Saturday, June 12, 2021 5:17:24 PM
BUSINESS
https://www.thestar.com/business/2021/06/12/why-arent-you-a-user-tilray-ceo-sees-potential-ahead-in-expanding-the-cannabis-market-at-home-and-abroad.html?rf
‘Why aren’t you a user?’: Tilray CEO wants to convice more consumers that cannabis use is OK
By Joanna Pachner; a business writer and a freelance contributor for the Star.
Special to the Star
Sat., June 12, 2021
timer6 min. read
It’s been less than three years since Canada legalized cannabis and the nascent industry has already gone through steep growth, a stock bubble, and now a consolidation as oversupply depresses prices.
The recent merger of Tilray and Aphria under the former’s name has forged a national powerhouse that is also the leading provider of medical marijuana in Europe. CEO Irwin Simon, who built Hain Celestial into a global tea and health-food company before taking the helm of Aphria, now hopes to bring the packaged-goods formula to the cannabis market.
You’ve completed the merger. What’s next?
We also acquired the U.S. brewery SweetWater that sells to about 30 states. The combined company now has about a $7.7-billion market cap but we still have a pandemic in my biggest market. My plan is to grow the Canadian business to about 30 per cent market share in adult use, medical cannabis, and cannabis 2.0, which are drinks and edibles.
I want to build a consumer packaged-good business around brands where the common denominator is cannabis. With brands, you build brand equity and consumer trust that the product has gone through stringent regulatory reviews. If you’re just buying cannabis, who knows what you’re buying?
People used to talk about marijuana in a generic sense: you smoked a joint. Now it’s a lot more specialized and segmented.
Think about it like alcohol: vodka is not just vodka. There are different alcohol levels and ways to consume it, differences in how it tastes and how it goes down. It’s the same with cannabis. It’s about how it’s grown, the potency, what the flower is like. My view is, I’m not selling marijuana. I’m not selling grass. I’m selling a cannabis product.
I’m not a user but I’d argue that for the average consumer, vodka is a known quantity and consumers understand that there are different varieties. That understanding has not fully developed around cannabis. Would you agree?
Helping them understand that is what I’m trying to do. The other big thing I have to address is exactly what you just said: “I’m not a user.” So why aren’t you a user? We have to educate consumers that cannabis is OK. It gives you a good feeling, doesn’t leave you with a hangover, and there is no real science that shows negative medical effects. Like any industry, as it grows and matures, you get more awareness and education. For many years we thought of it not as cannabis but as weed that we bought in the illicit market. There’s a big learning curve.
I didn’t say I’ve never used. But there is still some stigma. What will it take for cannabis to be as socially acceptable as alcohol? Do we need to see politicians and CEOs smoking pot in public?
Today, 15 per cent to 20 per cent of adult Canadians consume cannabis, but there are three parts to that: those who buy it, those who still go to the illicit market, and those who don’t admit to using it. You probably use it but don’t want to tell me. It’s amazing how many people I know carry edibles in their bags or take gummies for relaxation. It just takes time.
You used to run a tea company. What will you take from that experience into Tilray?
In 1993, I started a company later called the Hain Celestial Group. I did more than 55 deals and built a $3.5-billion global company in the new category of natural organic food. At that time consumers were not educated about natural, organic, GMO-free foods, so I’ve done that before, creating an industry around a category that was not well known. I’m taking a similar playbook to the cannabis industry.
How do you envision the industry consolidation playing out?
I don’t envision anything different than the experience of the alcohol, beer or food industry. When legalization happened in Canada, there were more than 500 brands out there. The big guys who can afford to invest and innovate and put the right marketing behind their products will survive. There will be a medium tier, there will be some niche players, and the rest will go away.
Throughout the pandemic, liquor and beer stores have stayed open and cannabis stores haven’t. Do you think that’s unfair?
I was told the Canadian government was warned not to close down liquor stores because crime would go up. People were stuck at home all day and at least alcohol — and cannabis would have been the same — calmed you down, and if you drank enough, you passed out. Now, happy hour probably starts at 2 or 3 p.m., right? The Canadian government also does not allow us to advertise, and not that we should be out there saying, “Let’s get high and party.” We need to advertise the health and safety and the benefits.
Many U.S. states have been moving toward legalizing cannabis. How big a market do you expect it to be for you?
In the U.S., our beer and hemp-based food businesses have about $150 million in sales, so my objective is to potentially buy other food or drink businesses and when cannabis is legal there — it’s not if, it’s when — I would parlay them into cannabis.
Will Canada eventually be just a small portion of Tilray’s business?
Canada is only 10 per cent of the U.S. population and half cannot consume cannabis because of being under age, but I see Canadian retail sales becoming a $9-billion marketplace. I’m by not means running away from Canada. It’s an important business and it’s important from a product development standpoint. I hope to grow products in Canada and export to the U.S.
So yet another natural resource of sorts that we will export. What about other parts of the world?
There is no other country other than Canada where adult recreational cannabis is legal today, except Uruguay where it’s quasi-legal. In the Netherlands it’s decriminalized: you can only consume it in coffee shops. But medical cannabis is legal in eight to 10 countries in Europe, and Germany and Portugal will probably legalize recreational cannabis in the next few years.
We’ve shipped some CBD oils to Asia, where I see the medical side being a major opportunity. I’ve done a lot of business in Asia and trust me, there is a market. CBD or THC is used in a lot of medicines in China and India, so it’s not like we’d be introducing it.
How do you intend to compete with tobacco and alcohol multinationals that are increasingly partnering with cannabis companies?
They have the infrastructure and the big footprint, but I don’t think Canopy is way ahead of us because of Constellation or that Cronos is out ahead because of Altria. The ESG (environmental, social and governance) concerns around tobacco could actually hurt them.
What’s your personal favourite in Tilray’s product portfolio?
I love our SweetWater beer.
Cute. I mean something that contains cannabis. Or do you also feel a stigma about admitting that you use?
I’ve used our gummies for sleep. Chowie Wowie is one of my favourites. Listen, it’s no different than the CEO of Diageo being a regular drinker or the CEO of Altria being a regular smoker. When I built Hain, I was a regular user of our natural organic products. But I will tell you, when I was running the food company, I wondered how people would perceive me selling drugs and alcohol. Well, I get stopped on the street all the time. Not that I’m Elon Musk, but everybody wants to know about this company.
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