Cloud Talk: The Business of Cannabis
At the latest edition of Cloud Talk, Gen.T invited three speakers to discuss the historical and cultural significance of cannabis in Asia, as well as the region's growing appetite for the controversial drug.
Around the world, countries are slowly opening up to the idea of legalising cannabis for medical use and research. In 2018, the global legal marijuana market, including recreational use, was estimated to be worth US$13.8 billion. The amount is expected to reach US$66.3 billion by the end of 2025.
In Asia, the market is currently much smaller, as the drug remains illegal in most Asian countries. But the tides are changing. In 2018, Thailand became the first in Asia to legalise medical marijuana. It later became the first to open a full-time clinic dispensing cannabis-based medications. The governments of the Philippines, South Korea and Japan are also debating medical cannabis legalisation. Is the region finally softening its stance?
Gen.T honouree Chidchanok Chidchob, entrepreneur Chokwan Kitty Chopaka and investor Brian Sheng tackled this question in our Cloud Talk session on June 23, taking a look at the potential "green wave" that's about to sweep the region.
Chidchanok Chidchob co-founded Thailand's Pan-Ram festival, where she promotes the benefits of legalising medical cannabis in Thailand. "A lot of people still view it as a drug, and when you suggest anything else, they become very angry and say we will all become lazy if we legalise it," she said in an interview with Gen.T. "But that’s what I’m here for: to try and change people’s perceptions, because underneath all the bad press, the health benefits of [cannabis] are undeniable. And it is far less dangerous than alcohol.”
Chokwan Kitty Chopaka is the founder and CEO of Elevated Estate, a cannabis-focused incubator, fund, events and consulting firm. On a bi-annual basis, Elevated Estate releases a Cannabis Report that provides insights on the trends in the local, regional and international markets. During the session, she focused on the growing cannabis startup scene and the potential growth of the industry in Asia for investors.
Brian Sheng is the founder and CEO of Asia Horizon, a private equity investment company specialising in the emerging hemp-derived cannabinoid industry in Asia. He has been invited as a speaker at major industry conferences such as China's first International Hemp Industry Forum, hosted by the Heilongjiang government. He also hosted the first Cannabis & Hemp Government and Industry Investment Summit in Hong Kong in 2018. Asia Horizon has since published its first-ever white paper on the China hemp-derived cannabinoid industry, detailing insights from key players in the public and private sectors, you can view their webinar here.
Here are the key takeaways from the session.
The cultural significance of cannabis
Asia has some of the strictest marijuana laws on the planet, despite the fact that the cannabis plant is native to the region. And there's a long history of use and cultural significance of marijuana in this part of the world, particularly in Thailand.
"During my grandparents' generation and before that, cannabis was very much a common plant," said Chidchob. "It was like a garden herb that the Thai people would grow and use like they would basil. But when it came to my parents' generation, cannabis became labelled as a drug and the taboo surrounding its use persists until today. However, it's interesting to see the newer generations now becoming more interested in understanding it and its place in Thai culture and history."
Recent data from the United Nations shows that cannabis was consumed recreationally by 3.8 percent of the global population. In Asia, the number was about 2 percent, the lowest of any region. "My father recently started talking to me about cannabis after getting to know its medical benefits, but even then, the herb is still deeply stigmatised in Asia," said Chopaka. "The way governments and companies are pushing for medical cannabis is actually perpetuating this stigma, particularly if it were used for recreational purposes."
She adds that even businesses in the supply chain usually have a negative impression of the plant. "They want [to make] the money, but they don't want any association with the cannabis plant itself unless it were for medical purposes."
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The difficulty of marketing cannabis
With any product, marketing is just as important as quality. For the cannabis industry, this has been a big challenge.
"We can't buy any ads on Facebook or Google," said Chopaka. "For our Highland weed festival, for example, we market it through word of mouth. I tell my friends about it, and they will in turn share with their friends and so on. Marketing is a challenge that all cannabis businesses face."
At the same time, she added that due to the lack of education about cannabis and its illegal status in most parts of Asia, businesses in the industry can get away with marketing a product that isn't of the best quality. Consumers are more susceptible to cannabis marketing than any other consumer good, said Chopaka.
Business opportunities across Asia
For companies looking to enter the Asian cannabis market, the opportunities are fragmented and "very much driven by legislation", said Sheng. Besides Thailand, he also highlighted opportunities in markets such as Japan and China.
"Japan has quite a large consumer market for cannabidiol (CBD), despite the fact that there are a lot of regulatory grey areas for importing it into the country. In China, the industry has been developing and over the past few years, a much stronger regulatory framework has been put in place similar to that of the West, where the government is giving out licences and actually commercialising the industry."
He added that Asia is about seven years behind North America in the cannabis game, but the interest is steadily growing across the region and hopefully, this will be accompanied by regulatory changes. "This is a plant where you need to build the infrastructure; we need to grow it, harvest it, process it and create it into products. All this is slowly being done today from the ground up in China and in other parts of Asia. The interest is growing, it's just a matter of what happens on the regulatory side."
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Myths about marijuana
Due to the stigma surrounding marijuana, there are many misconceptions about how the plant works and how our body reacts to it.
"There's a thinking that marijuana makes people lazy and [not want to] do anything when they are stoned, but that's a harmful way of thinking," said Chidchob. "It's ultimately up to the person and how they want to use it. Don't blame the herb, blame the person."
For Sheng, the biggest mistake for investors is seeing cannabis or hemp as a special investment class of its own. "If you look at the different parts of the Chinese industry right now, you can see that the companies that are participating in the cannabis industry have similar backgrounds. They are either pharmaceutical, tobacco or consumer packaged goods (CPG) companies. Also, it's not ideal to compare the Western cannabis industry and trends to that of Asia's, because they are very different markets. Investors are better off looking at the pharmaceutical or CPG industries in Asia instead."
Cloud Talk is a virtual event series that takes place twice a month, alternating between Chinese- and English-language editions. Visit our Events page to learn about upcoming editions.