10 Mar 2019

Growing Demand - NZ's budding cannabis businesses

From Insight, 8:12 am on 10 March 2019

Insight - Business is booming in Canada and some US states, where cannabis use is no longer an offence. With a binding referendum on whether to legalise for personal use set for 2020, Insight's reporter Teresa Cowie takes a look at what some of the promises, pitfalls and potential for a 'cannabusiness' sector in New Zealand might be.

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Photo: RNZ

On a suburban street in Auckland’s Grey Lynn, Karma Cola's road marking-yellow, corrugated iron-clad headquarters, encloses whirring fridges full of fizz. On a sunny Friday morning, delivery staff pick up and drop off, while others work diligently at computers alongside stacked boxes of various liquid concoctions - from the company's namesake cola, to kombucha, sparkling water and turmeric infused juice.

From this tin shed office, dressed in shorts and jandals, works Karma Cola's co-founder, serial entrepreneur Chris Morrison. His outfit might suggest he’s a pretty casual sort of a bloke. But he's serious about New Zealand getting it right if it decides to ride into the wild west of selling cannabis products.

Next year, a binding referendum will see New Zealanders decide whether or not cannabis should be legalised for personal use. In the meantime, companies - both local and international - are keeping a close eye on what could potentially become the next lucrative ‘cannabiz’ market to open. Karma Cola is one such company. But unlike some of the bigger players, Morrison says that if New Zealand does loosen up its attitude to marijuana consumption, he wants it done thoughtfully.

"We would like to support those companies that are growing hemp and marijuana products organically; treat their workers well, have a good supply chain and support small New Zealand business," he says.

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Entrepreneur Chris Morrison would support ethical cannabis businesses Photo: RNZ /Susan Strongman

Countries and US states with comparable values to New Zealand have followed a similar legislative trajectory; first falls medicinal cannabis, then comes a softening on recreational cannabis. Morrison sees a relaxing of the law here as only being a matter of time.

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With major companies like alcohol giant Constellation Brands, (which owns beer brand Corona and Kim Crawford and Nobilo wines,) buying up stocks in leading Canadian cannabis company Canopy Growth, and celebrities from lifestyle guru Martha Stewart to rapper Snoop Dogg getting in on the game, the phenomenon has not gone unnoticed.

Morrison - who is also co-owner of All Good Organics and the ice-cream company Little Island, amongst a string of other successful New Zealand companies - knows how to spot an opportunity.

"We're thinking about it a lot.

"I've just been in the States and CBD [cannabidiol] is everywhere; It's in gum and drinks and balms. So, we would like to be a player in that, because we think CBD has some real functional benefits and we're wanting to position ourselves as a healthier drinks company and that's a good space to be in and certainly where the trend is at the moment."

Morrison is eyeing up the possibilities that might lie ahead when it comes to his own company and imagines he would concentrate on products with relaxing properties rather than the hallucinogenic ones.

"It would be CBD drinks. It could be a lemonade with CBD, and we would be positioning that as a relaxing drink, good for sleeping and anxiety."

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Photo: RNZ /Susan Strongman

Morrison's got a history of taking on the big guns, like cola companies, and doing it his way; organic, ethical and fair trade. But he sees a certain inevitability to big business determining any future cannabis industry in New Zealand.

"We've seen a number of companies positioning themselves and starting lobbying and buying up smaller marijuana companies in Canada etc, so I don't see why it wouldn't happen here."

He seems resigned that New Zealand will be taken over by cannabis giants, with little concern for doing business in an ethical way.

"I'd like to think that we would have a more inclusive approach to this, but traditionally it's big companies who chase the money and lobby and position themselves for the best rewards," he says.

Lessons to learn

In the United States, cannabis is now legal for recreational use in 10 states and the District of Columbia, while many other states allow it for medical use.

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Washington-based National Cannabis Industry Association spokesman, Morgan Fox believes New Zealand could learn a lot from the 10 years of experience that's been built up there. Especially, the hard lessons learned about creating a business-friendly environment for smaller companies, that would allow them to grab hold of the opportunities too.

"I think one thing is to make sure that there is an open and competitive regulatory process in terms of the licencing for the people who are allowed to produce and sell these products."

Fox says that in the US, some regulations have created roadblocks that make it difficult for small to medium businesses to survive.

"It's important not to make barriers that will prevent smaller businesses from being able to take advantage of cannabis; like inordinately high licensing costs, or arbitrary licencing caps that limit the number of businesses that can actually be involved in this industry." he says.

He hopes New Zealand will not make the same mistakes that have stunted the growth of small businesses there.

But Fox doesn't think big business is necessarily a bad thing; he's optimistic that a rising tide will lift all boats.

"Particularly if they are willing to bring their lobbying money and expertise to bear in changing federal policy… and make the US competitive on a global level," he says

Buy Kiwi made

To make it globally though, Auckland bio-tech entrepreneur Paul Manning says New Zealand will have to hold dear what's being produced here.

Manning is a co-founder and executive director of Helius, one of three New Zealand businesses that have been granted a licence to cultivate cannabis for research and development purposes.

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Paul Manning says cannabis technology is moving fast Photo: RNZ / Teresa Cowie

Last year the government announced it would hold an amnesty allowing illicit growers to come forward with unique plant strains they might have.

An exact date for the amnesty is yet to be set, but his company is already asking people to get in touch about their plants.

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Photo: RNZ / Teresa Cowie

Manning is an exuberant salesman; floorplans in hand he proudly details his big plans for the factory. For now though, cannabis plants are nowhere to be seen in the mostly empty offices, laboratories and warehouse.

He believes local cannabis strains offer a potential treasure trove of therapeutic compounds, that could rival the best in the world.

So following the amnesty announcement, the company set up an encrypted website where growers could get in touch to discuss opportunities for their special breed weed.

So far, more than 500 people growing cannabis illegally have contacted the Tamaki-based medicinal cannabis firm, to see if they could be in the running to make a best selling product.

"It's really an eclectic bunch of people; growers who have been in this space for a couple of years and have some of the more mainstream cultivars to offer… right through to very experienced growers that have [with their families] been growing this for generations."

The Helius Cannabis factory in Auckland

The Helius Cannabis factory in Auckland Photo: RNZ / Teresa Cowie

But what's in it for the growers who hand over their plants and intellectual property?

"Once we understand exactly what they've got, we will be able to enter into a commercial exchange with that grower. Exactly what that looks like will depend on how unique or special the strain is," Manning says.

For now though, those growers will have to stay in the shadows until the public has its say; a referendum on whether to change the law on cannabis for personal use will be held during the general election next year.

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