Dozens of US medical cannabis firms are setting their sights on Canada, where a $1 billion industry is taking shape as the country opens up the MMJ business to the free market.
There are plenty of opportunities for ancillary medical cannabis companies across the spectrum, from consultancies and insurance firms to investment funds and paraphernalia providers. But tapping the Canadian market presents its own unique challenges, and doing business there can be quite different than here at home.
Marijuana Business Daily spoke with several MMJ consultants and executives who have expanded to Canada for advice on what it takes to make a successful push up north.
Here are 10 of their top tips for business-to-business (B2B) companies:
#1. Learn the Laws Backwards and Forwards
The first thing any business looking to expand into Canada should do is learn everything possible about the country’s medical marijuana laws, including reading actual bills and legislative documents. This might sound like a no-brainer, but many MMJ businesses in the US fail to fully examine the laws in their own states and cities.
Some types of MMJ businesses looking to expand in Canada, such as consultancies, should also pay particularly close attention to local laws in different provinces.
“There are many local laws that we were unaware of, including building codes and restrictions that required our facility design to be targeted towards the local regulations,” said Michael Mayes, CEO of the Illinois-based MMJ consultancy Quantum 9, which recently expanded to Canada and is working with businesses applying for producer licenses.
#2. Focus on Quality Over Price
In the US medical marijuana market, MMJ companies are often concerned with the bottom line above all else, meaning price is typically the biggest factor. In Canada, however, quality often trumps everything else.
If you’re trying to sell to a marijuana dispensary, delivery service or producer, focus your pitch on why your product or service is better than the competition, rather than on the cost.
“In California, it seems all anyone cares about is the price,” said Dallas Imbimbo, CEO of California-based Kush Bottles, which has sold roughly 1 million marijuana containers to dispensaries and related businesses in Canada over the past few years. “In the Canadian market, there’s more of a focus on quality. Canada is one of the first places that really cares about the quality of the products. Everybody that approached us from Canada asks about this early on in the discussion, then they want to talk about customer service, and then pricing.”
#3. Meet the Highest Standards
Canada is still developing rules and regulations on some areas of its medical marijuana industry, such as packaging. If this is the case for your particular niche, ensure your company meets the highest standards for similar products and services in other regulated industries or in heavily regulated MMJ states in the US.
Kush Bottles, for instance, focuses on child-proof packaging and uses FDA-approved materials for its products. Canada is still developing standards for packaging, but these two aspects of Kush Bottles’ products appeal to business owners and position the company well for whatever rules come down the pipeline.
#4. Attend Industry Events in US, Get Boots on the Ground in Canada
Internet research and phone calls to potential clients should serve as the cornerstones of your early efforts in Canada. But attending industry events stateside provides a valuable networking opportunity and can open significant doors as well. Many Canadian cannabis businesses attend and exhibit at these events in the United States, and they’re often looking to team up with local companies.
For many businesses, the next step is to make a trek up north to meet potential clients and partners, even if it’s not required.
“Slow down and take time to really learn about your potential partners, and go up and visit them,” said Patrick McManamon of Cannasure Insurance Services LLC, which has expanded to Canada. “Just don’t talk on the phone or email – meet face-to-face.
#5. Create an SEO-Rich, Canada-Specific Section of Your Website
To really gain traction, devote a section of your website to the Canadian market, or create a whole new site dedicated to the region. Then load it with keywords that a Canadian MMJ business owner is likely to use.
“After realizing a need for consulting in Canada, we created content on our site specifically targeting Canada and the services we offered,” Mayes said. “Search Engine Optimization (SEO) help tremendously with getting our message to our customer base.”
#6. Prepare for a Longer Decisionmaking Process
In some US medical cannabis markets, everyone is in a rush to make money, and deals are often struck on the fly. Canadian MMJ business owners usually take a more measured approach.
It might take just a few weeks (or even days) of back-and-forth to cement a deal in the United States, whereas it could take a few months in Canada. The industry is also growing at a slower pace, so there’s less impetus on moving as quickly as possible.
#7. Start Small
Many US cannabis businesses that have successfully entered the Canadian market started small, limiting their advertising, marketing and financial budgets in the market and focusing on just a handful of clients. The market is not mature enough – and there are too many unknowns with the switch to a free-market industry – to warrant a huge initial push.
#8. Pay Attention to Currency Issues
Remember that Canada has a different currency, so you must be very clear whether you are referring to US dollars or Canadian dollars when submitting business proposals. Also, the exchange rate fluctuates constantly, and that can certainly affect your bottom line and the ultimate value of any contract.
“It may not seem like a big difference, but when entering multi-million dollar deal that really becomes a value issue,” Mayes said.
#9. Create a Flexible, Scalable Business
With many unknowns ahead as the government works on additional regulations and the country transitions to a free-market structure, you need a business model that can adapt to unexpected changes. Build in flexibility so you can customize your product and refocus your business model if the climate shifts.
Additionally, Canada is a vast country, and the market is much more spread out than in the US. So you could be dealing with many small clients located across the nation (rather than a handful of larger clients condensed in one or two cities).
This requires a scalable business model that can hit multiple markets and serve multiple needs.
“For us, this meant that we needed to create a business that doesn’t require as much labor and hands-on work, so we set up a system in which we can drop-ship from the United States to Canada,” Imbimbo said. “If we didn’t do that our overhead costs would be far too high.” Under this model, Kush Bottles can ship directly to customers who order through its Canadian retail partners, which can reduce costs.
Kush Bottles has also diversified its business model so that it is not only a retailer and wholesaler, but also a distributor – giving it flexibility to meet different demands.
In some US medical marijuana markets, you can show up to a meeting with a potential client or partner in flip-flops, shorts and a T-shirt. That won’t fly in Canada, where the market demands a much more professional approach. Come prepared, act professional and treat it like any other business.
“They take it much more seriously than we do here,” Imbimbo said. “There’s a sense that standards and laws and being seen as a real, legitimate industry are very importance, and that’s what we liked about it.”