On June 19, 2018, Canada made history when it became the first major economic power in the world to legalize cannabis for recreational purposes.
The Canadian Senate passed Bill C-45, also known as the Cannabis Bill, by a 52-29 vote, paving the way for Canada to join Uruguay as the only two countries in the world to legalize marijuana. For many Canadians, the news brought to life the dream of a more progressive approach to cannabis. For Prime Minister Justin Trudeau, it represented one of the primary goals he had set when first elected to lead the country.
In response to the Senate vote, Trudeau tweeted his support for the ground-breaking act: “It’s been too easy for our kids to get marijuana — and for criminals to reap the profits. Today, we change that. Our plan to legalize & regulate marijuana just passed the Senate. #PromiseKept.”
The following day, C-45 received royal assent and Trudeau announced sales could begin Oct. 17.
Supreme Cannabis CEO John Fowler.
One Bud at a Time
John Fowler, CEO and director of Supreme Cannabis and 7ACRES, has been waiting 15 years for this day.
“While the law is not perfect, the magnitude of this event cannot be overstated: Canada is the first G7 nation to legalize cannabis and Canadians nationwide will be able to legally purchase and consume cannabis in October,” he said in an email to Marijuana Venture.
Fowler said the new law strikes a “reasonable balance” between those who support legalization while recognizing that many Canadians are still opposed.
“Like using cannabis products, ‘start low, go slow’ is a good mantra,” he said.
Fowler said for producers like Supreme, the “devil will be in the details” of the regulations that follow, though he said he would like to have seen more permissive advertising rules, particularly given the relative safety of cannabis compared to other legal products and activities.
But Fowler said 7ACRES has been preparing for this since its founding, not only by working to perfect its production techniques, but in building relationships with provincial authorities and retailers all through 2018 to ensure that its product will be on shelves when shops open this fall.
“Beyond that, Supreme is also ramping up for additional premium offerings when the concentrates become available in 2019,” he said.
The next step will be execution, because all the legwork that’s been done so far is meaningless if the company can’t deliver a quality, consistent product.
“For us, this summer is about sharpening our ability to execute and getting ready to win over Canada’s cannabis enthusiasts one bud at a time,” he said.
Fowler believes the next 12 to 24 months will be “defining” for the country’s industry and he is anxious to see if the adult-use market is an “evolution” from the medical market — where quality, aroma and flavor are important — or if it will take a more “low-cost and commoditized approach.”
“I, for one, am excited to see how this unfolds,” he said.
Legal Perspective
Although many of the details have yet to be released, the passage of Bill C-45 is a major step in the right direction, said attorney Trina Fraser from the Ottawa-based firm Brazeau Seller Law.
However, she also urged everybody to understand that there will be bumps along the road and that it’s important to take a step back to understand the big picture.
“I don’t think there’s anybody who thinks the framework that’s been concocted now is perfect,” Fraser said. “But it’s a great starting point.”
And now the real work begins. From the perspective of legal storefronts, most provinces are not ready, she said, with the possible exception of New Brunswick. There are many questions about how exactly the Access to Cannabis for Medical Purposes Regulations will transition into the Cannabis Act, whether outdoor cultivation will be allowed and whether security clearance will be granted to individuals with small-scale cultivation or possession charges.
Fraser said people need to understand that the bill won’t immediately eliminate the illicit market. The process is “not going to be without issues,” she said, “but we will work through them.”
In developing its regulations, Canada took a lesson from Colorado to start with strict rules and then adjust as needed, she said. That philosophy could explain why edibles will not likely be legal in Canada for more than a year.
“I think we’re definitely a little too restrictive in many respects with what we have now, but I’m not surprised because it’s much easier to be overly restrictive at the start and then loosen the rules as you go forward than it is to do the reverse,” she said. “This is a massive regulatory shift that we’re undertaking. It’s going to take a little bit of tinkering to get it right.”
Canadian marijuana companies like Ascent Industries, Emblem Cannabis and Buds & Leaves are excited about the opportunity presented by recreational legalization.
Licensed Producers
Along with millions of other Canadians, Ascent Industries CEO and co-founder Philip Campbell waited patiently as the House and Senate passed the Cannabis Bill back and forth, knowing that the branches would have to come to an agreement before the Senate was to shut down for the summer on June 22.
“It was really nice to see that they did their job effectively and honored the intentions of the elected government,” Campbell said. “It’s a pretty historic day for Canada and the world.”
The British Columbia-based company also has operations in Oregon, Nevada and Denmark. Campbell said the law accelerates quite a few of the company’s opportunities for distribution. As an added bonus, Ascent is one of the few Canadian companies with experience in the adult-use market.
“For us, as a company, we’re going to be well positioned to take advantage of this with the three facilities we have — the indoor hydroponics facility, the 600,000-square-foot greenhouse and the 40,000-square-foot manufacturing facility. They’re really going to allow us to execute our business plan,” he said.
Since adult-use cannabis is set to follow Canada’s alcohol distribution models where the government is the primary buyer (and often seller) of alcohol, Campbell said Ascent’s direct access to the adult-use consumer will be mitigated. He estimated that after the product is taxed from manufacturer to wholesaler to retailer to consumer, the cost per gram will be roughly $12. But since the medical program is to be left intact for the next five years, Ascent plans to support the recreational market while continuing to focus on the patient market, where it can remain competitive in pricing.
On the opposite side of the country, Emblem Cannabis founder and business development officer Maxim Zavet said he was happy the bill passed so swiftly, “even with the Senate’s proposed amendments.”
He’s even happier that the House of Commons pushed back on amendments such as restrictions against merchandising, which would limit the marketing efforts of Emblem, a publicly traded distribution and extraction company based in Ontario.
However, he’s disappointed about the new distribution model planned for Ontario, the most populated province in the country.
“In terms of retail, the Ontario stores are a division of the Liquor Control Board,” he said. “They are going to be running the retail; online and brick and mortar. This is probably a responsible start, but we’re hopeful that access for consumers in Ontario expands.”
Since the rules regarding products other than dry flower have yet to be announced, Zavet said a wait-and-see approach is best for the company.
“It’s an evolution and it’s going to continue to evolve,” he said. “I think the government and businesses and the people will evolve accordingly and together.”
Emblem anticipates going through approximately 17,000 kilograms (just under 18 tons) to meet the market’s demand for oils, capsules, time-released tablets and other health and wellness products the company distributes.
“We’re building up capacity now. We are also exploring various strategic partnerships and supply agreements,” he said. “We’re focused more on the front-end, on the distribution, brand-building and value-add and high-margin product in both the medical and adult -use space. We’ll definitely be continuing down that path.”
Jodie Emery
The Flip Side
Despite widespread excitement across Canada, not everyone sees the passage of C-45 as a good thing. Some activists, like Jodie Emery, say the new law simply does not go far enough.
“I’m very upset and distressed about the Cannabis Act,” said Emery, a cannabis advocate and civil liberties activist. “This is not legalization.
“It’s a new form of prohibition,” she said, calling the details “troubling.”
Emery says the passage of C-45 replaces eight current marijuana offenses with 45 different cannabis offenses, increases the potential prison time and does nothing to expunge the records of Canadians who currently have criminal cannabis prosecutions hanging over their heads.
“So, for me and many others,” she said, “we’re still deemed criminals.”
Emery said the new law exists to allow the government and big business to make hundreds of millions of dollars while shutting down those dispensaries and shops currently operating in the country’s gray market system.
“This is strictly about money,” she said. “It should be about civil liberties.”
According to Emery, actual legalization would stop criminalizing people, stop criminalizing the industry as it currently exists and stop wasting tax money on enforcement, while refuting the “prohibitionist propaganda of the past.”
“None of these objectives is met by C-45,” she said.
According to Emery, the day the law was passed, police in Toronto raided dispensaries, cutting off patient access to product.
“Legalization needs to recognize that it was wrong to criminalize people in the past and in the future,” she said.
Emery said she recognizes that regulation is necessary, but would have preferred to see the government treat cannabis like coffee, instead of alcohol. She said she will continue to advocate for what she sees as a fairer system, including amnesty for those with marijuana offenses.
“Take what you can get and always ask for more,” she said. “We need an expunging of records. Decriminalization is not enough.”
The interior of Buds & Leaves in Victoria, British Columbia.
Dispensary Operations
Jeeves Sadana feels proud to participate in such a historic turn of events, but uncertainty over the future of cannabis retail shrouds an otherwise celebratory moment.
Sadana owns the Buds & Leaves dispensary in Victoria, British Columbia, one of the municipalities in the country that licenses cannabis shops. But the passage of C-45 could put his business back in the gray as many details for retail shops remain unclear.
“There’s still a lot of uncertainty and doubt,” he said. “We still don’t have a 100% clear picture of the way it will roll out because of the way we did it. They legalized recreational cannabis, not medicinal, so what’s going to happen to a store like ours as this goes forward?”
Now that the federal government has approved the legalization of cannabis, Sadana is waiting for provincial and municipal governments to provide insight on how the program will affect Buds & Leaves. The one certainty is that new laws mean new taxes.
“I believe that the federal government is throwing around numbers like 10% and then the province’s government takes it from there,” Sadana said. “But a lot of the provinces are saying that they are doing a lot of the work, so they should get a bigger cut of the tax revenue.”
Sadana said he fears the local industry will be similar to that of states like California where many of his longtime, vetted producers will not make the transition into the new recreational market.
“It’s going to be a shame to see some of these guys go because they are producing some amazing work,” he said. “In our municipality you have the option to get your license and do it the right way. There were still a lot of people who didn’t bother doing that. It’s just detrimental — if they are finally allowing you to do it, just fill out the paperwork and get yourself registered.”
For now, Sadana said it’s business as usual until the provincial government decides on the licensing procedure and application process.
“We went through the process of getting licensed by the city,” he said, “so we’re not going to stop now.”
An employee at a different dispensary (name withheld) said the news of legalization was more of a formality than a watershed moment.
The employee said her Vancouver, British Columbia storefront was already serving the adult-use community.
“We don’t require a medical permit,” she said. “You just need a piece of ID. A lot of things like that have changed recently. Before we used to have a registered nurse and you would need a medical reason, but we’re going with the flow since there’s no purpose for that anymore.”
Moving Forward
Though Canada has been moving toward legalization for some time, seeing the actual legislation passed is still “very surreal,” according to Lindsay Blackett, president of the Canadian Cannabis Chamber in Alberta.
“Having been an elected official myself, I never thought this day was coming,” he said. “It’s a long time coming.”
Blackett said the Chamber is disappointed that edibles will remain illegal in Canada, for now, and that there is not specificity regarding driving while intoxicated. He also said the advertising restrictions are limiting, but overall the Chamber approved of the bill.
“There’s nothing in it we can’t live with,” he said. “People are pretty excited.”
“We feel it’s quite positive for the most part,” said Jonathan Denis, legal counsel for the Chamber and a former minister of justice in Alberta. “Realistically it’s the best we’re going to get without edibles.”
Blackett said he expects Parliament to address edibles within the year and public consumption sites soon after.
Blackett said he agrees with critics who think the law does not go far enough in addressing the records of people who have criminal charges in their background for offenses that are now legal. On the business side, he said he believes other criticism about the law supporting government and large corporations are unfounded.
“I think it’s fair to everyone,” he said, adding that the country’s “microcultivation” licenses for operations under 2,000 square feet will “help the smaller craft and organic growers.”
Next up for the Chamber will be to continue education efforts and to work with provincial and municipal legislators to ensure that local regulations are fair and work to help the industry grow.
“Canada is definitely open to cannabis business,” Blackett said. “The market will be significant.”
Fraser, the lawyer who has been at the forefront of the legalization process, said the rest of the world is now looking at Canada to see how the process will unfold. On the day she spoke with Marijuana Venture, one day after the bill passed, she was fielding interview requests from journalists from Australia and France, among other places.
“Everybody’s interested in how this is going to go,” she said. “I think it has the potential to be a catalyst for a worldwide shift in the regulation or decriminalization of cannabis, so it is important that we do the best job we can in getting it right.”