Special Report: The managing director of Creso Pharma’s (ASX:CPH) Canadian subsidiary is making progress promoting recreational cannabis in a market where advertising is forbidden.

Two years after Canada legalised recreational cannabis, the country is still working out some of the kinks of setting up a licit marketplace.

In Nova Scotia, where Creso Pharma’s wholly-owned subsidiary Mernova Medicinal Inc. is located, cannabis companies are fortunate to have a cooperative partner in the Nova Scotia Liquor Corporation, which is the sole distributor of recreational cannabis in the province.

As the market is still in its early stages, the customer experience is ever evolving and constantly improving. The amount of progress seen in the last couple of months, in Nova Scotia alone, is very encouraging.

Mernova managing director Jack Yu has been conducting some local market research and, together with vice president Isaac Allen, has been working with the NSLC to promote the company’s Ritual Green brand of high-quality legal cannabis products and navigate the province’s cannabis regulation.

Recently, the NSLC has provided clarification and guidance on in-store displays, so Mernova has started to provide promotional material to stores, with more to follow, as the rules around displays become clearer.

The NSLC has also  launched their new “Proudly Nova Scotian” program, which dedicates a display case at each NSLC location that sells cannabis, to exclusively promote locally grown product, and the company is glad to be able to participate in that.

Mernova has also been cultivating relationships with “budtenders”, the staffers who are the point of contact with the customers. They answer customer questions and often provide recommendations on cannabis products.

There’s strong local pride in Nova Scotia, Yu says, so the Windsor-based company is highlighting that its cannabis is locally grown.

“We feel we’re starting to get traction, and highlighting the local angle of our company and products, definitely helps,” Yu says.

Since receiving clarification and guidance from the NSLC, Mernova had started to conduct in-store education sessions, as well as tours for budtenders, so they could see its 2,000 square metre, purpose-built, indoor grow facility for themselves.

Alas, these education sessions and tours are on hold for now due to a recent COVID-19 surge in the province – but Yu and his staff are looking forward to resuming them, hopefully soon.

“For tours, we want to get them in on days when we harvest, because when we harvest, it absolutely stinks – and if you haven’t experienced that in person, it is something that will definitely make an impression. It is overwhelming,” says Yu.

“We basically want to overwhelm them with the aroma, so that the experience is not soon forgotten. They’ll go home and their clothes are going to reek.”

Cannabis industry veteran

If you haven’t guessed, Yu isn’t your typical corporate executive. He has 16 years of experience consulting for medical growers and working in the legal cannabis industry, and extensive knowledge and experience growing cannabis — including from the dawn of commercial medical legalisation in Canada, as the original master grower and production manager for MedReleaf, and then later as the regional production manager for Eastern Canada for Canopy Growth Corp., one of the world’s largest cannabis companies.

Now he’s in charge of a midsized company with 27 full-time employees, plus 13 part-time trimmers on call.

“At least at this size, I don’t think there’s currently a single CEO or managing director that is a skilled former grower, who has experience in the production of cannabis on a commercial scale,” Yu says.

Most cannabis company execs aren’t connoisseurs and don’t realise that cannabis consumers can be incredibly selective about what they inhale, he says. A smoker isn’t going to give a brand a second chance if it sells low-quality cannabis.

Many companies and their executives even discourage their employees from consuming cannabis, says Yu, incredulously.

So far Nova Scotians seem to like what Mernova is selling, with the company recently filing its fourth order from the NSLC for Mernova’s Ritual Green strains.

Its premium cannabis sells for $C35-45 ($37-47.50) for 3.5 grams, whereas other companies are selling cannabis “that has less THC content and terpenes, and isn’t quite as good,” for $C55 ($58) for 3.5 grams, Yu says.

Mernova is working on selling into other jurisdictions across Canada, such as the Yukon, where they just fulfilled their first purchase order, and Ontario, Canada’s largest legal recreational market for cannabis, where they hope to receive a purchase order in the next month or so.

Mernova is also looking to move into the medicinal space so it can sell direct to consumers in need of medical cannabis.

With the Nova Scotia Liquor Corporation in charge of recreational sales in the province, “we have a willing partner with extensive expertise and experience selling a controlled substance, so we hope we can combine that with our knowledge and experience with cannabis, and work together to increase sales of our Ritual Green products,” he said.

In the medicinal space, “you can sell directly to the end users. There are no middle men,” so “you completely control your own destiny,” Yu said.

There may be opportunities to the south as well, with Vice President-elect Kamala Harris expected to push her legislation removing cannabis from the Federal Controlled Substances Act once in office. That could allow cannabis imports into the United States for sale in the growing number of states where marijuana is legal .

The company is also progressing on the production and sales of other cannabis products such as joints, kief and hash, in addition to their high quality cannabis flower.

“There’s a high demand for high-quality 2.0 products,” Yu says.

“If we stick to quality, we should be good.”

This article was developed in collaboration with Creso Pharma, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.