Cannabis 2.0 Regulations Overview, Analysis

Today we take a look at highlights for the recently-released Health Canada regulations for cannabis derivatives, or Cannabis 2.0, and how it might impact cannabis companies’ expansion plans

SmallCapPower | June 19, 2019: On June 14, 2019, Health Canada held a teleconference, which provided an update on the legalization and regulation of cannabis products. With the future legalization of edibles and other derivative products on October 17, 2019, cannabis companies have been waiting for the guidelines to begin preparing for the legalization, also known as Cannabis 2.0.

For Our Complete Coverage Of Canadian Marijuana Stocks Click Here      

Although, as expected, the amended regulations will be enforced on October 17, 2019, edibles and other derivatives won’t be available for at least 60 more days. This means companies will only be able to send in a notice with an overview of the product to get Health Canada’s approval (not immediately for sale). For a quick reference, please refer to this chart, which was published by Health Canada.

Some key highlights from the new legislation include:

Edibles

  • Edibles must have 10mg or less of THC per package
  • No added alcohol
  • Caffeine can only be used if it occurs naturally in an ingredient

Beverages

  • Alcohol association regulation will be enforced. This means cannabis products cannot be packaged or labeled in a manner that connects it to alcohol. This is meant to prevent cannabis beer, wine, or the association of a cannabis product with an alcoholic brand
  • Cannabis beverages will have no restriction on volume but, must not go over the legal cannabis possession limit (10MG THC per container)

Ingesting Cannabis Extract

  • 10mg of THC per dispensed amount
  • 1,000mg of THC per package
  • Maximum package size should be no more than 90 mL

Inhaling Cannabis Extract (Vape Pens)

  • 1,000mg per package
  • No sugars, artificial colors, or sweeteners
  • No nicotine or caffeine
  • Maximum package size should be no more than 90 mL

Topicals

  • 1,000mg per package of THC
  • For use on skin, hair, and nails only

General Restrictions

  • Cannabis products cannot be associated with tobacco
  • Cannabis products can not include alcohol or caffeine
  • Only exception is if caffeine occurs naturally and is less than 30mg, or if alcohol occurs naturally in an ingredient (such as chocolate)
  • All cannabis-related products cannot be enticing towards minors
  • Cannot make health or dietary claims
  • Products need to be shelf stable; meaning they must be capable of being safely stored at room temperature in a container

General Regulations

  • Products must contain a Health Warning Message. Products must disclose THC and CBD amounts, have a standardized cannabis symbol, and ingredient list
  • Products must be packaged in a child-proof container
  • Flavoured products are permitted, however, no added sugars are allowed
  • THC duty on the product, which bases the amount of tax on the quantity of the intoxicating components present in the product
  • Provinces will decide what products will be available and how they will be distributed

These new regulations could pose issues to cannabis companies that were looking into cannabis-infused energy drinks, alcoholic beverages, and health and wellness products.

CannTrust Holdings Inc. (TSX:TRST), along with Club Coffee L.P., which operates as a roaster, contract manufacturer and distributor of packaged coffee, founded Cannabis Coffee & Tea Pod Company. The Cannabis Coffee & Tea Pod Company launched BrewBudz, which is a CBD-infused coffee pod. The founding companies patented BrewBudz, which is a unit dose pod formulation that administers cannabis through single-serve brewing pods and are compatible with Keurig, Nespresso and Tassimo-type brewers. BrewBudz is already available in the U.S., but CannTrust was hoping to expand offerings to Canada. The new Health Canada regulations could pose a challenge for CannTrust, due primarily to the limits on added caffeine.

This could also cause potential issues for HEXO Corp. (TSX:HEXO) and Molson Coors Canada (NYSE:TAP), which announced an agreement to create a Joint Venture (JV) for non-alcoholic, cannabis-infused beverages in the Canadian market. The companies are going to have to ensure that any product they create will comply with Health Canada regulations, which limit alcohol in cannabis-infused products.

Unfortunately, for restaurants to be able to even consider selling cannabis products, there are three large hurdles. First, the restaurant would need a processing license to sell cannabis from Health Canada. Secondly, it would then need a license from the related province or territory. Finally, the restriction that all cannabis products need to be shelf stable and have the related warning label prevents restaurants from adding cannabis into their dishes. The only exception would be if it was sold as a packaged good.

To read our full disclosure, please click on the button below: