Richmond Hill, Ont.-based natural, organic and specialty foods company Neal Brothers is partnering with cannabis company Newstrike Brands on a joint venture dedicated to developing, marketing and selling cannabis edibles.
Newstrike will take a 60% stake in the as-yet unnamed joint venture, which represents the licensed producer’s first foray into the edibles space. The joint venture will procure, manufacture, distribute, market and sell co-branded specialty food products containing cannabis. (Newstrike is the parent of Up Cannabis Inc., which is licensed to both cultivate and sell cannabis.)
Neal Brothers co-founder Peter Neal expects the company to begin developing products early next year, but did not provide specifics about what types of products will comprise its portfolio.
Neal Brothers is best known for its line of chips and salsa, a stark contrast to the cannabis-infused chocolate bars and gummies that currently dominate the legal edibles market in U.S. states such as California and Colorado.
“We’ve identified some pretty significant gaps where we could create some items that are very exciting for consumers [and] are safe and responsible,” says Neal. “We will start doodling in the next week or so and putting parameters around what makes sense.”
While edibles aren’t expected to become legal in Canada until fall 2019, Neal also hinted the company could get a head-start by introducing a line of cannabis-free products–such as a mix–to which consumers could add cannabis oil legally purchased through a provincially-licensed retailer. Cannabis oil is the preferred raw ingredient for edibles.
While his company weighed possible consumer backlash to a move into the cannabis space, Neal says extensive conversations with family and friends, as well as people in the medical and law enforcement communities, convinced him the effects on the brand will be negligible.
All of the products, he says, will adhere to the company’s quality standards. “We’re not trying to make a product that’s going to get someone high for the hell of it and just generate profit,” he says. “We’re trying to do something that’s different.”
Newstrike CEO Jay Wilgar says the company was introduced to Neal Brothers through mutual business associates about six months ago and moved quickly to cement a formal agreement. Newstrike has also acquired a minority stake in Neal Brothers as part of the transaction.
“It was a really strong fit on many levels, from a personality standpoint, a philosophy around the cannabis sector and what we intend to do together in creating innovative products and brands,” says Wilgar.
Once legal, Wilgar predicts edibles will become “a very big market” for Newstrike. “We see it as a huge opportunity, and we were looking for a partner that had a really strong understanding of the marketplace from a quality point of view and an understanding of what our business is all about,” he says.
Wilgar says the company plans to spend the coming months developing a “CPG-style” group of edible brands built around an understanding of what Canadians are looking for in these types of products. “I think we have some pretty neat things up our sleeve that we’re going to surprise the market with,” he says.
Experts say edibles–which includes cannabis oil, pills and any other products that are ingested rather than smoked–could be a $1 billion market in Canada within two years.