Business of Cannabis: Cronos Group

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By Jason Gorber

As part of our Business Talks with Canada’s top cannabis CEOs, we had the pleasure of speaking with:


Mike Gorenstein

Chairman/CEO, Cronos Group

Toronto, Ontario

How would you describe your company? We are a global cannabinoid company based in Toronto.

How have you seen the industry change over the last several years? Early in the industry, it was about getting the ability to operate and how to get acceptance for cannabis... How do you figure out just how to grow and break through stigma? Now, we’ve really got momentum on mainstream acceptance.

What do you want to see change, and how are you contributing to that change? With legalization, we’ve got the opportunity or the privilege to be able to finally unlock the potential of the plant. That means making sure that cannabis is classified and regulated in the right way. We don’t think that medical patients should be taxed, and so, in Canada, we absorb that excise tax. We’re really hoping this will drive that conversation forward, along with a number of others who believe strongly that medicinal patients should not be penalized by the government.

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There are many sectors that this particular product is wanting to occupy: medical, recreational, wellness products, and also wellness as a whole notion. How do you, as a company, navigate all of that? There are three main ways of being able to get the product, and they all should be treated and regulated differently. On the one hand, there will be product that you need a prescription to buy. I think that should be regulated closer to what we see in the pharmaceutical world, so you do have to certainly produce at a much more controlled and elevated standard, and I think that there should not be taxation, there should be access to insurance coverage, and we have to do research and be able to make sure doctors understand the benefits.

For deregulated products, that’s a segment that we just haven’t seen yet, so it’s really something you don’t see in Canada yet. You’re going to follow [a] more traditional consumer packaged goods model.

Finally, with adult use, you can see how it works in the alcohol and tobacco industries. The biggest roadblock there [are] in Canada is the way the regulations are; it makes it very challenging to communicate to new consumers [and] to deliver things that don’t have excess packaging.

What specifically would you like to see change in terms of not only the regulations but the industry itself, and how are you and your company contributing to that? In Israel, we’re working with organoid models to research different skincare methodologies for psoriasis, wound healing, and acne, laying the foundation there for precision medicine. It will certainly take time, but what we’re doing domestically, in the immediate relation, is really shaping the conversation around taxing patients.

What do you see as the biggest misconception in the industry? From the consumer perspective, [what] they used to do is walk into a dispensary and have a jar of flower, pick what they want and walk out, and not pay [any] tax. It was quite easy. Because you have tax, you have excess packaging. There’s this idea that the licensed producers are overcharging or aren’t environmentally friendly, using so much plastic. There is a misconception there [that] this is something that we want to do! In order to get the market going, these were the regulations that needed to be put into place.

Why do you think those regulations were put into place? Was it simply a misunderstanding of the market? Was it them being draconian? Or was it them truly trying to do something better in terms of the safety of the product? Think about how historic this is for Canada to step forward and say this is the right thing to do at the federal level. This is the beginning of the ending of global prohibition. You didn’t have 100% support for that, so everything becomes a compromise, a negotiation. There were a lot of people that worried what would happen day one - we’d suddenly see everyone just smoking in the street if it’s legalized! I think going a little bit slower, being more conservative, waiting and seeing, is why there are all of these controls and restrictions [that] needed to be done to make sure that everyone would just be OK with the idea of a high level of legalization.

Canada didn’t burn down when legalization hit.

Is it fair to say that being first isn’t just a matter of just short-term advantage but, in the long term, dictating the way that the conversation moves forward?

I think that’s right. One of the things you’ll see about us is our focus isn’t really on how much capacity can we build and how much can we grow because I think that to say that from a growing capacity that Canada will compete with, say, Columbia would be unrealistic. But that’s never stopped companies like Starbucks from being successful when they started in Seattle or Apple from being successful in California when they had their iPhones made in China. There’s a lot of technology, a lot of marketing and branding that can be built here, and I think that’s a long-term advantage that we should be aiming for. It actually will make the Canadian companies stronger to be able to leverage the global economy.