These grey market cannabis brands are going legit

Since legalization, Canadian cannabis consumers have been inundated with new cannabis brands, largely with no end in sight. With this month’s launch of cannabis 2.0 products, such as edibles and oil vape cartridges, there’s no telling how many more new brands will come to market.

But instead of just creating new brands to promote new product, some legal producers are looking to the illicit market, where their reputations thrive, even though such products are technically illegal and not subject to government-sanctioned quality control.

Once illicit “grey market” brands establish authenticity and a built-in fan base, their consumers can be valuable to new-fangled cannabis producers hoping to cash in on legacy market notoriety.

Some companies are taking this approach full-throttle.

Take Pasha Brands, a BC-based company that trades publicly on the Canadian Securities Exchange. Pasha has an interesting value proposition: transitioning illegal, yet reputable, cannabis brands into the legal fold.

Their brands include Grizzlers, Baked Edibles Inc., and Beard Brothers—three respective west coast preroll, edible, and concentrate brands that consumers in British Columbia have come to know.

Even large companies are looking to bite off a bit of the illicit market’s reputation.

Canopy Growth Corporation, one of the largest cannabis companies in the world, is set to release oil vaporizer products under the name of Juju Joints. The Juju Joints company, founded in 2013 by Seattle’s Marcus Charles and Rick Stevens, quickly became popular in legal states across America for their disposable cannabis oil vaporizer pens.

Here before regulations

In Canada, cannabis oil-containing vaporizers weren’t legal until this month, but that didn’t stop Juju Joints from penetrating the Canadian market early, even if seemingly on an illegal basis.

Scores of online posts and threads from Canadian cannabis consumers in 2016 and 2017 indicate that the cannabis-containing disposable pens by the brand were available in certain illegal shops and online stores.

And in 2018, VICEreported that a Durham Regional Police officer—who somehow got the okay from his superiors to run an illegal dispensary called Living on Medical Marijuana in Port Perry, ON—was previously advertising illicit Juju Joints for sale.

Despite these past developments with the brand, there’s no indication that Canopy was directly associated with the company or the brand at those times. Ownership of Canadian Juju Joint-related trademarks were transferred to Canopy in 2018.

CannMart buys into Phyto Extractions

As a division of publicly-traded Namaste Technologies, CannMart’s grey market onboarding has turned heads.

Before “processing only” cannabis licenses were granted by the Canadian government, CannMart established themselves as the first commercial company in Canada to offer their medical patients a marketplace of strains from different producers—none of them directly produced by CannMart.

On Dec. 2, 2019, just before cannabis 2.0 products were set to hit shelves, the company announced that it had bought the naming rights to “award-winning” Phyto Extractions, a prominent grey market company that previously sold cannabis concentrates including shatter through illicit mail-order marijuana (MoM) websites.

The response from Reddit commentators was not impressive.

“Phyto is one of the lowest quality and shadiest black market extraction brands in Canada… I actually avoid illegal stores that carry them,” one person wrote.

In another thread, a commenter quipped, “wasn’t Phyto selling all the tainted shatter?” and another Redditor replied that, “it’s the only shatter … that gave me an immediate reaction that burned my throat and made me throw up.”

Another commenter said that while it was a good thing that CannMart partnered with a black market extracts company, “the problem is they partnered with a super shady company.”

Anonymous Reddit posts from the past handful of months indicate many users suspect their Phyto-branded purchase of illegal shatter was actually the mysterious pine resin, a substance that doesn’t get you high, leaves white residue on glass pieces, and tastes exactly like black liquorice.

This on top of posts from 2017 on the website in which users mentioned that the Phyto-branded shatter they purchased appeared “under-purged” and “tastes like butane.”

Holy fuck. Phyto.

This makes me want to puke. How is this possible?

Talk about shaking my faith in the legal market.

Maybe I should just fire up the worst acting illicit company ever, and port that into the legal market.

Much easier than engaging, building and applying. pic.twitter.com/C4R6ilV1lx

— Travis Lane (@BeardedGreenly) December 21, 2019

Following CannMart’s announcement, industry consultant Travis Lane tweeted, “This makes me want to puke. How is this possible? Talk about shaking my faith in the legal market. Maybe I should just fire up the worst acting illicit company ever, and port that into the legal market. Much easier than engaging, building, and applying.”

A licensing agreement

This is one of our first agreements into legacy market partnerships.

“Namaste is committed to safe, high-quality cannabis products and we are licensed to distribute across Canada online and in Cannabis stores in BC, Saskatchewan, and Ontario,” the statement read.

“This is one of our first agreements into legacy market partnerships and we view this effort as an opportunity to legitimize a selection of popular products that would otherwise be available solely without regulation or quality assurance.”

Meller said that Namaste’s agreement with Phyto is “exclusively focused on trademark licensing.”

“It includes a limited number of cannabis products under Phyto’s name and/or trademark, which will be manufactured by an unnamed Health Canada-licensed LP under our supervision until the CannMart Labs production license is finalized and in effect.”

Responding to questions regarding product quality issues with illegal Phyto products, Meller says that “unsubstantiated reports about Phyto product quality should be addressed directly to Phyto Extractions.”

As for the recent posts by illicit online sellers hawking illegal Phyto-branded shatter?

“Our partnership with Phyto Extractions covers a very limited set of products, not including wax and shatters. Therefore, Namaste Technologies and its subsidiaries do not have influence over Phyto’s product catalogue or how products outside of our agreement are offered for sale.”

Later, Aaron Bouganim, managing director of CannMart, emailed Leafly saying that, “our partners at Phyto assure this product is not authentic or legitimate. As a well-recognized legacy market brand, they frequently combat fake product distribution just as many other industries experience.”

Phyto-branded oil vaporizer cartridges are now available on CannMart’s  online store to registered medical patients, while recreational consumers can purchase Phyto vape cartridge through the BC Cannabis Stores website.

Editor’s note: A previous version of this article reported that Health Canada was unaware of Phyto products launching on the legal market. CannMart has since confirmed to Leafly that “Health Canada is well aware of CannMart’s activities with all 2.0 products, including our licensing agreement with Phyto Extractions.”

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