As we wrote about in our recent article, cannabis is a huge emerging market in Canada. With the recent half-decade of growth in the medicinal cannabis sector, as well as the pending legalization of recreational cannabis in October 2018, more entrepreneurs are getting into the industry, and scaling up quickly backed by large amounts of investment.
The regulatory picture for cannabis in Canada is fast-evolving, with a lot of uncertainty, and the competitive landscape is becoming more mature, which means there are tremendous opportunities and challenges for companies. Don’t call it a wild west, but it’s an exciting space – a chance for Canada to lead on the world stage by pioneering a new formal economy for a product that was previously underground.
At Argentus, we’re particularly interested in how these companies will respond to opportunities and challenges particularly in the supply chain management function – which can make or break a scaling company in a fluid regulatory environment. So to delve a bit deeper into the current picture in this industry, we spoke to an executive with a great track record of working at the nexus of supply chain management, healthcare, and cannabis.
Caroline Lalonde is a bilingual business leader with an intimate knowledge of the Canadian healthcare system, from end-to-end supply chain through to patient delivery. She’s spent 20 years in senior business development, marketing leadership, and advocacy, with a background in founding and leading a successful national distribution company.
It was an enlightening chat that touched on issues like:
- The shifting regulatory environment around cannabis
- How companies can anticipate and respond to supply chain challenges in unpredictable market, as well as,
- The talent picture in the Canadian cannabis industry, and where these fast-growing companies will find the leadership they need to succeed.
Can you tell us a bit about your career journey in Supply Chain Management/Logistics and how it led you to the cannabis space?
“First of all, I want to congratulate the Argentus team on your recent article putting a spotlight on Cannabis Supply Chain Challenges in Canada. Great read!
My career in Supply Chain began when I founded KATT International – a national distribution company of American licensed branded and private label products. Originally, I created and designed a women’s apparel line, and through networking with a Licensing Agent in New York, I was presented with the opportunity to become the exclusive distributor of licensed American branded and private label products in Canada. As the exclusive Canadian distribution company for US Brands, I set up an office and distribution facility in Vaughan. The company expanded overseas through Licensing Agreements, with manufacturing facilities throughout Asia for both private label and branded products, lines of credit were set up with manufacturer as new agreements required me to own the product from country of origin. These new agreements included moving the products manufactured overseas to our facility, where we would store the products before shipping it to various clients across Canada. This was a successful business model for 10 years, and I sold the company prior to the 2009 recession.
My entrepreneurial and supply chain experience provided a career change opportunity when I joined a healthcare 3PL company. This was the beginning of my new career in the healthcare field, starting working for a 3PL where we moved health care product from country of origin to destination – everything from narcotics, to medical devices and more.
My career introduction to the cannabis field was the Supreme Court decision R v. Smith, when the federal government decided to get out of the business of medical cannabis and open this market to the private sector. For the first time, as a result of the ruling and Health Canada regulatory changes, the private sector could apply for a license to produce marijuana for patient consumption for medical purpose. Those first two years were an amazing opportunity to learn about the benefits of medical cannabis for patients and presented a unique opportunity to develop an expertise in manufacturing and distribution in this space. My supply chain career expanded with my most recent role as Vice President of Pharmacy and Business Development, where I focused on the advocacy component. In this role, I worked with Health Canada, the Cannabis Secretariat, the federal and provincial governments on regulatory, compliance, distribution and supply chain issues, related to the regulatory changes for medical cannabis, and the upcoming legalization of recreational cannabis.”
Canada is in fairly uncharted waters as one of the first countries to legalize cannabis. What do you think are the biggest challenges that cannabis companies face from a Supply Chain perspective?
“Health Canada’s new regulations for medical cannabis – Marijuana for Medical Purposes (MMPR) reformed to Access to Cannabis for Medical Purposes (ACMPR) and the legalization of recreational cannabis; presents Canada with a rare opportunity to become the leaders in this new formal economy. Canada will become the first G20 country to legalize cannabis. It’s a historic move that will create an entirely new industry – both in the traditional retail sector with the legalization of recreational cannabis and with the Licensed Producers, as manufacturers and suppliers of medical cannabis for patients. Medical cannabis distributed through LPs rather than being approved through the traditional process of pharmaceutical manufacturers’ research and development and Health Canada’s drug approval process. This new process of bringing a prescription drug, medical cannabis to market, presents new challenges, for industry and patients. Without the traditional safeguards of the drug approval process, Canada must ensure that the legislative and regulatory environment currently being shaped for the legalization of both medical and recreational cannabis, is one that results in a safe and reliable system, for all Canadians. Canada’s responsibility includes ensuring the integrity of the product in the entire end to end supply chain process and distribution, from the start with the integrity of the raw materials to the safe use of the product by the end user, whether it be a patient or consumer.
Canada has the opportunity to become the global leader in the cannabis sector, and that’s exciting. It is a rapidly evolving, changing landscape, and this is a challenge facing every cannabis company. Companies need to meet health Canada standards, negotiate complex distribution challenges, and deliver quality products and services that meet the evolving needs of this market. These companies will need to bring on talent with a strong understanding of all of these facets of the business: finance, entrepreneurship, management, research and development, regulatory affairs and quality assurance, health care supply chain, operations, logistics, distribution, sales, marketing and customer service.”
Lately, we’ve been interested in exploring where the leadership for cannabis companies will come from. If you were leading the Supply Chain function for a growing cannabis company, what type of people/skill sets would you look to hire?
“It’s certainly a very costly business to establish yourself in. For a startup, there’s a significant operational investment component with the evolving regulatory and compliance regulations, so you need a strong leadership team in place that has varying skill sets, which should include experience either in the cannabis or a healthcare related industry.
The provincial regulations for recreational cannabis vary from full privatization to government-run cannabis stores or a mix of both business models. The regulations are still changing, as we have seen in Ontario since the election and even after the election, with a government run business model that will slowly open the recreational cannabis market to private industry. Businesses will need to be flexible in order to adapt their strategies to geographic-specific and evolving legislation; including changes in pricing, taxation and consumer preferences.
The industry will mature, but right now, the marketing component is very stringent for packaging and advertising in terms of compliance. Health Canada and the Cannabis Secretariat, have deemed public health and safety as their #1 priority, so there are limited opportunities for branding and advertising. However, I believe the marketing component will develop over time and that skill set will be valuable from the onset with competitors having limited product and brand differentiators and later, as Health Canada eases up on the regulations, and as branding becomes a competitive advantage.
Many Licensed Producers have a very strong skill set base – with ownership or management from either the pharmacist or from the healthcare manufacturing industry. There is also a strong component of leadership coming from an entrepreneurial or startup background – people with the ability to get the financial support and getting companies up and running. These are all skill sets that will be crucial for companies scaling up in this industry.”
Are there any other industries that will be big sources of talent for cannabis companies, particularly in Supply Chain?
“Certainly, comparable industries will be a source of talent – industries with a very strong branded component. Consumer packaging, retail or e-commerce experience will be a great addition to the expertise on a management team, but again it depends on how things evolve. Cannabis will be competing with many of these industries, and you can recruit from similar industries to develop your team as you build a competitive company in the new formal economy of recreational cannabis.
On the medical cannabis side, following the more traditional route and recruiting for experience and expertise from the healthcare industry, will lead to a more reputable and successful business model for the Licensed Producers and patients.
With both recreational and medical cannabis, consumers and patients will ultimately have the final say on how successful a business model, product or this new formal economy will be in the end.
Canada is challenged in this opportunity to be leaders in this new formal economy, we would be wise to ensure we are successful in benefiting our economy and ensuring the integrity and safety of both recreational and medical cannabis for all Canadians.”
A big thank you to Caroline Lalonde for speaking with us! It’s always exciting to speak with a business leader with such a sterling track record in Supply Chain Management.
Stay tuned in the coming weeks as we seek out more voices and explore more trends within the cannabis industry.