Canadian cannabis companies focused on scaling up to meet anticipated post-legalization demand

Producers recognize the need to invest in innovation and talent to be competitive

TORONTO, Nov. 20, 2017 /CNW/ - Thirty-seven percent of Canadian licensed cannabis producers are focusing on scaling up capacity and production to meet anticipated post-legalization demand, according to a new Canadian EY cannabis study of licensed producers.

"Limited access to capital and an uncertain regulatory environment is impeding Canadian cannabis companies' ability to make long-term strategic investments," says Monica Chadha, EY Canada's National Cannabis Leader. "Many companies are currently allocating available capital towards increasing scale of production, but recognize that there's an opportunity to shift some of that investment towards technology and innovation in order to build a competitive advantage."

The report, How do you define your future in an undefined market?, outlines how survey respondents see established industries – such as tobacco, pharmaceuticals and alcohol – as well-positioned to enter the cannabis market due to their strong ties to capital, mature infrastructure, brand recognition and knowledge of operating in a regulated environment.

Survey respondents recognize further investment in human capital, and technology and innovation will be crucial moving forward. In fact, 37% say they will be investing in technology to drive a competitive advantage and allow for differentiation in the market. 

For 85% of licensed producers, technology or innovation means creating new products or derivatives. This is complementary to the 75% who believe the demand for varied derivative products will increase in the coming years.

Survey results show investment in talent is lacking the most. Only one-quarter realize that the composition of talent in areas of the recreational business – including retail, corporate compliance, governance and branding – will need to improve in order to operate effectively.

"As the industry matures and regulatory frameworks become clearer, investments in human capital and innovative technologies need to occur, in conjunction with production," says Chadha. "A focus on innovation will ultimately lead to lower costs, heightened product quality and/or productivity enhancements. Cannabis companies who fail do to so, risk losing market share to bigger players."

Read the EY How do you define your future in an undefined market? study for key insights on Canada's cannabis industry.

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SOURCE EY (Ernst & Young)