THE COOL NORTH

Canada's Hemp Legalization Sparks Growth of New Industries

Now that the jokes about getting high on hemp are trailing off, Greg
Herriott is happier. It means people have a better grasp of the differences
between hemp and marijuana.

Industrial hemp, like marijuana, is a member of the cannabis sativa family,
but has negligible traces of the hallucinatory chemical THC. Herriott is in
the hemp business, one of a growing number of entrepreneurs developing a new
industry now that hemp can be grown legally in Canada.

In 1998 the Canadian government legalized the growth of industrial hemp
under license from Health Canada, the country's ministry of health,
following a 60-year ban because of hemp's association with its psychotropic
cousin. Hemp generally contains 0.1 percent to 0.4 percent THC, far less
than needed for any kind of drug-induced high. Marijuana, by contrast,
generally has THC levels of between 4 and 20 percent.

In legalizing hemp production, Canada has broken step with the United
States, which has adamantly refused to lift its ban. Four states -- Hawaii,
Maryland, Minnesota and North Dakota -- have passed legislation to permit
hemp production for research and commercial purposes, but the federal
Controlled Substances Act still keeps it illegal. Legislatures in five other
states -- California, Illinois, Montana, Vermont and Virginia - have called
on the federal government to change its policy. Until that change occurs,
hemp production remains off limits.

US drug czar Barry McCaffrey has argued that legalizing hemp would make it
impossible to bust marijuana-growing operations, since hemp in the field
looks similar to marijuana. But Andy Kerr, a member of the board of the
North American Industrial Hemp Council, scoffs at that line of argument.
"There are 30 countries that can tell the difference between hemp and
marijuana, but he can't seem to," Kerr said.

There's other opposition to legalizing hemp. Hemp is a remarkably versatile
crop, requiring almost no herbicides, that can be used to make everything
from fiber products and oil to textiles and paper, according to the Hemp
Industries Association, based in Occidental, CA. Hemp advocates say the
synthetics industry, which supplies so much of these products already, sees
hemp as a threat to its market share.

Canada's legalization of industrial hemp has opened the door to a whole new
market comprising mainly small companies selling a variety of hemp-based
products ranging from soap to salad dressing.

Herriott and his wife, Kelly Smith, operate Hempola, based in Port Severn,
Ontario, which sells hemp-based products including massage oils, flour,
salad dressing, soap, moisturizing cream, lip balm and hemp oil. "We were
pretty gun-shy," Herriott recalled. "After close to two years of research we
finally bit the bullet."

Hempola is part of an industry that, still in its infancy, is growing at an
estimated 20 percent a year. According to a 1998 study by the province of
Nova Scotia, the North American market for hemp is estimated at $28 million
to $30 million (US dollars), with annual increases of $8 million to $10
million. That includes the United States, where industrial hemp products are
legal, but their manufacture is not.

Efforts to market hemp products in Canada are only just beginning because
most of the first crop was used to develop seed for a new crop, explained
Sasha Przytyk, general manager of Regina, Saskatchewan-based GEN-X Research.
"After this, you'll probably see more than one brand of hemp oil, for
example, on the market," he said.

Hempola hopes to capitalize on this growth potential. Through its Canadian
and American distributors, its products are available in health food and
grocery stores in Canada and some stores in the United States.

With some consumers wanting to know how hemp differs from its cannabis
cousin, education is an important part of marketing, Herriott said. "When it
comes to natural products, people are information-hungry."

Health Canada officials could have used some information in October 1998,
soon after the government lifted the hemp ban, when they tried to stop The
Body Shop Canada from launching Hemp Dry Skin Treatment products and a
provocative campaign that used such slogans as "High in protein, essential
fatty acids and hysterics." Confused officials, who worried the skin
products could get customers high, came to their senses when they realized
the products weren't going to give users the slightest buzz.

The resulting national headlines in Canada about the controversy actually
helped companies such as Effort Industries Inc., based in the Toronto suburb
of Scarborough. "It had a positive impact because it showed just how
ridiculous our government is," said Effort vice president Robert Greenwald.
"It made it easier when we made (marketing) phone calls."

Effort began selling 30 varieties of hemp fabrics, mostly to manufacturers,
six years ago. It launched T-shirts, pants, bags, hats and dresses three
years later to demonstrate to potential customers how the sturdy hemp fabric
could be used.

While hemp textiles have made it big, they tend to be pricey, said John
Roulac, author of several books about hemp and founder of the
California-based hemp food company Nutiva. Food and body care products are
poised to become big sellers, he predicted. "More people are willing to
spend $1.50 for a hemp bar or $2.50 for lip balm than $70 for hemp jeans,"
Roulac said.

Shaftesbury Hemp Ale is another product making a small splash among
consumers. It was launched in May 1998 by Vancouver-based Shaftesbury
Brewing (now Okanagan Spring Brewery). The beer is sold through Canadian
government liquor stores, privatized beer and wine stores, and bars and
restaurants in British Columbia and Alberta.

Shaftesbury began producing hemp ale to capitalize on growing consumer
interest in hemp-based products. But despite its increased popularity, hemp
beer is not and never will be a big player in the beer category, marketing
director Jim Pelkey predicted. It accounts for only 7 percent of
Shaftesbury's sales volume, last on its roster of four beers.

"It's a niche brand but it's a very important brand for us because it's a
cutting-edge beer that pushes the envelope a bit," Pelkey said.

Jason Freeman, president of BioHemp, a Vancouver-based company founded in
January 1999 to develop markets for hemp-based products, likes being part of
a smaller niche. That way, he says, his company isn't "open to being
trounced by a bigger player."

Another advantage of having so many small players is that it makes the
playing field level for everyone. "It's an open market right now," Freeman
said. "It will be two or three years before the big players get into it."

By then, a cutting-edge industry could well be going mainstream if Canadian
consumers nonchalantly make hemp products a part of their lives, perhaps
starting off the day lathering up with hemp-based soap in the shower, and
winding down after work with a hemp beer.