Asia’s Emerging Cannabis Markets with Deepak Anand

Cannabis industry expert Deepak Anand offers his take on the state of the cannabis sector. Anand highlights the progress and growth cannabis has achieved in Asia. He reveals that India and Thailand are advancing on the cultivation front, with Thailand consider cultivation licenses for medical purposes and India granting cultivation licenses for domestic use and export. Anand notes that some Chinese companies have started to export CBD extracts. He discusses the significance of the Japanese market for LPs, as the country is a huge CBD importer for human and animal consumption. Anand provides his analysis of the Ontario retail lottery process and emphasizes both the limitations of the lottery system and the potential for strict enforcement regarding the non-transfer of licenses.

Transcript:

James West:   Hey, Deepak, how are you?

Deepak Anand: Good, James, how are you?

James West:   Great, thanks! I hear you’ve been travelling the world helping people obtain cannabis nirvana on a legitimate basis.

Deepak Anand: One country at a time, James.

James West:   Awesome. So tell us about what’s going on in the world; give us a sense of the pace of de-prohibition in countries that we’re probably not following so closely as Canada and the US.

Deepak Anand: Yeah, I just got back from Thailand and from India, James, and there’s certainly a lot happening in those two countries. India has issued some cultivation licenses for sort of all purposes: R&D, exports, domestic cultivation, and there’s certainly some very good opportunities in that country, particularly on the product formulation side.

And then Thailand, most people may be aware, recently are looking at legislating cultivation in Thailand, you know, including granting licenses to be able to grow cannabis there for medical purposes. So definitely, you know, the Asian markets seem to be really heating up. We’re seeing a few licensed producers get into those markets, but none of the big guys yet in there. We’re certainly seeing Bedrocan out of the Netherlands make a lot of moves early on into those pockets, so that something we’re watching very closely.

James West:   Sure. You bet. Have you heard anything coming out of China? And the reason I ask this is because at some point I’m expecting to see a press release that says XYZ Corp partners with China XYZ Corp to create the first billion-square-foot marijuana grow operation with an average cost of production of $0.02 a gram, or something like that. Is there any sign of broad de-prohibition in China? I know it’s sort of selectively legal; some of the CBD products in areas of China.

Deepak Anand: Yeah, nothing broadly in terms of a Federal perspective in China. There’s certainly a lot of CBD isolate coming out of China, a lot of manufacturers in China, you know, sort of exporting CBD, bringing in CBD isolate to countries like the UK there’s a number of CBD manufacturers that have licenses to be able to import those products in from China. But nothing sort of on the scale that we’re seeing in Thailand or in India at the moment.

Japan on the other hand, you know, importing a lot of CBD products into that countries both for humans as well as for animals, so we’re certainly, you know, looking at that market for imports. And the obvious sort of country that they are looking at is the US, particularly given the Farm Bill and all the changes that the Farm Bill has got involved in CBD.

James West:   Huh. Interesting. So let’s come back to Canada for a bit, because you know, you guys, you were formerly with Canada clients that was very much involved with helping companies obtain licensing on the medical side, and we just had this lottery that occurred here in Ontario where we saw 25 winners of, you know, licensed to operate a retail location, but with some peculiar restrictions and limitations that, you know, call into question the viability of this strategy. What is your take on the lottery process that was used to award these 25 licenses in Ontario?

Deepak Anand: Yeah, I mean, the process itself clearly has a number of limitations in terms of the way it was sort of ruled out. I mean, the challenge is, you know, a lot of people didn’t get into this thinking that there was going to be these many restrictions in terms of restrictive covenants and transfers of licenses, and the ability to partner up in some of these winners and start to sell products. So certainly a number of restrictions from that perspective in terms of those licenses, you know, being transferred.

And now what we’re seeing is, the AGCO is very aggressively starting to sort of enforce transferability of licenses. So that’s a limitation that people weren’t expecting, and a number of winners who have won this have never actually really run businesses, ever, so for them, who understand what the AGCO wants, in addition to, you know, transferring these licenses and getting businesses set up has proven quite challenging in many ways.

James West:   Yeah, so if I was a betting man, I would say that 25 new licenses is not going to necessarily result in 25 new stores in Ontario; it’s going to result in maybe five stores and 20 bankruptcies.

Deepak Anand: Absolutely. You know, and the AGCO also has a number restrictive set of things where if you’re not able to get a store up and running, there’s severe penalties for people that have won these licenses and aren’t able to actually demonstrate. So we’re certainly going to see a number of challenges in Ontario with the way that this lottery process has been sort of unfolding.

Nonetheless, there’s been a lot of interest with the winners. There’s been all kinds of bidding wars taking place; I think the numbers that we’re seeing being offered to some of these winners are absolutely insane. I think in many cases people haven’t figured into the fact that you really can’t transfer some of these licenses. So despite what the business model looks like, and despite that you may want to offer millions of dollars, in many cases, to these winners, there’s really not much that can be done. So I certainly think there’s going to be a number of challenges with this model, and you’re right, there’s definitely going to be some bankruptcies as well.

James West:   Sure. Now one of the other aspects of supply that I’m curious to pick your brain about is the idea that we are allowed to grow four plants at home in all provinces except Quebec and Manitoba, however, at least in Ontario, there is no seed or clone material available to propagate the foundation for your four plants. So I’m wondering, to what extent does the unavailability of simple seeds or clones sort of demonstrate that the government maybe isn’t all that serious about making it easy for people to grow weed at home, and they’re in fact trying to make it a lot more difficult than the law implies it is. Is that an overly cynical perspective from where you sit, or do you think that there’s some validity to that sort of idea?

Deepak Anand: I mean, certainly a number of challenges with that, James. There’s, you know, the Federal process allows for provinces to sort of, you know, buy seeds and clones and also sell them through various licensing categories, including something that was recently launched called the Nursery License category. But what we’re seeing is, you know, the province of Ontario specifically is not really, hasn’t really sort of embarked on that and isn’t making clones and seeds available.

So there’s clearly a lot of frustration amongst people that are looking to grow their own product at home, and on one side, you know, people are apparently buying products in the medical channel, and what we’re seeing is medical patients can actually give away some of their plants and seeds to others, and they would be able to paint it that way.

In addition to that, some licensed producers have dried product that’s available through the Ontario retail channels that often come with seeds. And so if you basically get seeds from a licensed source, and if you were to find seeds in your dried bud, you could actually plant that legally and start to grow it, because that is technically a legal source. And we’ve seen a lot of posts on Reddit on this, and seen people grow it that way.

James West:   Sure. So does that mean that if I obtain seeds through the mail, and there’s no way to know whether it’s legitimate or licensed sourcing or not, does that mean that my four plants are illegal for me to grow?

Deepak Anand: Unless it was actually obtained from a legal source, it would be illegal. The problem becomes, the police have been having a very hard time enforcing sort of where that came from and trying to ascertain if it was a legal source or not. So there’s a number of challenges there, but we’ve seen from provinces like Newfoundland and Labrador and we’ve seen other provinces like Manitoba now, start to make seeds and clones available, and I think the Ontario government would be sort of prudent to start to look at, you know, sourcing of these materials and start to sell them, at least through the online channel, which is the OCS at the moment.

James West:   You bet. So Deepak, my understanding is that you’ve moved on from Canada Compliance. What exactly are you up to now in the world?

Deepak Anand: Well, a number of things taking place, James. You know, some public companies being involved, I can’t really say too much on that side, but we’re definitely looking at the international markets. I’m looking at sort of supply deals, you know, everyone is very focused on cultivation at the moment; nobody’s paying as much attention on supply and distribution, and certainly looking at that very closely, particularly in the European and international markets.

Original article: Asia’s Emerging Cannabis Markets with Deepak Anand

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