Half-Baked: Edibles, Beverages and New Cannabis Products to Be Legalized and Regulated in 2019
On June 14, 2019, Health Canada released the final regulations (the “Regulations”) that will govern the production and sale of additional classes of cannabis products including edibles, beverages, concentrates and cannabis-infused topical creams and lotions.
Deloitte published a report earlier this month which valued the market for these new forms of cannabis products at $2.7 billion annually. Consequently, industry actors now have clear guidelines for how to develop new lines of products that will comply with Health Canada’s strict regulatory regime.
Content of the regulations
The Regulations will amend the Cannabis Regulations to implement specific restrictions for the new classes of cannabis products. With respect to edible cannabis and cannabis beverages, which are expected to make up more than half of the recreational cannabis market, the Regulations include restrictions on:
- The use of ingredients that could increase the appeal of cannabis (e.g., nicotine, alcohol, non-naturally occurring caffeine, added vitamins and minerals);
- The development of products which require refrigeration (i.e., no perishable goods, like ice cream);
- Any products that have an appearance, shape or other attribute or function that could be appealing to young persons (which some commentators expect will limit the possibility of gummy bears or other candy products generally marketed towards young persons).
Additionally, the Regulations include restrictions on the use of sugars, sweeteners or colours in cannabis extracts, such as oil for vaping.
The Regulations substantially mirror the draft regulations published by Health Canada for consultation in December 2018, despite numerous concerns raised by industry surrounding the rules on production facilities.
The Regulations provide that a holder of a processing license cannot produce, package or store cannabis in the same building as non-cannabis food destined for public consumption. This requirement creates high barriers to entry for existing food processors who may wish to integrate the production of edible cannabis products into existing food processing infrastructure.
Coupled with the requirement announced on May 8, 2019 that new license applicants must complete construction of an operational processing facility before applying for a processing license (see our article “Health Canada Announces Changes to the Cannabis Licensing Process”), existing licensed processors may have a significant first movers advantage in bringing these new cannabis products to market.
The Regulations include specific packaging restrictions for the new classes of products. Edible products and beverages cannot contain any more than 10 mg of THC per individual child resistant package. Cannabis extracts, such as oil cartridges for vape pens, and topicals for use on skin, hair and nails will be limited to 1000 mg of THC per package.
Similar to the existing packaging obligations for dried flowers and other existing cannabis products on the market, the new classes of cannabis products can only be sold in plain packaging which conforms to specific rules, such as limitations on colour, use of logo, and the inclusion of mandatory health warnings.
Companies wishing to produce and sell these new classes of cannabis products will have access to new markets but will also face new challenges on regulatory compliance for production, packaging and marketing.
The Regulations will come into effect on October 17, 2019, however licensed processors will have to provide Health Canada with a written notice at least 60 days before making a new cannabis product available for sale. Delays in the roll-out of products are to be expected.
We note that Health Canada will not provide pre-approval of new products and processors will be responsible for ensuring that any new products are compliant with the Cannabis Regulations, as amended by the Regulations. If you are planning on developing new product lines in this space, will you be ready for 2019?