2018 | EMERGING BUSINESS
RECREATIONAL CANNABIS LEGALIZATION TO TRANSFORM BUSINESS TOURISTS READY FOR BUD-AND-BREAKFAST OPTIONS CANNABIS-SECTOR TRAINING OPPORTUNITIES SLOW TO DEVELOP POLITICAL PUSHBACK POSSIBLE IF PUBLIC FLOUTS NEW LAWS
AGRICULTURAL JOINT VENTURES FLOURISH TOURISM
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LEGAL
QUALITY
RETAIL
PARTNERSHIPS
2018-09-13 9:41 AM
CANADIAN CANNABIS
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Andrea Brown, CPA, CA Regional Leader, Public Companies T: 604.637.1525 E: andrea.brown@mnp.ca
Glenn Fraser, CPA, CA, MBA National Leader, Cannabis T: 416.263.6914 E: glenn.fraser@mnp.ca
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CONTENTS FROM THE EDITOR’S DESK
5
COLUMN
FEATURES Entrepreneurs eye cannabis-related tourism business
6
Canadian cannabis firms with U.S. subsidiaries find home on CSE
10
Legalized weed unlikely to end civil disobedience
14
Reviews of recreational and medicinal cannabis regimes on the way 16
Farnworth—12
Expunging criminal records
16
Universities slow to adopt cannabis-sector training
20
COLUMN
Cannabis marketing likely to involve quality-assurance programs
22
Reimagining retail in the regulated recreational space
24
First Nations taking own approach to cannabis legalization
27
Cannabis growing to be done via ... wait for it … joint ventures
29
24 REIMAGINING RETAIL IN THE REGULATED RECREATIONAL SPACE
Fraser—18 COLUMN
Recreational cannabis retailers relying on inclusive design, expertise, professionalism to woo consumers
Anand—19 COLUMN
14
LEGALIZED WEED UNLIKELY TO END CIVIL DISOBEDIENCE Political consequences of flouting cannabis laws could be further change, or a backlash
Gonzalez—26
20 UNIVERSITIES SLOW TO ADOPT CANNABISSECTOR TRAINING Kwantlen Polytechnic University is a rare Canadian university to have cannabis-related courses
6
ENTREPRENEURS EYE CANNABIS-RELATED TOURISM BUSINESS ‘Bud and breakfasts,’ tour companies lure travellers who want 420-friendly safe spaces
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From the editor’s desk
WIDE RANGE OF CANNABIS-RELATED BUSINESS OPPORTUNITIES TO LAUNCH OCTOBER 17
W
elcome to the second edition of CannaBiz magazi ne, Glacier Med ia’s publication that enlightens readers about business opportunities arising as recreational marijuana becomes legal across Canada. Much has happened since we released our first edition in December 2017. Most significantly, the Cannabis Act has passed through Parliament and corresponding provincial laws have passed through B.C.’s legislature. Excitement is palpable, with legal recreational cannabis sales set to launch Canada-wide on October 17. This is not just from the growers, distributors and retailers, but also from scientists who are eager to find opportunities that lie ahead. Humanity has consumed cannabis for thousands of years, but the advent of legalization, along with today’s technological advances, provides the opportunity to create products that the world has never seen. Emerald Health Therapeutics CEO Chris Wagner said it well, while on a panel at an event that Business in Vancouver and CannaBiz magazine hosted in July. He explained that the cannabis plant has more than 200 compounds – cannabinoids and terpenes – and that most products today have smashed those compounds into one.
Wagner expects to begin to reformulate the cannabis plant with different genetic combinations to better target popular uses for cannabis: inability to sleep, anxiety and pain. This could be equated to the early days of pop music, when there were multitudes of chord sequences, or hooks, yet to be fully developed into hit singles. Of course, there are plenty of unknowns around what legalization will look like. Will existing black-market operators apply for government licences so they can operate legally? Will growers have capacity to produce a sufficient amount of cannabis to meet public demand? Will U.S. border guards scrutinize the social media feeds of Canadians in an attempt to find those who admit to consuming cannabis and then issue those people lifetime bans from entering the country? Canada’s largest bourse, the Toronto Stock Exchange, continues to forbid listed cannabis ventures from doing business in the U.S. How long will that be the case? So far the impact of that policy has been a steady stream of cannabis companies choosing to list on the Canadian Securities Exchange, thereby providing the general public more cannabis ventures in which to invest, while also making it easier
PRESIDENT: Alvin Brouwer EDITOR-IN-CHIEF, BUSINESS IN VANCOUVER, AND VP EDITORIAL, GLACIER MEDIA: Kirk LaPointe EDITOR: Glen Korstrom DESIGN: Randy Pearsall PRODUCTION: Rob Benac WRITERS: Darryl Greer, Glen Korstrom, Tyler Nyquvest,
Albert Van Santvoort, Omri Wallach, Hayley Woodin PROOFREADER: Meg Yamamoto INTEGRATED SALES MANAGERS: Pia Huynh, Laura Torrance ADVERTISING SALES: Benita Bajwa, Dean Hargrave, Blair Johnston, Corinne Tkachuk, Chris Wilson NATIONAL SALES: Shirley Moody OPERATIONS MANAGER: Michelle Myers ADMINISTRATORS: Katherine Butler, Marie Pearsall RESEARCH: Anna Liczmanska, Carrie Schmidt
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for early investors to monetize their holdings. T his edition of Canna Bi z has stories that probe where business opportunities lie – in tourism, retail, agriculture and more. Readers get to meet short-termrental entrepreneurs who want to cash in on demand for 420-friendly accommodation, and representatives at post-secondary institutions that are just starting to offer much-needed training for students who want to enter the sector. Other stories ex plore whether growers could create a mark of distinction similar to the British Columbia Vintners Quality Alliance designation that exists for B.C. wine, and what growers have launched joint ventures with First Nations. Look for Brazeau Seller lawyer Trina Fraser’s column on the many ways that provinces differ in how they plan to reg ulate cannabis use – insight that comes alongside a helpful infographic to make it clear at a glance how B.C.’s regime is different from the others. B.C. Solicitor General Mike Farnworth has provided one of several other columns – one to outline how he foresees the local cannabis landscape post-legalization. Happy reading.
Glen Korstrom is editor of CannaBiz. He is an awardwinning business reporter who has more than 20 years’ experience in journalism
Glen Korstrom Editor, CannaBiz
CannaBiz 2018 is published by BIV Magazines, a division of BIV Media Group, 303 Fifth Avenue West, Vancouver, B.C. V5Y 1J6, 604-688-2398, fax 604-688-1963, biv.com. Copyright 2018 Business in Vancouver Magazines. All rights reserved. No part of this book may be reproduced in any form or incorporated into any information retrieval system without permission of BIV Magazines. The publishers are not responsible in whole or in part for any errors or omissions in this publication. ISSN 1205-5662 Publications Mail Agreement No.: 40069240. Registration No.: 8876. Return undeliverable Canadian addresses to Circulation Department: 303 Fifth Avenue West, Vancouver, B.C. V5Y 1J6 Email: subscribe@biv.com
2018 | EMERGING BUSINESS
RECREATIONALCANNABIS LEGALIZATION TO TRANSFORM BUSINESS TOURISTS READY FOR BUD-AND-BREAKFAST OPTIONS CANNABIS-SECTOR TRAINING OPPORTUNITIES SLOW TO DEVELOP POLITICAL PUSHBACK POSSIBLE IF PUBLIC FLOUTS NEW LAWS
AGRICULTURAL JOINT VENTURES FLOURISH TOURISM
LEGAL
QUALITY
RETAIL
PARTNERSHIPS
Cover: Roxana Gonzalez/Shutterstock
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
ENTREPRENEURS EYE CANNABIS-RELATED TOURISM BUSINESS ‘Bud and breakfasts,’ tour companies lure travellers who want 420-friendly safe spaces
OMRI WALLACH
TY SPEER CEO, TOURISM VANCOUVER
There might be a small group of people for whom [cannabis] is part of their life and part of their lifestyle choice, and they can exercise that choice in Canada, and within Canada, they’ll choose Vancouver
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B
ed and breakfasts usually go out of their way in caring for guests, with operators placing chocolates on pillows or bottles of wine in guests’ rooms. At Unity Whittaker’s shortterm rental in Vancouver’s Chinatown, travellers are greeted with complimentary joints. The venture is one of many tourism businesses where owners are trying to capitalize on the growing market for cannabis-related tourism.
“I leave a couple of pre-rolled [joints],” says Whittaker, “one sativa and one indica, with an ashtray.” She markets her venture on Bud and Breakfast, which operates as an online platform, much like Airbnb, and has listings that display pictures and cite accommodation rules. The difference between the two platforms is that Bud and Breakfast highlights businesses that celebrate cannabis and its use. It has gained a loyal following and has more than 1,000 properties listed worldwide. So far, Bud and Breakfast’s traction in Canada has been limited. Denver, Colorado, for example, has more than 100 listings on the platform, but Metro Vancouver has only five. Another four listings are on Vancouver Island. Whittaker, who works as creative director for the cannabis-oriented lifestyle website Blysscloud.com, has had a listing on the platform since last summer because it helps
her attract guests who want to be in a 420-friendly space. She does not, however, rely on its booking system. Instead, she redirects any traffic from the website to her Airbnb listing, which she says she believes is more secure, as it has city-enforced licensing. “Airbnb is more professional and widely accepted,” says Whittaker. “With my insurance [and strata rules], I need to be on Airbnb.” Other short-term-rental booking sites require travellers who are seeking 420-friendly accommodation to comb through each listing’s details and house rules. Many hosts who place listings on them may also feel uncomfortable about publicly endorsing a drug that has been illegal recreationally in Canada for the past 95 years. “I’d love to see Airbnb offer a cannabis-friendly checkbox in legal states,” says Whittaker. A bigger change that W hittaker wants to see is
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Canadians recognizing the opportunities that cannabis tourism presents. B.C.’s tourism sector generated more than $17 billion in revenue in 2016 according to the B.C. government, and local tourism marketers have mixed opinions on whether legalized weed will lead to a significant boost to that revenue. Tourism Vancouver CEO Ty Speer, for example, calls cannabis-related tourism “a niche market” and says he has his doubts that it will become a significant source of new visitors. “There might be a small group of people for whom that is part of their life and part of their lifestyle choice, and they can exercise that choice in Canada, and within Canada, they’ll choose Vancouver,” he says. “Sure, I can see that within the next few years, but I don’t think [cannabis-related tourism] will be a substantial driver for tourism – not in the near future.” In contrast, the Vancouver Convention Centre’s sales and marketing vice-president, Claire Smith, says to CannaBiz magazine that she expects that legalized weed will help draw conventions. “We’ve hosted a couple of little [cannabis-sector] forums over the last couple of years but I think we’ll start seeing more of those types of events,” she said. “It’s a very
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seriously growing business sector. There are associations now that are around the business of cannabis, which is really quite interesting.” In Colorado, where recreational marijuana is legal, cannabis tourism has been a boon to the local economy. A 2016 report by the Colorado Tourism Office found that 15 per cent of visitors participated in a “marijuana-related activity,” while five per cent said legal marijuana was their main reason for visiting the state. Cannabis tourism in that state has grown to include everything from tours of dispensaries and grow-ops to mountain retreats with marijuana-infused spa packages. In many U.S. cities where consumption of weed is legal, airport shuttle services take travellers to retail stores on the way to hotels, and some vehicles have drivers isolated so that passengers can smoke. B.C. law makes it illegal for anyone to smoke anything in a taxi, limousine or bus even if the driver is isolated from passengers and second-hand smoke. “Shuttles are actually important to get people to dispensaries but also off the road so they’re not driving,” says Whittaker, who has travelled in states that have legalized cannabis. “When someone arrives [in a new place], it’s disorienting, and buying cannabis in a new country or city can be scary.
Unity Whittaker’s shortterm rental in Vancouver’s Chinatown provides guests with free joints | CHUNG CHOW
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
Entrepreneurs eye cannabis-related tourism business
420-friendly short-term rentals and bed and breakfasts may provide complimentary cannabis as well as pipes and reading material | CHUNG CHOW
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The idea is to take that pressure off people.” Destination British Columbia is waiting to see what the government’s final rules for advertising and promotion of cannabis will be before ironing out marketing and promotion plans, but some tourism businesses have already started targeting cannabis consumers. Victoria’s CannaTours offers dispensary tours and works with partners to add a cannabis-related twist to other activities, such as golf and whale watching. Other tour operators and business owners are waiting to get more details from the B.C. government on what rules will govern tourism opportunities in the province. B.C. Minister of Public Safety and Solicitor General Mike Farnworth has said that smoking lounges will be illegal. Cooking classes that involve making edibles will be illegal federally until at least later 2019, when the federal government is expected to legalize the consumption of edibles. Smoking cannabis on private property will be allowed, as regulations will be the same as with smoking tobacco cigarettes. That opens the door to retreat-style ventures, tours and, of course, 420-friendly bed and breakfasts. É
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
CANADIAN CANNABIS FIRMS WITH U.S. SUBSIDIARIES FIND HOME ON CSE Canada’s major stock exchanges eschew cannabis-related listings
DARRYL GREER
RICHARD CARLETON CEO, CANADIAN SECURITIES EXCHANGE
We are, certainly in terms of numbers, far and away the dominant exchange in the [cannabis] space globally
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annex Capital Holdings CEO Anthony Dutton reflects on the process to take his Vancouver-based company public on the Canadian Securities Exchange (CSE) earlier this year, and recites some frustrations. Raising money, and telling the story of his company, has been, relatively speaking, quite simple, he says. The problem has been the “800-pound gorilla in the room, which is the disconnect between federal law and state law in the U.S.,” Dutton says.
Cannex, which went public through a reverse merger in March, 2018, has subsidiaries in the U.S., which include Washington state’s largest producer, Northwest Cannabis Solutions. Those assets preclude it from listing on Canada’s major bourse, the Toronto Stock Exchange (TSX). “Companies like Cannex, which have U.S. assets, are
currently prohibited from trading on the TSX because of rules that aren’t 100 per cent clear to me,” he says. “The TSX has just made a decision. I think an internal decision.” Cannex’s trading launch saw the firm raise $48 million in what Dutton claims was the largest institutionally led financing for a Canadian cannabis firm on the CSE. Investors were from Canada, the U.S. and as far away as
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Switzerland and Australia. The company, Dutton says, is striving to be one of the largest five cannabis firms in North America within the next five to 10 years. He aims to capitalize on consumer demand for quality products and on investor appetites for large returns. “Many great companies have gone public by way of reverse mergers,” he says before explaining that this method of going public takes less time and costs less. The CSE in particular, Dutton adds, has been helpful and supportive of the cannabis industry. The selfproclaimed “exchange for entrepreneurs” has positioned itself as a go-to marketplace for early-stage cannabis firms where executives are looking to raise money in a capital- and regulation-intensive sector. Cannabis ventures now comprise 20 per cent of the exchange’s listings after massive growth in the sector during the past few years. The CSE had 32 cannabis-related issuers with a combined market capitalization of $310 million in 2015, according to the exchange. By the end of 2017, it had 52 cannabis-related issuers that had a combined market capitalization of more than $7.5 billion. For the CSE’s CEO, Richard Carleton, positioning the exchange to be a welcoming place for cannabis companies has allowed it to carve out a niche with untold and
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unimagined value as the space evolves. “We are, certainly in terms of numbers, far and away the dominant exchange in the space globally,” Carleton says. “But as the rules and regulations change, clearly we’re going to have to defend our turf from larger, more established rivals.” He points out that going public in the U.S. is far more expensive, even when done through reverse mergers with established firms. Canada is a low-cost jurisdiction to be a public company, compared with virtually every other jurisdiction in the world, with the possible exception of Australia, Carleton says. Not only are the fees from the regulators and exchanges lower in Canada, but the cost of directors’ and officers’ insurance is considerably less in Canada because companies do not need to “defend spurious class-action suits at the drop of a hat,” as they would in the U.S., he says. Carleton predicts that a “significant number” of U.S. companies will soon want to tap Canadian capital markets in tandem with international players, who are looking for both funding and expansion into North America. He adds that if the U.S. were to legalize cannabis federally, he would expect to see “a real free-for-all from a mergers-and-acquisitions perspective.” É
Anthony Dutton’s Cannex Capital Holdings has assets in the U.S., which preclude it from being able to list on the Toronto Stock Exchange | ROB KRUYT
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
MINISTER URGES COMPLIANCE WHEN LEGALIZATION TAKES PLACE MIKE FARNWORTH |
Slow rollout means legal stores ‘won’t magically appear overnight’
A B.C. will continue to monitor implementation and make any changes necessary to ensure our provincial goals of protecting public health and safety are being met
fter years of study and debate, the federal government passed its historic Cannabis Act and announced that nonmedical cannabis will become legal on October 17, 2018. B.C. has worked hard to create a provincial regulatory regime that provides a sound foundation for the safe implementation of legalized cannabis, one that takes a cautious but balanced approach to protect youth, public health and safety, and displace the black market. We also recognize that legalization could provide economic development opportunities for individuals and communities across B.C. The legalization of non-medical cannabis has few precedents, and while there are still a lot of questions to be answered, there are also a few key things to remember. O C TO B E R 17 IS J US T TH E BEGINNING Q The legalization
of cannabis is a complex change
in public policy, and the date set by the federal government is just the beginning. We’re focused on introducing a safe retail cannabis sector in time for legalization – but it’s important to understand that stores won’t magically appear overnight; the legal cannabis retail industry will ramp up over time. As more legal retail stores open across B.C., enforcement activity, via B.C.’s new community safety unit, will step up activities against illegal dispensaries that operate outside of the provincial framework. O N LY P R O V I N C I A L LY L I CENSED RETAILERS WILL BE AU T H O R I Z E D T O S E L L CA N NABIS Q British Columbians of
legal age will be able to purchase non-medical cannabis through privately run retail stores, governmentoperated retail stores or government online sales. Whether run by the B.C. government or private entities, non-medical cannabis stores will obtain their cannabis only from the provincial wholesale distributor, the British Columbia Liquor Distribution Branch. THERE’S NO ONE-SIZE-FITS-ALL MODEL FOR CANNABIS REGULATION Q We’ve established a system
that allows local governments and Indigenous nations to make some
cannabis-related retail decisions based on their communities’ needs – whether that’s setting a minimum distance between cannabis stores and schools or prohibiting storefronts altogether. Local governments, landlords and strata councils will also be able to set additional restrictions or prohibitions on non-medical cannabis consumption and cultivation. WE WILL KEEP ROADS SAFE Q We’re going to take care-
ful stock of what happens on B.C.’s roads after legalization. With legalization on the horizon, we’re implementing tougher sanctions to deter impaired people from getting behind the wheel, and giving police more tools to remove drug-affected drivers from the road. B.C. will be launching a public education and awareness campaign before October 17 to ensure that everyone has information about our provincial regulations when they come into force. T he federa l lega l i zat ion of non-medical cannabis represents a historic shift in public policy and we’ll all experience a considerable learning curve. But, rest assured, B.C. will continue to monitor implementation and make any changes necessary to ensure our provincial goals of protecting public health and safety are being met. É Mike Farnworth is B.C.’s minister of public safety and solicitor general and is in charge of B.C. legislation and regulations that govern many aspects of cannabis legalization, such as how cannabis is sold, consumed and grown at home.
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emeraldhealth.ca
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
LEGALIZED WEED UNLIKELY TO END CIVIL DISOBEDIENCE Political consequences of flouting cannabis laws could be further change, or a backlash
GLEN KORSTROM
DANA LARSEN FOUNDING DIRECTOR, VANCOUVER DISPENSARY SOCIETY
I have a lot of mixed feelings about going into the new system because it means that I’ve got to stop carrying a lot of the products that I’m carrying now
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nding 95 years of prohibited recreational cannabis use comes with plenty of regulations – enough rules to be documented in several thick binders. Warnings, fines and arrests will undoubtedly take place as federal, provincial and municipal enforcement officers respond to complaints and otherwise seek out scofflaws who do not abide fully with the letter of the law. The question is: how pervasive will this law-breaking be, and will the civil disobedience involved convince government to loosen regulations? Alternatively, could the law-breaking create a political backlash where citizens elect a new government that promises either to crack down on the transgressors or to recriminalize recreational cannabis use? Activist Dana Larsen tells CannaBiz magazine that he believes much of the inevitable civil disobedience will have widespread public support, particularly when it is targeted at restrictions that moderates view as being excessive, such as a maximum penalty of jail time for a
person who makes homegrown cannabis plants visible to neighbours. “Me and many other Canadians are going to grow four cannabis plants on our front lawns,” Larsen says. “We’re going to challenge that law and go to court, and I will keep doing that until they make me stop it. I think that a lot of people will be willing to push the system in that regard.” When CannaBiz magazine asks B.C. Solicitor General Mike Farnworth about that situation, he chuckles and says that there is no need for hysteria. Enforcement about visible cannabis plants in a garden, says B.C.’s top cop, will start with warnings and then,
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if complaints persist and the situation warrants, fines. A much harsher crackdown will take place with respect to illegal cannabis stores that operate without a provincial licence, or break the conditions of that licence by selling, for example, edibles or vaporizers, before those products become legal. Larsen does not rule out breaking the law at the non-profit Vancouver Dispensary Society, where he is a director, but says that he may apply for a provincial permit. “I have a lot of mixed feelings about going into the new system because it means I’ve got to stop carrying a lot of the products I’m carrying now, and probably they will want me to shut down and then wait until I get permission to reopen under the new system,” he says. “Those are things I really don’t want to do.” He then tweeted on August 15: “I wouldn’t leave my members in the lurch like that. I’d rather do new projects, maybe open a psilocybe dispensary.” Farnworth, however, promises that a new provincial compliance team will actively seek out dispensary owners who break the law and that non-compliance could result in $100,000 fines and jail time. Anne McLellan, who chaired the federal task force on marijuana legalization and regulation, is taking a conciliatory approach and says her hope is that everyone just plays by the rules. “It’s going to be important for all the actors in this change
to play by the rules and not try to cut corners, not put prohibited pesticides on your crop and not to sell edibles out the back door of your retail shop as long as edibles aren’t allowed,” she tells CannaBiz magazine. “There’s a range of things that could happen. In communities, [law-breaking] could turn community members against legalization. I think we all want this to go well, so therefore it is incumbent on all of us to play by the rules.” She brings up the spectre of a future Canadian government rolling back the legalization even though activists, such as Larsen, doubt recriminalization is feasible. “If [Conservative party leader Andrew] Scheer wins the next federal election, and we get a Conservative government, they will not be able to stop the legalization of cannabis that has already happened,” he says. “That’s out of the bag. Once these stores open up and cannabis gets sold, you can never go back from that.” The next federal election is set for October 19, 2019 – two days after the Cannabis Act stipulates that the government must put in place regulations for the legalization of edibles. Larsen would not be surprised if the Liberals found a legal loophole to allow them to delay legalizing edibles until after the election. If the Conservatives win that election, he expects that the most that they would do, in terms of recriminalization of cannabis use, would be to roll back the legalization of edibles or put a stop to it if that legalization has not yet taken place. É
Vancouver Dispensary Society founding director Dana Larsen may flout cannabis laws once recreational use is made legal | ROB KRUYT
QUALITY MATTERS
T
Choose
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
Reviews of recreational and medicinal cannabis regimes on the way
T
he Cannabis Act has yet to be fully implemented but the next review of the bill is already set in law to start by October 17, 2021. That review must end no more than 18 months after it starts. Two years before that deadline for a review, on October 17, 2019, regulations must legally be in place to allow for edible cannabis products.
A review is likely to also be in the cards for the parallel regime through which Canadians will be able to access cannabis – the medical marijuana system. Patients who have a doctor’s note that authorizes them to buy cannabis for medical purposes are the only ones legally able to purchase cannabis direct from a licensed producer, and that will continue after October 17, when recreational cannabis sales launch. Those patients have long been also able to grow a reasonable supply for their own use, and if they were not capable or inclined to grow that weed, they could designate a neighbour, friend or other third party to grow it for them. That provision of being able to designate a third party to grow cannabis should be eliminated in a future review, says Anne McLellan, who chaired the federal task force on marijuana legalization and regulation. “We heard from law enforcement and others that if there is abuse right now in the medicinal stream, it is with the designated grower,” says McLellan, who is also a former justice minister. “Designated growers grow beyond that which they are allowed to grow, and they are selling into the black market. That has got to stop. In our task force, we looked at medicinal [cannabis] because we were asked if it should be kept or not. We said, ‘Yes, keep it, and review it after five years. Keep it for now because too much change for the legitimate patient would be unfair.’”
Expunging criminal records
T
he same day that Prime Minister Justin Trudeau announced that legal recreational cannabis sales will launch October 17, he hinted at some future legal changes that could take place. “Until the actual coming-into-force date and the law is changed, there is no point looking at pardons while the old law is on the books,” Trudeau told a press conference on June 20. “We’ve said we will look at next steps once the new coming into force happens, but between now and then, the current regime stays.”
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One person who has a criminal record for operating illegal cannabis dispensaries and was not listening to Trudeau’s media scrum was Vancouver’s Jodie Emery, who pleaded guilty last year and was fined $195,000. “I can’t stomach it,” she explains. “They will only look at the idea of maybe studying perhaps the suggestion that they may possibly [look at pardons]? It’s appalling.” Emery has since launched her first café – a coffee shop in Toronto’s Kensington Market neighbourhood that she calls Jodie’s Joint. É
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Want to enter the medical and recreational markets in Canada? Under the new Canadian cannabis regulations, small “craft� cultivation facilities are now eligible for a Micro Cultivation License. This will allow small businesses to enter the revolution on craft cannabis production. A successful application must be thorough and professionally drafted, and submitted to Health Canada for review. CCI can work with you on your Micro Cultivation License application, and provide you with workforce training programs to ensure your facility meets Health Canada's compliance regulations.
cannabiscomplianceinc.com
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
CANNABIS REGULATIONS DIFFER ACROSS THE COUNTRY TRINA FRASER |
R
ecreational cannabis will become legal in Canada on October 17, and legalization will be coupled with extensive regulation at every level of government. While cultivation, processing, packaging and labelling will be regulated at the federal level, distribution, sale and consumption matters will be handled provincially (and to some extent municipally). The varying approaches taken by provincial and territorial governments across the country on these issues are striking. Here are some expamples.
Generally, existing leases can be amended only by the mutual consent of the landlord and tenant. Exceptions are found in B.C., Saskatchewan and P.E.I.
MINIMUM AGE Q The minimum age to purchase, possess and consume non-medical cannabis will be 19 in every province and territory except Alberta and Quebec, where the minimum age will be 18. This
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Litigation is likely to clarify provincial laws
accords with the legal drinking age in every jurisdiction except for Manitoba, where the legal drinking age is 18 but legislators chose 19 to be the minimum age to consume cannabis. RETAIL MODEL Q Quebec, New Brunswick, Nova Scotia, Prince Edward Island and the Northwest Territories have chosen a public sale model, where the government has a monopoly on the distribution and sale of cannabis, both retail and online. At the other end of the spectrum, Saskatchewan has chosen a completely private model for both distributors and sellers. In Manitoba, private companies are able to sell in retail stores and online but will have to purchase product via a government-run distributor. Private distribution may come later. Alberta and Ontario have embraced public distribution and online sales, with private-store retailing. B.C., Newfoundland and Nunavut will have a combination of public and private retailers, with government controlling distribution and online sales. Newfoundland has said that it will run retail locations only where no private seller steps forward to do so. Yukon will have public distribution and sales to start, but it intends to allow private retailers in the future.
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Private stores are allowed Private stores are not allowed
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As legalization unfolds, legislators will likely carefully examine these models to determine which ones best achieve the objectives of cannabis legalization: public health and safety, reducing the illicit market and making cannabis inaccessible to youth. HOME GROWING Q Ca nada’s Cannabis Act permits four cannabis plants to be grown in each dwelling. This is not a per-person quota. Manitoba and Quebec, however, have passed legislation to prohibit home growing – laws that may be subject to court challenges. Other provinces have placed restrictions on the right to grow cannabis at home. In B.C., it will be illegal for cannabis plants to be visible from any public space, and in New Brunswick, plants must be in a locked enclosure. LANDLORD RESTRICTIONS Q
L a n d lo rd s m a y p roh i b it n o nmedical growing, smoking and vaping in new leases. Generally, existing leases can be amended only by the mutual consent of the landlord and tenant. Exceptions are found in B.C., Saskatchewan and P.E.I., where landlords have been legislatively given the right to impose such bans in existing leases. The degree to which landlords can prohibit or restrict home growing, smoking or vaping cannabis for medical purposes is an issue that engages human rights legislation and the duty to accommodate. Litigation between landlords and tenants, as well as strata corporations and condominium owners, is expected. É Trina Fraser is comanaging partner of Brazeau Seller Law and leads its CannaLaw group.
Intend to make growing cannabis illegal
Landlords are able to unilaterally change existing leases to ban cannabis consumption
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GERMANY: CROWN JEWEL OF THE EU CANNABIS MARKET DEEPAK ANAND |
Licensed producers look abroad for export opportunities
C Canada’s advantage is that it has a wellestablished, and regulated, production and distribution system for medicinal cannabis
anadian licensed producers are enjoying opportunities in Germany because that country’s medicinal cannabis regime is experiencing challenges. Germany has a large, aging population that is covered by socialized medical insurance. That means that the country’s annual medical cannabis market could be worth as much as 10.2 billion euros. Understa nd i ng futu re opportunities in Canada’s largest export market for medical cannabis means understanding the past, present and future direction of this crown-jewel market. THE PAST Q Before G erma ny
legalized cannabis for medical purposes in January 2017, patients who suffered from certain diseases, such as multiple sclerosis, cancer or chronic pain, could use cannabis only if they had applied for specific exemptions at the Federal Institute for Drugs and Medical Devices, also known as BfArM. As regulations were extremely strict, only a few hundred patients were granted the permission to use the cannabis plant for medicinal purposes. A f ter Ja nu a r y 2017, pat ients could receive a prescription from their doctor and obtain cannabis at a pharmacy. Although the restrictions have been lifted slightly, these processes are still strictly controlled by BfArM. As i n Ca nada, the ma i n form of cannabis being prescribed in Germany is dried cannabis flower. The costs of the dried cannabis flower and cannabis extracts are covered by health insurance for patients who have no other treatment options, but only about one- third of the patients who access medical cannabis in Germany are being reimbursed by insurance providers. G e r m a n p h a r m a c i e s c h a rge patients significantly more than patients pay in Canada: 25 euros
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(C$38) per gram of dried cannabis buds. As demand for medical cannabis surged after January 2017, shortages arose. To combat this, BfArM proposed a tender process for the public procurement of cannabis. It invited qualified companies to put forward their bids to sell cannabis plants to BfArM, which in turn would sell these plants to the pharmacies. THE PRESENT Q In March 2018,
Düsseldorf regional court in Germany halted the tender process, arguing that the timeline given to companies had been too short. The court’s decision followed compla i nts from Germa n companies that had reportedly argued that timelines were too tight, and that certain tender requirements, such as experience growing cannabis legally, favoured foreign applicants from countries such as Canada, which has an existing medical cannabis system. Several Canadian companies and their German subsidiaries were believed to have been on the short list for the 10 licences to sell cannabis to BfArm. They include Canopy Growth Corp., MedReleaf Corp., Aurora Cannabis Inc. and Aphria Inc. (through its recent acquisition of Nuuvera Inc.). Other companies, such as Maricann Group Inc., Tilray and Cronos Group Inc., are also exporting cannabis to Germany and may also have been in the running. It is unclear when the tender process will resume, and whether the process will start from the beginning. In 2017, Canadian licensed producers (LPs) exported more than 520 kilograms of dried cannabis, and 183 litres of cannabis oil to Germany to be used for medical purposes. Companies involved i nc lu d e d A u rora (t h ro u g h it s wholly owned German subsidiary
Pedanios), Canopy (through Spectrum), Cronos (though Pohl-Boskamp), Tilray, Maricann, CannTrust and MedReleaf. The halt in the tender process to supply cannabis to BfArm stands to significantly benefit Canadian LPs, includ ing a host of newer LPs that didn’t have cultivation licences when Germany first announced its tender process. In the meantime, German medical cannabis patients continue to ex per ience shor tages because there is a lack of domestic cultivation. THE FUTURE Q Until medical cannabis from German cultivation is available to German patients, dema nd is covered by i mports from Canada, the Netherlands and, soon, Israel. Canada’s advantage is that it has a well-established, and regulated, production and distribution system for medicinal cannabis. Germany can be sure that products from Canada go through strict quality-control testing. Canadian laboratory testing determines that on ly a l lowable i nsecticides or pesticides are used during production, and how much tetrahydrocannabinol (THC) and cannabidiol (CBD) is present in the cannabis. Canadian LPs, however, still face challenges. Si nce G er m a ny is i mpor t i ng med ica l ca n nabis to be sold th roug h pha rmacies, the Ca nadian LP must be certified to be an importer or exporter with good manuacturing practices. É Deepak Anand is vicepresident of business development and government relations at Cannabis Compliance Inc.
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
UNIVERSITIES SLOW TO ADOPT CANNABIS-SECTOR TRAINING Kwantlen Polytechnic University is a rare Canadian university to have cannabis-related courses
TYLER NYQUVEST
ZAMIR PUNJA PROFESSOR, DEPARTMENT OF BIOLOGICAL SCIENCES, SIMON FRASER UNIVERSITY
When it comes out of a public institution there is more leverage, there is more credibility. I am hoping other institutions, as well as our own, jump on board
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any future cannabis entrepreneurs will need education and training to succeed, yet some traditional institutions in British Columbia are slow to adopt relevant curriculum. Simon Fraser University (SFU) biological sciences professor Zamir Punja tells CannaBiz magazine that he believes department heads at many institutions have not yet “clued in” that a bevy of educational opportunities exists in the cannabis space.
“When it comes out of a public institution there is more leverage, there is more credibility,” he says. “I am hoping other institutions, as well as our own, jump on board.” Accessing necessary materials to conduct research and expand cannabis knowledge has been a challenge for institutions that want to develop courses, he says. “Health Canada clamps down on us as well as licensed producers,” he says. “It would be nice if things were loosened up a bit so we could access material for doing research and for finding out what these molecules inside really are – that’s
important from an educational perspective.” Last year, SFU president Andrew Petter led what was dubbed the President’s Dream Colloquium – an exclusive seminar on the issues surrounding cannabis and legalization. Students submitted essays on why they wanted to take part in the session, and only some of those students were accepted. Representatives at the University of British Columbia’s Sauder School of Business and faculty of land and food systems say no new course offerings are being developed for cannabis, and nothing exists at present.
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David Purcell, director of emerging business at KPU: “It’s not often you get to see a brand new industry emerge from the ground up and really be part of that. We can be part of setting the direction of success for this industry” | ROB KRUYT
Meanwhile, one of the leading educators on cannabis training in B.C., and in Canada, is Kwantlen Polytechnic University (KPU). KPU was the first institution in Canada to introduce non-credit cannabis courses. Offered through the university’s continuing and professional studies, the Cannabis Career Training program offers a comprehensive overview of the rapidly expanding cannabis sector. “It’s not often you get to see a brand new industry emerge from the ground up and really be part of that,” says David Purcell, director of emerging business for continuing and professional studies at KPU. “We can be part of setting the direction of success for this industry.” Courses are offered online and operate within federal government regulations. The training is split into three sections, the first of which is plant production and facility management. The second course is centred on developing marketing strategies while the third teaches students how to raise capital, how to create short presentations to pitch their business and how to launch a cannabis business in Canada. All courses take eight to 13 weeks, are taught by industry workers and cost roughly $1,500. There are no prerequisites for the program. So far, KPU has had approximately 1,500 students go through the courses in the last two years. The school plans to develop two more courses in the near future. Private companies are building out their own course offerings. Many of those are similar to KPU’s, although some have the perk of hands-on training and the ability to touch cannabis.
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Julie Domingo, founder of Calaxy Academy Cannabis Business Training, and her partner, researcher and educator Adolfo Gonzalez, developed a separate cannabis-related educational platform, CannaReps, out of their frustration with the lack of quality cannabis education. The two were previously the main content writers for the majority of the courses being offered at KPU. “As educators, if you want to be known as an expert or consultant, then you want to know everything that is going on regardless of whether it is considered a legal or illegal product,” says Domingo. “We wanted to ensure that when you are learning about a cannabis product, you are looking at what is happening in the real world.” CannaReps offers three different courses, which are centered on research, retail and therapy guidance. Courses cost between $50 and $500, and the company plans to expand. Domingo says that the hands-on element in CannaReps’ courses make them superior to KPU’s offerings. “Whether you are physically touching the product, you are assessing the quality or you are even doing any tasting, that is a part of learning that you can’t get at Kwantlen or any other school,” she says. Terry Roycroft, owner of the Medicinal Cannabis Resource Centre Inc., suggests that the best places for knowledge and education are still career fairs and conferences. “Those are the events that are going to have a lot of recruitment, training programs and information for people to be able to get an idea of what is available in the industry here,” he says. É
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
CANNABIS MARKETING LIKELY TO INVOLVE QUALITY-ASSURANCE PROGRAMS Industry could follow wine industry’s strategy of a VQA-style program
ALBERT VAN SANTVOORT
I An early version of the GQA logo intended to be a mark of distinction to identify quality cannabis | SUBMITTED
f you’ve ever taken a sales or marketing course, you’ve likely heard of the rule of seven. It’s the idea that prospective customers need to see a company’s brand and message seven times before deciding whether to buy a product or service. While this has its challenges for any business in today’s competitive round-the-clock advertising environment, it may prove to be a nearly impossible feat for cannabis producers. Rules around cannabis company logos are extremely restrictive, including limitations on colour and font. Rules also ban using images of people, animals or cartoon characters as well as any endorsements or testimonials. “Brand is all about storytelling, and my ability to signal to my end-user what this product is, this is where it is on the quality spectrum, where it’s cultivated and how it’s cultivated,” says Dan Sutton, founder and managing director of Tantalus Labs. “It will be difficult to tell that story with the limited advertising restrictions and
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restrictions around packaging, but not impossible.” As a result, this infant industry is looking at its much more established predecessors, who went through their own legalization processes nearly 100 years ago. In the early 1990s, Canadian vintners needed to develop a new way to brand themselves as trade agreements loosened international trade and increased competition. One solution was to set up an industry-specific, self-regulating body in order to set standards and raise the quality of branded Canadian wine. This was the
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beginning of Ontario’s Vintners Quality Alliance and the British Columbia Vintners Quality Alliance (VQA). Cannabis growers have watched the VQA programs enhance the reputation and awareness of certain wines and are hoping that using the same strategy will help with their branding difficulties. Jon Watson, founder and CEO of Growers Quality Assurance (GQA), is trying to establish a similar structure to set standards for marijuana growers and producers. Not only can standards help marijuana brands to distinguish themselves, but also Watson says that they can also be an important part of an international market strategy. GQA intends to have standards that meet or exceed those in Europe’s medicinal cannabis market, which he claims has some of the toughest benchmarks. Industry participants are already showing interest in the idea of an industry quality-assurance group. Adine Fabiani-Carter, chief marketing officer at Canada’s High Park Co., a company that produces and distributes a portfolio of cannabis brands and products, says that because the industry is in its infancy, the role of education has an even higher importance. After spending 14 years in the wine industry with Andrew Peller Ltd., Fabiani-Carter has seen the benefits of the VQA firsthand and says that similar branding can help the cannabis industry by providing its customers with clarity and assurance. Watson and GQA are not alone in their attempt to establish an accreditation program and a set of quality standards for the industry. The National Institute for Cannabis Health and Education launched Cannabis Wise late last year to set standards for both high quality and craft cannabis. While Cannabis Wise has concentrated on consultation with experts as well as patient and consumer groups, it has also spoken with producers who have expressed interest in the branding opportunities associated with a quality-assurance label. GQA and Cannabis Wise are focusing on addressing consumer demands for quality local products by implementing an accreditation regime. “We believe that Canadian licensed producers will take a look at our [quality-assurance] program because one thing we are certain of is that consumers are going to be demanding it,” says Barinder Rasode, co-founder of Cannabis Wise. “We understand very clearly the consumer demand that is going to be around the issue of quality. We have no doubt that we’ll be embraced by licensed producers once their consumers are demanding this product.” Overcoming advertising restrictions isn’t the only benefit that comes with quality-assurance programs. Both GQA and Cannabis Wise say that their certification will help boost the price of accredited cannabis products. Watson cited the price increase experienced by wines certified under the VQA system. “I would expect that there would be a 20 per cent to 30 per cent lift in the retail price of GQA-certified cannabis,” says Watson. “That number is based on the experience we’ve had in the wine industry.” Aside from helping to brand certified producers, executives behind these quality-assurance systems are also hoping to brand Canadian cannabis globally. Rasode says
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that her organization’s goal is to be fierce champions of the made-in-Canada brand abroad by ensuring its reputation for quality. A quality-assurance program is needed to help ensure Canada’s brand power internationally and to maximize the economic benefit that the legalization opportunity presents. Watson believes that his organization, and ones like it, will make it easier for international customers to buy high-quality Canadian cannabis, by providing a quality-assurance shortcut. A transparent industry standard that exceeds other international standards, like the ones in Europe, gives global buyers the confidence to make large-scale purchases without having to retest or modify the product. While executives at GQA and at Cannabis Wise have similar mandates and goals, they both see a different trajectory for their respective organizations in the future. Rasode believes Cannabis Wise’s independence from industry will allow it to follow the VQA path. She says that she believes Cannabis Wise will have an opportunity to become a part of government as the official industry regulator. Watson, on the other hand, says he thinks the most efficient way to run the organization is as a private business separate from government. In fact, he thinks GQA’s brand potential is too valuable to relinquish to the government. The success of these organizations will depend on the value placed on quality assurance systems by producers and consumers. If consumers don’t see value in the quality-assurance brand, then producers won’t feel a need to comply. Ultimately their marketing value is dependent on consumer protection. É
Growers Quality Assurance founder and CEO Jon Watson heads an organization that aims to provide consumers with confidence that the weed they buy is high quality | SUBMITTED
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
REIMAGINING RETAIL IN THE REGULATED RECREATIONAL SPACE Recreational cannabis retailers are relying on inclusive design, expertise, professionalism to woo consumers
HAYLEY WOODIN
NATHAN MISON VICE-PRESIDENT, GOVERNMENT AND STAKEHOLDER RELATIONS, FIRE AND FLOWER CANNABIS CO.
The emphasis needs to be on how you’re going to create a different retail experience
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n a few years’ time, brands like Meta, Muse and Fire and Flower could become recognizable cannabis retail chains across B.C. A lot will depend on consumer demand. On top of competition, location and costs, one of the biggest challenges facing these businesses is figuring out how to stand out while also adhering to strict branding and advertising regulations in an industry where part of their target customer base does not understand nuances in products, let alone how the companies that sell them differ. “Really, the emphasis needs to be on how you’re going to create a different retail experience and how to distinguish yourself as a different retailer in a very crowded market,” says Nathan Mison, vice-president of government and stakeholder relations at Fire and Flower Cannabis Co., which has big plans out west. Mison originally planned to open 40 locations in B.C. but then had to revise that projection when the provincial government, in July, released regulations that said that
no individual or company could have more than eight cannabis retail stores. That limit applies to anyone who is the sole licensee, or a significant shareholder, defined as having 20 per cent or more of the voting shares. Regardless, there will likely be a crowded market that includes a range of private-sector competitors and British Columbia Liquor Distribution Branch-run cannabis stores. Provincial regulations also prevent licensed retailers
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from selling liquor or tobacco alongside cannabis, and urban-area retailers will be barred entirely from selling unrelated products, such as T-shirts. According to Mike McKee, chief financial officer of private liquor store operator JAK Group, maintaining two separate brands for two different products and customer groups makes sense. His group operates 14 JAK’s Beer Wine Spirits stores, 10 of which are in the Lower Mainland. He plans to open as many Muse-branded cannabis stores as the provincial government allows. His company has already secured five B.C. locations for future stores on the condition that it also get provincial and municipal approvals. “What’s been our big push is basically showing landlords how we would run one of those locations,” explains McKee. “Mirroring the sort of design layout and approach we take with liquor gives landlords comfort that we’re going to do a professional job that’s going to add positively to their tenant mix.” Unlike coffee chain Second Cup’s announcement that it would convert some locations into cannabis stores through a partnership with National Access Cannabis (NAC), JAK Group is looking for new space in grocery-anchored malls, which has proven challenging.
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TOP: JAK Group CFO Mike
McKee has already started signing retail leases for when recreational cannabis becomes legal | ROB KRUYT ABOVE: A rendering of one of
National Access Cannabis’ planned Meta Cannabis Supply Co. locations | SUBMITTED
“The existing dispensaries, particularly in Vancouver, have put somewhat of a black eye on the industry as a whole, and landlords are hesitant,” says McKee. “Unfortunately, a lot of those operators don’t run a particularly attractive, professional-looking operation, and the landlords and other business people do not want to have that type of business where they’re doing business, which I totally understand.” The future of such operators remains somewhat unclear. B.C. has no plans to preclude operators of illegal dispensaries from applying or obtaining retail-store licences and operating future stores – ventures that will no longer be legally allowed to be referred to as “dispensaries.” At the municipal level, councils will hold sway over how retail landscapes in their jurisdictions evolve. “I’m very curious to see, at the end of the day, who sues,” says Mark Goliger, CEO of NAC. “Is it the legal, waiting on the sideline, or is it the illegal, who have been acting for the last years and are now cold-shouldered out?” Goliger argues that would-be future retailers like NAC, and its upcoming Meta Cannabis Supply Co. brand, have had their lunch eaten by illegal dispensaries. Once in the game and off the sidelines, however, Goliger says Meta will capture market share with well-lit, technologyassisted stores. The cannabis stores that he hopes to operate in B.C. by year’s end will be in a mix of newly leased real estate and former Second Cup stores. Most of the other 40 to 70 stores that Goliger plans to operate in the other four Canadian provinces where private cannabis stores will be allowed to operate will also be in newly leased space, he says. Executives at Meta, Muse and Fire and Flower are all clear that their shops will be staffed with knowledgeable employees. To further distinguish itself, Fire and Flower plans to host speakers, and will look to offer cooking classes in urban centres once edibles are legal. Off the table will be liquor-store-like tastings, which will not be permitted for cannabis. Bar-like lounges will be banned too, but McKee says that is not a deterrent, adding that regulations are likely to loosen as the industry matures. Goliger agrees. “Craft growers, tasting rooms, lounges, brands, edibles, innovative products, sponsorships, events, all of that has to come because it’s logical, and very much common sense, that the millions of people who end up supporting this industry will demand it,” says Goliger. “I don’t think you can close the Pandora’s box.” É
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
CANNABIS TO ADD SPICE TO FOOD AND BEVERAGE INDUSTRY MARIA GONZALEZ |
W Companies interested in experimenting with cannabis must first obtain a licence from Health Canada to purchase, experiment and formulate products. If they plan to sell their products, companies will need to apply for a separate licence
hat’s the hot new food trend coming soon to Canada? All signs point to edibles. While the minister of health has indicated that legalizing edibles may not happen for about a year after the expected legalization of recreational cannabis in 2018, many entrepreneurs across the country are already researching opportunities. For processors, these products offer appealing advantages. Many consumers prefer ingesting cannabis to smoking it. According to a 2017 study by Dalhousie University, 46 per cent of Canadians said they would try cannabis-infused food. Following legalization, it’s expected that acceptance of cannabis products and market demand will quickly climb. In 2016, edibles represented nearly 16 per cent of the U.S. cannabis-products market, according to Statista. Trends indicate that cannabis could soon be cooking up the Canadian market too. While establishing a business to
Edibles set to become legal by October 2019
produce cannabis-infused food and beverages is similar setting up other processing businesses, there are a number of regulatory challenges companies will need to overcome before their products can hit the shelves. The process to sell edibles is more complex than simply adding THC (tetrahydrocannabinol) extract to an existing recipe. Companies interested in experimenting with cannabis must first obtain a license from Health Canada to purchase, experiment and formulate products. If they plan to sell their products, companies will need to apply for a separate licence to allow them to distribute their products to licensed cannabis retail locations. Those licences will vary between provinces. If a compa ny succeeds i n obtaining its licence, the next hurdle to overcome is the strict laws and regulations related to advertising, packaging, labelling, distribution and sales. Some regulations will vary from city to city and province to province. Earlier this year, Health Canada proposed plain-packaging regulations that would restrict branding and the use of colour on packages, and require various warning labels. Regulations will also govern what corporate logos and slogans are
allowed, including stipulations on font size and style, so companies must be clear on what is required of them. Before investing in the application process, it is recommended companies discuss how expanding into edibles may impact their brand. In an emerging market such as this, it is important to start small by identifying, acquiring and retaining your target audience, and recognizing which niche your brand may survive and thrive in. In a revolutionary and heavily regulated industry like cannabis, this is no easy task. Since Canada’s cannabis industry is new and rapidly evolving, it is difficult to predict how the public will respond once the drug becomes legal for recreational use. Despite the many advantageous opportunities worth considering, companies must do their research before diving into the industry. Food and beverage processors will need to work collaboratively with others in the sector to understand the changing landscape, to develop best practices and to identify innovative, and legal, solutions. It will be crucial to find industry allies and partners with which to establish productive, co-operative relationships. By sharing knowledge and resources and exploring new approaches together, every player can address the novel challenges of the hot new food trend that’s coming soon. É Maria Gonzalez is a senior adviser with MNP’s food and beverage processing practice and the firm’s cannabis services team.
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FIRST NATIONS TAKING OWN APPROACH TO CANNABIS LEGALIZATION Indigenous communities partner with private sector
ALBERT VAN SANTVOORT
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long with legalizing recreational cannabis, Canada’s Liberal government has pledged to strengthen its relationship with First Nations. Recent events show that achieving one of those goals may come at the expense of the other.
One source of hostility among some Aboriginal people can be traced back to June 6, when the Canadian Senate voted down a proposed amendment from a Senate committee that would have changed the Cannabis Act to require that the federal government ensure that at least 20 per cent of marijuana production licences are granted to facilities on First Nation land. Of course, there is no way of telling whether that Senate amendment would have found its way into Bill C-45’s final text. During the Senate debate, however, Sen. Daniel Christmas voiced his concern that a 20 per cent minimum quota could be interpreted as a maximum threshold, and ultimately limit the amount of First Nations ventures that could become licensed producers. “That’s a pretty shifty sidestep,” says Regional Chief Isadore Day, who holds the cannabis portfolio for the Assembly of First Nations. “First Nations need special accommodation because of our unique situation. Having to deal with the realities of dispensaries in our community, the issue of poverty and having a right to an economy.” Day points to Tyendinaga as an example of a First Nation community that has already developed a thriving cannabis economy with 20 dispensaries. “Why would we want to see that change?” asks Day. “It’s working well.” Day says he would have liked to see the Cannabis Act
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RavenQuest CEO George Robinson (right) stands with communications director Mathieu McDonald at the company’s Vancouver office | CHUNG CHOW
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
First Nations taking own approach to cannabis legalization
RavenQuest CEO George Robinson speaks on a panel on June 25 at the International Cannabis Business Conference in Vancouver | GLEN KORSTROM
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guarantee that a specific portion of Canada’s licensed producers have operations on First Nation land even though he could not quantify exactly what that percentage should be. His bigger concern, however, is that he does not believe that First Nations were consulted in a meaningful way during the drafting of the legislation or in the discussion surrounding revenue sharing. First Nations were not present, for example, during federal-provincial negotiations on splitting proceeds from the 10 per cent excise tax that will be applied to all retail sales. Those discussions resulted in provinces set to receive 75 per cent of those proceeds, with the federal government getting the rest. Many expect the federal government to provide some money to First Nations from its 25 per cent share of excise-tax revenue so First Nations have more money to spend on social services. As for cannabis-related businesses on reserves, Day believes that those ventures will continue to evolve. Rob Stevenson, an Anishinaabe man of the Bear Clan, owns Medicine Wheel Natural Healing dispensary. That is on a reserve of the Alderville First Nation, which has more than 6,000 patients. Disappointed with what he views as a lack of First Nation consultation by the previous Liberal government,
Stevenson says that he will continue to exercise his right to economic self-determination by keeping his doors open. That will be the case even if he is unable to acquire a legal licence. Stevenson says that his business is willing to conform to the new legislation. However, if there is no licensing framework for First Nations, Stevenson says he has no choice but to remain open despite being unlicensed. He believes that First Nations should be able to license their own producers and retail operations. Ontario’s Progressive Conservative government announced August 14 that it will be licensing private retailers and consulting with First Nations to develop a private retail-cannabis model. Stevenson says that he hopes the current government offers more than the previous one. “I’m optimistic but I’m not going to hold my breath,” says Stevenson. “Ultimately, the best thing would be if they choose to not interfere with the Indigenous cannabis industry.” Non-First Nations Canadians have been eager to partner with Aboriginal groups for their cultivation and land expertise as well as the expected financial benefits. First Nations’ exemption from PST and GST is one large incentive. Executives at Vancouver’s RavenQuest tell CannaBiz magazine that they believe the federal government will strive to have 20 per cent of licensed producers that have connections with First Nations. To help the government inch closer to that goal, RavenQuest aims to partner with First Nations to create cannabis facilities on First Nation land. RavenQuest has already partnered with Fort McMurray #468 First Nation in a partnership where the First Nation has a 70 per cent stake. The goal is to provide what spokesman Mathieu McDonald calls a “turnkey solution” for First Nations that are keen to enter the cannabis industry. RavenQuest, in its partnerships, helps with the application process for a venture to become a licensed producer, develops and designs a production facility and installs its proprietary grow method. RavenQuest then hands the operation over to the First Nation. The partnership remains economically beneficial for RavenQuest, as a minority equity owner, says McDonald. The Assembly of First Nations expects economic benefits for First Nations from these types of partnerships, as well as numerous opportunities for investment from the private sector. Not only do these partnerships offer First Nations business opportunities, but they also create new economic developments for northern First Nations. While those First Nations’ sparse populations make dispensaries less viable, northern First Nations have the land and know-how to create production facilities that can help supply the rest of B.C. and Canada, says Day. É
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CANNABIS GROWING TO BE DONE VIA ... WAIT FOR IT … JOINT VENTURES Greenhouse growing set to be as lucrative as it is controversial with those who fear the loss of farmland DARRYL GREER
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ritish Columbia cities with prime farmland are fast becoming hot targets as places for cannabis producers to partner with greenhouse operators eager to grow something other than tomatoes. They are also hot targets for political opponents. The City of Delta received nearly three dozen applications from companies looking to grow on Agricultural Land Reserve (ALR) plots in 2017. Large licensed producers have already moved in, including Canopy Growth Corp. and Emerald Health Therapeutics. Both companies have formed joint ventures with existing greenhouse operators – Canopy Growth with SunSelect and Emerald Health with Village Farms International. The result is millions of square feet of production space that will serve the burgeoning medical and recreational cannabis markets at home and abroad. Investors, meanwhile, have pushed Canopy’s market capitalization to more than $7 billion and Emerald’s to more than $500 million. But the green-tinted gold rush onto agricultural land is fraught with controversy, a fact that is not lost on Emerald Health CEO Chris Wagner. “Most people want to preserve agricultural land for agricultural purposes,” Wagner tells CannaBiz magazine. “There’s sensitivity, rightly so, around cannabis. It’s been illegal for so long.” Wagner says the company’s million-square-foot facility in Delta will be capable of producing 75,000 kilograms of cannabis each year, most of which will be turned into value-added products for export rather than sold in the local market. Before the Delta facilities were taken over, the greenhouses were used to grow tomatoes
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Cannabis plants grow at an Emerald Health facility | SUBMITTED
that were all exported to the U.S., he says. The City of Delta, however, opposes marijuana production on ALR land largely because of food-security concerns. Its lobbying prompted the province, in midJuly, to allow cities and First Nations to restrict cannabis production on ALR land “unless it is grown in ways that preserve the productive capacity of agricultural land,” according to the province. The new rules mean that local governments can ban what the province calls “cement-based, industrial-style cannabis-production bunkers,” but they cannot ban cannabis farming outright.
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CANNABIZ 2018 PUBLISHED BY BUSINESS IN VANCOUVER
Cannabis growing to be done via ... wait for it … joint ventures
Emerald Health hit a snag when one of its growing sites in Richmond got hit with a city-issued stop-work order late last year over that site’s potential use as a place for growing cannabis. The site, a 21-acre vacant farmland plot, had sat empty for years after the Agricultural Land Commission denied the owners’ bid to import soil to grow wasabi in 2011. A numbered company that owns the land is run by Emerald Health’s executive chairman, Avtar Dhillon, and is now locked in a legal battle with the City of Richmond. Wagner says Emerald leases the land from Dhillon’s company. “T here’s no requirement to say that you’re going to grow tomatoes or you’re going to grow cucumbers or whatever you’re going to grow,” says Stevens Virgin lawyer Nathalie Baker. “This is just vacant land, ALR land, that farmers want to farm.” Despite the hiccup, Wagner says the Richmond facility will add to Emerald’s existing production in Victoria, Delta and a recently acquired indoor facility in the province of Quebec. He also downplays concerns about potential supply gluts that have rocked Oregon’s cannabis industry, and expresses confidence that an expanding
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Emerald Health Therapeutics CEO Chris Wagner oversees several growing facilities in B.C. as well as one in Quebec | ROB KRUYT
export market will support the industry long-term. “These facilities start to not just supply Canada, but they start to supply other markets around the world,” he says. “That’s, I think, why there will continue to be cannabis grown in these facilities for a very, very long time, even if the Canadian adult-use market becomes saturated.” For Lenore Newman, Canada Research Chair in Food Security at the University of the Fraser Valley, concerns about the impact of cannabis on agricultural land are real. “We’re very worried there’s going to be a rush, and [production] is going to displace long-standing profitable businesses growing cucumbers and tomatoes and things like that, and then those people are going to go bankrupt and we’re going to have less food production,” Newman says. While farmland in B.C. faces many threats, such as rampant land speculation and megamansions being built by non-farmers, Newman says that she has no problem with cannabis as a crop, likening it to wine grapes. “It’s an easier problem to deal with than the megamansions. That’s a very different problem,” she says. “At least this is a crop.” É
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