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How a Canadian company hopes to smoke the edible marijuana market

Lila MacLellan
The Rate of Colorado Adults Who Use Marijuana Will Surprise You

To most of America, the Incredibles are a suburban family of superheroes dressed in matching cherry red bodysuits, the stars of an acclaimed animated film about to be sequeled. To “bud tenders” and their customers in Colorado, however, “incredibles” are THC-infused “Gum e’s” and chocolate bars with names like Peanut Budda Buddha and Mile High Mint. And for any company entering the edible marijuana market in that state, they will be the super-tough competition to beat.

Bob Eschino, founding partner at incredibles (graphic emphasis on “edibles” in the logo), says his staff has been building its presence in Denver for five years. He has been told by many of the nearly 800 dispensaries that carry his product line that it’s the top seller in their stores, and his Affogato chocolate bar recently took the Silver in the High Times Cannabis Cup 2015 edibles category. Despite all of this, Eschino says, “It’s taken us five years to get to where we are and there are still issues.”

“What do I say to new companies entering the edibles market?” he asks, “What I say is, good luck.”

Why Edibles?

Without question there are formidable hurdles in the edibles category. There’s public pushback from groups who say the products are too dangerous because they look exactly like the sugary snacks kids like to ferret out at home. There’s criticism from others who say it's too easy to get way too high by unintentionally consuming more than necessary, as New York Times columnist Maureen Dowd learned, because the effects from eating cannabis take a while to kick in and can last hours as the chemicals move through the digestive system. (The high from smoked pot is almost immediate and can often wear off quickly.) In fact, some feel that the over-consumption of edibles can be linked to two suicides and one murder in Colorado. Finally, there’s constant confusion over the shifting legalities around everything from the purity of ingredients, to labeling rules, and even banking with pot profits.

There are also plenty of legitimate reasons that “Green Rush” businesses are now lining up to make or invest in edibles. Toronto’s David Posner can name a few. The 42-year-old is the founder and CEO of Nutritional High International Inc., the first publicly traded recreational marijuana company in Canada, where recreational marijuana is still illegal.

His company, formerly known as Sonoma Capital, focuses exclusively on edibles and is currently only operational in Colorado, since until a couple of weeks ago, medicinal edible products were illegal in Canada.

Nutritional High was launched under its current name in April of 2014, after Posner spent more than a year researching the market. He found that snacks and beverages are not only the preferred delivery method for anyone who’s ill and taking marijuana for its potential medicinal benefits, they’re also simply more palatable to athletes and others, like office workers or retirees, who aren’t interested in smoking. As the market for marijuana grows to include all age groups and walks of life, the appetite for edibles is expected to explode.

(Apparently they were irresistible to police officers raiding a Santa Ana dispensary this month.)

What’s more, medical edibles are already legal in 23 states and in D.C. The Supreme Court of Canada’s recent unanimous ruling legalizing their consumption was good news for Nutritional High. It plans to be ready for sales in Canada as soon as the new legislation “gives the thumbs up.”

Edible marijuana products can also sell to the recreational buyer, of course. Currently, recreational marijuana is legal in four U.S. states—Colorado, Washington, Oregon and Alaska—and is expected to be legalized in most others, and at a federal level, in a matter of years. In media interviews, Nutritional High’s CEO often highlights that, “On January 1, 2014, Colorado went recreational. Three days later, edibles were sold out in the state.”

In all of 2014, nearly 5 million edible marijuana products were sold in Colorado, for both medical and recreational use. According to The Cannabist, they made up 45% of the total pot market last year. The state’s marijuana sales for edibles and non are expected to bring in $1 billion in 2016.

Most importantly to the company’s backers, oils and edible products offer higher margins than the straight-up plant cultivation and retail side of the business. Posner’s plan is to take scalability into the category, jumping into the field as it transitions from a phase of mom-and-pop selling cookies to an updated retail landscape, one with big brands, slick marketing, and reliable, consistent products that can sit on retail shelves for six months. In that goal they are not alone, B. Le Grand, editor of Edibles Magazine says established brands like incredibles, Dr. J’s Hash Infusion, Edipure and Dixie are on the same path.

Got SPLIF?

Nutritional High debuted on the Canadian Securities Exchange last month as a small cap pot stock with big ambitions. (In Toronto it trades under the ticker “NHL,” on the OTC exchange in the U.S., it’s “SPLIF.”) Its edibles are not yet for sale but should be in Colorado dispensaries by the end of 2015. Posner wants to be operational in six or seven U.S. states working with medical edibles licensees before next year, and ultimately wants to go national, earning revenue from products and from licensing deals. If anything, Posner explains, he likes working with the barriers to entry in the edibles business, saying, “We are a studious group.” The people who are going to be successful, he believes, “are those who have the high-quality products, but also those who have within their company the ability to be flexible to deal with legislation.”

Earlier this month, Posner and his small team signed a deal to use the Jimi Hendrix name in marijuana-infused candies and drinks, which the CEO believes will help them gain recognition in new markets as states pass legalization laws, and among marijuana tourists until then. That’s if the company can hold on to the naming rights, which they gained from Purple Haze Productions, a company linked to the singer’s brother, and not Experience Hendrix, a holding company with rights to his music and other trademarks.

Melissa Parks, a Cordon Bleu-trained chef and a recognized name in the cannabis cuisine scene, joined the company last spring to head up product development. So far she’s designed gourmet chocolates, gummy bears and Heisenberg Blue hard candies that will be made on an automated assembly line. (Nutritional High is planning a “Breaking Bud” product line, even though there is no official deal with Breaking Bad, which, again, may prove to be a problem, according to a copyright lawyer interviewed by Yahoo! News.) Posner says that in time, Nutritional High’s edibles will reflect the company’s name: “We will have a bunch of other products and we will be using natural ingredients, whether it’s an edible chocolate bar or a hard candy, we want it to be a healthier version of it.”

A few future edibles will not contain THC, the psychoactive ingredient in marijuana, but will instead be made with Cannabidiol (CBD), which offers the medicinal benefits of the plant without the loopy thoughts about the origins of time or other behavioural quirks—the munchies, the giggles, the sudden onset of motormouth—that can accompany a marijuana high.

The company has poured money into creating an advanced extraction process, and owns its own extractor so that its oil, the basis for all products, will taste consistent. It also hired a Novartis consultant to work toward consistent dosages, perhaps the biggest challenge facing all edible companies.

With edibles, however, the kind of “high” one gets from the THC, no matter the dosage, is not yet predictable. As Posner explains, the effects of consumption vary, as with alcohol. “All kinds of things come into play, like body weight and one’s tolerance levels,” he explains. As Jake Browne, the cannabis critic for the Denver Post, told a New Yorker reporter: “In my experience, marijuana is so intensely personal that people will have different reactions to the exact same plant. I’ve had readers become furious because a strain I found sedative kept them awake all night.” Ultimately, Posner and his team want make a product that tastes good, and that a person will have the same experience with, whatever that is, at each purchase.

“You’re still dealing with a bunch of stoners”

Posner grew up in Toronto and is a graduate of York University and University of Tel Aviv, where he studied sociology and anthropology. “I always knew I was going to go into business, I just wanted to understand the cultural aspects of dealing with people,” he says. “I find it important. I grew up where business, especially real estate, was a part of my family and life, and I saw that.”

He was working with Foundation Markets, an investment bank, when he first began investigating the marijuana field. Earlier in his career, he was in charge of acquisitions for a Canadian family trust, managing real estate purchasing in the U.S. He has also worked in real estate in Canada, for Stonegate properties, which bought retail plazas.    

Edibles editor B. LeGrand says it has become common for executives with varying mainstream corporate backgrounds to start up an edibles business, just as it’s increasingly the norm for non-potheads to buy edibles. The market is being flooded with private equity money and everyone is waiting for big tobacco and the Walmarts of the world to take over completely. But for now, she explains, the category still belongs to an insider, grassroots crowd. “You’re still dealing with a bunch of stoners. They’re really smart, productive stoners, but I mean, this industry remains unconventional. No one calls anyone before 10 a.m.,” she says, laughing. She predicts that newbies like Posner are going to find that people flake out, suppliers text you at midnight, “that kind of thing.”

Posner may not fit the stereotype, but he does enjoy his firm’s products. “I find it’s more of a relaxing high, more muscular and skeletal—as they say, a body buzz,” he tells Yahoo! His edibles also help ease pain after three knee surgeries. “I’m Canadian, I was a hockey player, and I’m not a big guy. I used to get killed all the time.”

Chances are he’ll get at least a little bruised in this new arena, if you ask Bob Eschino. “The secret to success in the business is still the million-dollar question,” he says, and “newcomers will be banging their head against the wall for years.

“I’ve seen people with good products who are no longer around, and people with terrible products who are still around. Why that happens, no one knows.”