AGCO Reverses Decision on White Labelling

The AGCO recently announced it will be reversing its decision to ban retailers from entering into agreements with cannabis producers for white label cannabis products.

The Breakdown

• The Alcohol and Gaming Commission of Ontario (AGCO) announced in early February new regulatory guidance on inducement rules for cannabis retailers in Ontario.
• Following swift feedback from the industry, the AGCO is now amending those new rules to create an additional exemption that will permit agreements between retailers and licensed producers (LPs) for store brand products (also known as white labels, private labels, private brands, and in-house/house brands).
• Cannabis retailers in the province can continue to work with cannabis producers and create store branded products.
• The new rules will take effect on June 30, 2022, as originally announced.

Our Perspective

The initial announcement that white label products would be banned as part of the new inducement rules set forth by the AGCO came as a big surprise to the industry and concerns were raised immediately by the Ontario Chamber of Commerce and other industry experts as reported by StratCann. The quick reversal of this decision shows that the AGCO is listening and open to feedback on rules that could negatively impact the industry. Allowing retailers to create branded products will provide additional revenue streams for cannabis producers and help retailers differentiate themselves and increase brand awareness. However, it should be noted that white labelling does tend to favor larger retailers that are able to establish these agreements and invest the necessary capital.

U.S. Federal Legalization Bill

The U.S. House of Representatives will vote on a bill to federally legalize cannabis as early as April 1st as reported by Marijuana Moment.

The Breakdown

• This is the second time the Marijuana Opportunity Reinvestment and Expungement (MORE) Act is headed to the floor, the first time being in December 2020 where it passed in a 228-164 vote but didn’t make it past the Senate.
• The bill declassifies cannabis as a controlled substance and eliminates criminal penalties for possessing, cultivating, or distributing cannabis, while creating a new tax framework.
• The chances of the bill coming into law are slim, primarily since it’s competing with Majority Leader Chuck Schumer’s own bill: the Cannabis Administration and Opportunity Act which he is likely to prioritize and is expected to be filed in April.

Our Perspective

The Federal legalization of cannabis does not appear to be a priority for the Biden administration and it’s unlikely that it will happen any time soon. Federal legalization will likely benefit larger cannabis producers in Canada that have already entered the market in the U.S. through several deals and acquisition. However, federal legalization in the U.S. may have a negative impact on smaller producers that don’t currently need to worry about American competitors. However, one positive takeaway of the legalization effort in the U.S. is the fact that social justice issues are a central aspect of several bills being introduced and has become a cornerstone in the legalization effort there. Canada unfortunately cannot say the same.

Profile on Field Trip and Psychedelic Therapy Using Ketamine

The Globe and Mail recently published a profile on Field Trip Health and covered primarily the use of Ketamine in psychotherapy.

The Breakdown

• Psychedelics are being touted as the future of mental health treatment and applicable to a whole range of illnesses.
• Dozens of start-ups are now hoping to push psychedelics further into the mainstream, both among consumers and investors. This includes Field Trip, a small start-up based in Toronto with roots in the cannabis industry
• Describing itself as a lifestyle company, Field Trip currently has 11 clinics across North America where a 3-week long treatment program, includes six ketamine dosing and three appointments with a psychotherapist costing roughly $5,000.
• For the first three quarters of their latest fiscal year, Field Trip lost $40.5 million, primarily from building new clinics and conducting research and drug development. Field Trip’s own stock is down by 70% in the past year and currently holds a valuation of $105 million.

Our Perspective

Excitement around the therapeutic potential of psychedelics is palpable, but as the article points out, there are some clear similarities to early cannabis days of “bold claims, huge uncertainties and a swath of money-losing companies angling to lead the way”. It is therefore difficult to discern between a medical treatment and “spiritual healing” with companies taking vastly different approaches. Regardless, there does appear to be strong anecdotal evidence related to the benefits of psychedelics, but as Dr. Susan Abbey says right now there is “more enthusiasm than data” and the industry is still very nascent.