The era of legal weed kicked off with a shortage in 2018, creating opportunity for the Atlantic Canadian cannabis market.
Atlantic Canada is without a doubt the most underrated cannabis market in the country. While British Columbia has a tendency to dominate the cannabis conversation thanks to strong cultural associations and that iconic “BC bud” branding, and Ontario has the population numbers to capture the attention of the biggest players, it’s actually Nova Scotian consumers who are very quietly enjoying the most cannabis per capita in the country.
During the third quarter of 2018, 23 percent of Nova Scotians reported consuming cannabis. That’s a massive portion considering the fact that recreational cannabis was not yet legal during that period. The consumption rates for the other Atlantic provinces are nothing to scoff at either, with Newfoundland and Labrador, Prince Edward Island and New Brunswick consumers reporting usage rates north of 18 grams per person per year.
Despite this clear relationship between Atlantic Canadian consumers and cannabis, the market is seeing little love from the industry, with retailers and producers often focusing on larger population hubs. This is good news for companies that are serving these provinces, however, as they have access to some of the least crowded markets in the cannabis space and a consumer base that’s passionate about the product.
Unique culture in the Atlantic Canadian cannabis market
As with most of Canada, in the early days of the federal government launching the legal cannabis market, demand for cannabis in Atlantic Canada vastly exceeded supply. The difference between Atlantic Canada’s cannabis supply problems and those of the big markets like British Columbia and Ontario is that those two provinces are home to 75 percent of the country’s Health Canada licensed producers. This means that, despite similar or possibly larger per capita demand in Atlantic Canada, there are fewer producers to help level out the market.
The results so far have been predictable, and, less than two weeks after legalization day, cannabis sales temporarily shut down as retail stores ran out of product. For the Atlantic Canada cannabis consumer this was problematic, as it had users turning back to the black market or going without for some time. For Atlantic cannabis businesses, however, it’s a good problem to have when you literally can’t produce fast enough to meet the demand for your product.
In Atlantic Canada, there’s a culture of local loyalty, and that loyalty extends to locally owned and operated businesses. This is why Atlantic Canada cannabis companies, like the Nova Scotia-based Biome Grow (CSE:BIO), have put emphasis on branding themselves as cannabis companies by Atlantic Canadians for Atlantic Canadians.
“In Atlantic Canada, being a local provider of goods and services resonates better than in other parts of the country,” Biome CEO Khurram Malik told INN. For local cannabis companies, there’s a big opportunity to establish a strong foothold in the Atlantic market by generating goodwill within the community. Particularly in rural and other economically challenged parts of the region, cannabis growers are some of the largest new employers to move into the area in generations. By building a truly local presence, infusing that local Atlantic Canadian DNA into their brand identities and products and forging partnerships with other local producers, retailers and Atlantic Canada brands, cannabis companies can become part of the Atlantic Canada fabric.
To that end, Biome, a licensed producer, has adopted a locally focused business model in the region. Each of the company’s wholly owned operations has a local management team, local production, locally focused branding and more. The company has taken pains to understand the demographics of the Atlantic provinces and cannabis consumer types, which include not just the stereotypical cannabis consumer but every demographic up to and including middle-aged single moms. This is particularly important in a market like Atlantic Canada, where an older demographic than the national average means it’s not a smart strategy to make assumptions about the “typical” cannabis consumer.
“This level of granular understanding of our local markets allows us to provide our markets with more customized solutions that will resonate better than what the competition has in the same markets,” Malik told INN.
While the Atlantic Canada legal cannabis market is comparatively uncrowded, Biome isn’t alone in the region. Large national players like Canopy Growth (TSX:WEED) have established a footprint, with the company announcing in November 2018 its intention to invest C$25 million to build a cannabis production facility in St. John’s, Newfoundland. In addition to the national players, local players like Aqualitas, Breathing Green Solutions and Truro Herbal Company are building regionally focused footholds in Atlantic Canada.
Cannabis as an economic driver
Cannabis legalization is as much an opportunity for local Canadian economies as it is for cannabis companies. Every cannabis business that opens in a given community means dozens of jobs in that community. In recent decades, Atlantic Canada has faced economic challenges associated with aging demographics, declining energy and resource exports and a lack of economic diversity.
New Brunswick was projected in early 2018 to have the lowest economic growth for the year of any province. An injection of cannabis jobs and spending could be huge for the region, and provincial governments in Atlantic Canada realize that. Provincial and regional authorities have been willing to provide incentives and partnerships because they consider cannabis jobs to be a key new economic driver for their economies. This isn’t the case in larger provinces like Ontario, British Columbia and Alberta.
Atlantic Canadians love their cannabis and, so far, comparatively few companies have stepped in to take advantage of that consumer enthusiasm. This creates an excellent opportunity for locally focused cannabis businesses to step in and show their provinces some love. In doing so, these companies can earn the loyalty of the Atlantic Canadian cannabis market consumer and establish themselves in the market for decades of success.
This article was originally published on the Investing News Network in November 2018.
This INNSpired article was written according to INN editorial standards to educate investors.
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