require a strong understanding of Canadian regulations.