Keeping the trust
In the same month that Canada legalized recreational marijuana for adult use, Peter Aceto assumed the role of chief executive officer at CannTrust, one of the first movers in the medical cannabis space. Since legalization, the company has made a big play for the recreational market, but continues to grow and focus on its medical cannabis patients, which now stands at 67,000.
May 14, 2019 By Mari-Len De Guzman
Six months into legalization and in his new role, Aceto is taking his company to greater heights, with plans to enter the edibles space and already working to develop products for the pet market. Grow Opportunity caught up with the chief executive at CannTrust’s head office in Vaughan, Ont., to check in on the LP’s progress navigating this new paradigm of a fully legalized cannabis industry.
Q: Coming from the financial services industry, how have you managed the transition from both a professional and industry perspective?
Peter Aceto: It was a really conscious choice for me to be a part an industry that’s in its early stages, where the rules and regulations aren’t clear. It’s on the ground floor of a new industry, which isn’t just going to be a Canadian industry. It’s going to be global, so it’s very exciting to be a part of that.
In my past job, what I did was a new way of banking. It started in Canada and ended up in nine countries around the world. I was the eighth employee and we ended up with thousands of employees around the world, doing something innovative. It was a regulated environment, which this is as well. And dealing with those exciting opportunities of rapidly growing and scaling.
There’s a lot of things about this role that are different – because of this vertical integration, because of licensing. In this business we do genetics, we grow plants, we harvest plants, we do manufacturing, we do labeling and production, we do shipping. We do medical research. We have retail customers, we have patients. It’s fun because it’s so broad and there’s so much to learn. So it’s fun to be a part of that, and to try and frame what that industry is going to be like.
Q: Talk about CannTrust’s product strategy.
PA: We put it in three segments. The first segment is medical cannabis. CannTrust, I think, really is the Canadian leader in medical cannabis. We have the third most patients in the country, but we are the fastest growing. Our patients were all obtained organically, as opposed to through acquisition. We were started by pharmacists. We are really known for the standardization of our products, really focused on dried cannabis, but also oils and capsules, which is why physicians refer us to their patients.
As soon as the rec market became legal in October 2018, we wanted to sell those products in the recreational market as well. We are one of few licensed producers in nine provinces. We created four retail brands – Liiv, Xscape, Synr.g and Peak Leaf. We have won multiple awards for the quality of our products. It’s very, very validating that through our methods, it turns out we are producing the highest quality products that are most-preferred by consumers.
Third, the rules are about to change. We are not 100 per cent sure what the rules will be. They published a draft, we provided our comments. We are waiting to see. We want to leverage that medical brand and what we have done on medical, our early success on recreational, and really be a leader in new, innovative product types – whether it’s vape pens, coffees and teas or beverages, a variety of them. We want to leverage these things so we can be a leader in those areas as well.
Q: Health Canada has released the draft regulations for what the extracted products market will look like. Having seen and commented on the draft, what would you like to see in the final regulations?
PA: A lot of people talk about supply and demand, that there has been a high demand for cannabis and that the supply has not been there. I think that when these new rules come out, that’s going to get even worse. The demand is going to be so much higher because really, people don’t want to smoke anything. I think maybe people who are interested in experimenting with cannabis are waiting for a way to get it in a very different way.
We would like the rules and regulations to permit us to do many other different formats for cannabis, both medical and recreational. And do it in a way that is user-friendly and cost-effective, but also safe. The regulators are trying to eradicate the black market, trying to make sure only people at the right age are getting access to the product and they want to make sure that the product is safe.
I think a challenge that we all face is how do we make sure we achieve those things. But in the same way, have good quality products, with not too much packaging, and cost-effective to produce.
I think the rules and regulations are going to continue to evolve, and I think our expectation is it’s good, that we will have the ability to bring these new products to market.
Q: Speaking of supply and demand, there have been statements and speculations about whether the widespread shortage in legal cannabis products will soon come to an end or continue over the long term. What is your take on it?
PA: I have a very clear view about the supply and demand problem. Today, we are allowed to provide dried flower, oils and capsules. If nothing else changed, CannTrust and the other suppliers will be able meet supply in 12 months from now.
However, with the new change of the regulations to allow edibles, and all sorts of different things, I just think that that’s going to exacerbate the problem, and maybe push it out for another four quarters, to be very honest. Because so many more consumers are going to be interested in trying products that are different, creating a lot more demand. And I think all the LPs are going to have the same supply issues. We’re trying to figure out how to grow these high-quality plants in a reliable way, and we’re working on our value chain to be efficient and low-cost that get product to customers, and now we have to do it in five, six, seven other product categories.
To me, I see this as a very exciting challenge. I think CannTrust has actually been particularly good at it. But I think the primary issue is we’re all figuring out our processes. We have hired hundreds of people in the last 12 months and we need to train them. And we have to train them. We are using machinery to automate, but none of these machineries were designed for the cannabis industry. It was designed for the pharmaceutical industry, for candy, confectionary industry. And we are figuring out how to optimize the machinery and improve all the time.
I am seeing improvements every day, but I think that they need to continue. I think that is a lot of the reason why we’ve seen some of the supply and demand issues that we have.
Q: We are now more than six months into this legalized recreational cannabis industry. What insights have you learned?
PA: There are probably four things that are really noticeable for me.
The first thing is the demand for cannabis. I must admit, I was surprised to see how high that demand is for cannabis on the recreational side. Maybe it should not have surprised me, but it actually surprised me.
The second thing that I think was really interesting to learn was that although medical cannabis has been legal for five years, really, in the eyes of most Canadians, cannabis became legal six months ago. To see the impact it’s having on our medical business was a really big surprise for our business. Not so much for me, I sort of saw it that way, but people here at CannTrust were a little bit worried that the legalization of recreational cannabis will have a negative impact on the medical business. But what we found is that consumers are talking about cannabis all the time, where they didn’t really talk about it before. They are going to their physicians and saying, ‘Hey I am having trouble sleeping, I have pain. You’re prescribing these medications to me, can you teach me about cannabis?’ And our physicians can teach you about cannabis.
We are seeing a large demand from physicians to take advantage of our education, and we are seeing a lot more patients being referred to our business from physicians – as well as the whole community. Even my mother, who is in her 70s, it’s becoming apparent that a bunch of her friends are using cannabis for pain, for sleep, for other issues. That level of awareness on the medical side and how it has actually changed our medical business is exciting.
The third thing is the whole supply chain. People’s expectations that there would be lots and lots of products available to meet the demand seem a little surprising to me. The complexity of growing a plant and how long that takes and harvesting it, and the reliability of exactly how much you’re going to get, and what the quality of it is, and how it works its way through manufacturing, testing, packaging and ultimately into customers’ hands – that takes time. And there are some bottlenecks. We have learned about how challenging that can be and I think outside of CannTrust, people don’t seem to have an appreciation for that complexity. That is important for all of us.
The fourth thing – maybe the most exciting of all – is the international perspective. We are seeing countries, regulators, businesses reaching out to us on a regular basis to think about medical cannabis and cannabis in general for their country: how should they do it in Germany; how should they do it in Australia. Licensed producers or people who want to be licensed producers are reaching out to us for our know-how and our knowledge – like our partnerships in Europe, our partnerships in Australia, and we are certainly evaluating others.
So it’s that quick awareness internationally of the opportunity and coming to Canadians for our knowledge and expertise. These are the four big things that I really noticed in those six months.
Q: What are some of your personal learnings since coming into this role and coming from a different industry?
PA: I sit right here by our call centre. We have 67,000 patients today and we are growing all the time. I listen to our call centre agents, talking to our patients all the time. I’ve listened to some of the conversations. I’ve actually spoken to some of these patients myself. I now know the role cannabis is playing in helping make so many people’s lives better. They are sometimes very young people who are suffering from multiple seizures a day, there are people who are going through chemotherapy and it’s helping them through their cancer treatment. It’s helping people who can’t sleep, and can’t live because they can’t sleep – and a variety of other things in-between.
For me to actually learn this and experience it myself, the people who we are actually helping, is mind-opening for me.
What I found with the legalization of the rec market is we’re just starting to see it on TV, starting to see it on the news, and famous people would come forward. I think it’s just rapidly changing people’s perspectives.
I also go to communities where people are not at that place. Here we are in Toronto, where maybe it’s moving a lot faster, but there are other places in the country that have a long way to go. I am in it every day, so I see the front edge of it, but I have to realize that probably the majority of our population is not quite there yet and it’s going to take a lot more time.
Q: One big way of gradually changing the stigma around cannabis use is through scientific evidence. Why should licensed producers care about the science?
PA: I talk to medical professionals all the time. We’ve got well over 2,000 – probably closer to 2,500 – physicians that are referring patients to us. And we’ve got foreign-trained doctors who work for us to help educate physicians across the country.
There are published studies about the health effects of cannabis and cannabinoids, the current state of evidence and recommendations for research. CannTrust is also trying to build the body of evidence. For medical cannabis we need proof. For this to be pharmaceutical grade for doctors to prescribe, we need proof that cannabinoids help. We have a really robust relationship with McMaster University and they’ve got the biggest pain clinic in Canada.
I’ve met multiple patients who are no longer on opioids, and are using cannabis to sort of get back to a semblance of a normal life. We are also doing a study in Australia, with Gold Coast University, who is doing an ALS study. There is no cure for ALS today, there isn’t even a medicine that reduces ALS symptoms. We have ALS patients here who have reported to us that using cannabis has improved symptoms for ALS. So we need to do this, we need to do the clinical trials to prove that this is, in fact, the case so that people can begin to prescribe cannabis to help things like this.
Building the body of evidence and building the science to truly prove to health care practitioners and to people that cannabis can help them with indications and ailments is part of our responsibility. If medical cannabis is going to be broadly accepted as a medicine in Canada or around the world, we need to do the research to really prove it.
Mari-Len De Guzman is the editor of Grow Opportunity. Email her at email@example.com
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