Watching the Canadian Cannabis Industry Evolve

by Pierre-Yves Galléty

Lamps, fertilisers, harvesting tools and security devices, inventory software, storage containers and testing equipment – such products are already used by the black market in every country where cannabis is classified as an illegal drugAnd yet last weekend here in Niagara, Ontario, for a special conference and expo were the black market’s mainstream counterparts and soon to be competitors – the businesses that may not touch the plant at present, but which hope to be a big part of the enterprise of growing and selling it in future. 

The GrowUp 2017 event was geared to those who are either already growing cannabis legally – one of the now more than 60 Licensed Producers granted that special permission by the federal government – or more directly, to those who are gearing up to grow cannabis at scale once the drug is legalised for recreational purposes next summer.  And rather than your typical weed convention where tie-dyed t-shirts dominate, this event attracted more suited delegates and there were no signs of any of the usual freebies. Free chocolate bars – regular Hershey’s chocolate – in one law firm’s branded packaging, and the usual crop of free T-shirts, pens and USB sticks, just no pot. 

Both the organisers and the exhibitors were presenting a new and more responsible face to the outside world – cannabis may come with a small mountain of cultural baggage, but for this event, cannabis was a sober business, and a rather conventional one at that.  And it was a business opportunity to be embraced and promoted, if the Mayor of Niagara’s warm welcome address was anything to go by.

Suppliers were on hand to promote their latest growing tools, seed tracking software or testing devices. Products that reduced contamination, monitored climate, or saved energy or water were all available. Interested folk could find advice and the right kit to support them in expanding their grow or boosting their yield. For those whose private passion was now about to become a public business opportunity, there were a lot of eager participants.

And getting to become a legitimate producer was itself a service on offer. A small industry in regulatory compliance is burgeoning – thanks to the strict standards set down by Health Canada that prospective growers must meet – and several consultancy firms are offering not just support to get a licence (available for a six figure sum) but advice all the way from application through to greenhouse design, construction and planting.

Those who gathered in Niagara were there to exchange ideas, to learn more about the plant and the emerging industry. Many were unfamiliar with where the legislation was at, or what could affect them when the regulations are finally set out, expected in the next few months. The critical difference between decision-takers, policy-makers and regulators was lost on some. But the speakers did their best to inform, with educational panels that were designed to help experts and enthusiasts alike to get a handle on the trickier issues.

Common talking points for delegates were the anticipation of California’s legalisation moment next year, and the implications of edibles now coming within Canada’s legal regime by summer 2019. There were industry presentations on recent developments in the sector, like the news that Aurora, a Calgary-based Licensed Producer (LP), is now exporting to supply the medicinal market in Germany. That company’s history and ambitions was laid out by their Vice President, Cam Battley, who gave a passionate speech about why this industry must do more than just make money. 

The event left the strong impression that the cannabis industry is moving quickly out of dark, untaxed bunkers and edging towards the light to become a regular, respectable part of the Canadian economy. Shane Morris from Hydropothecary, an LP in Gatineau, put it succinctly – Canada is about to create a commercial market that turns a plant into a crop – and the last time this happened was canola forty years ago. Cannabis and all its derivatives will be a new resource for the recreational economy and once it is taxed, a new revenue stream for government. 

With this new commodity will come all the ancillary industries and services that support that crop’s production and distribution to a new and lucrative market of consumers.  So fast is the sector evolving that you could easily convene a conference as large as GrowUp now just for Canada’s corporate players – the banks, private equity houses, accountants, and public affairs agencies – who all want in on the action. And until there is a change of federal law in the United States, many are seeing this as a window of opportunity – a chance for Canada to build a world leading industry, to the highest standards, and to use that position to secure export opportunities and to devise and propagate powerful new consumer brands.  The competition from the brands likely to emerge from California is already being anticipated, but it is only in Canada that bankers, lawyers and traders have complete confidence that they are financing and dealing in a legal product.  That is a critical head start.

Legalisation is often seen as lifting a burden – the burden of criminal conviction for possession, and the burden to the justice system and taxpayers of enforcing prohibition in a society that has resisted it.  But legalisation – even the heavily regulated and bureaucratic version that Canada is pursuing – also lifts a cap, the cap on innovation.  By making legal what was once illegal, the government is choosing to unleash the entrepreneurial spirits of a market economy that like any other sector will lead to new and better products. 

Many cannabis businesses will struggle to define themselves and there will be many market casualties, but ultimately a competitive market will emerge that will create a lot of employment and even more wealth.  How vibrant this sector will be depends a great deal on how restrictive provincial governments choose to be around retail and distribution – Alberta is proposing a tight model, though not the government monopoly of Ontario, and British Columbia is yet to declare its approach, but has recognised the economic development opportunity.

Few can say what the direct benefit of legalisation will be to Canada’s economy, even in the short term.  Rural communities and farming could be some of the biggest winners, even though cannabis consumers are assumed to reside more in urban areas with metropolitan tastes.  Until there is such a labour and fiscal estimate – and the federal government will be working on that as part of its forthcoming plans to tax and price cannabis – we can only assume that a market of 6 million legal consumers on its own will directly support hundreds of thousands of new jobs, and many more in the wider economy that supports growing.    

The widely discussed impact on traditional industries of automation, AI and robotics presumes that industrial production of all kinds will support fewer and fewer jobs in the decades ahead.  But cannabis in Canada could buck that trend for a while, with a new mass produced crop that demands growers, cultivators, plant scientists and agricultural specialists.  Then add to the ranks of budding producers the investors, engineers, builders and wholesalers, and every supplier in between.  When it comes, the transition from farmland for food towards a growing share of farmland for pot – already an issue that has agitated some Mayors – will be a sign of how important this new crop is for the future of the Canadian economy.

Among the sceptics of an older generation, one of the most common cannabis stereotypes is the unemployed teenage pothead, too busy getting high to get busy getting work.  After legalisation, Canada’s new cannabis stereotype could be the very opposite – people who aren’t workshy stoners but rather ambitious job creators.  Those who study this plant, work hard, take risks, build businesses and help shape a new consumer market around it. A generation of Canadians, both young and old, for whom cannabis is not a passion, or even a past time, but their livelihood.   As Hugo Alves from Cannabis Wheaton reminded the GrowUp delegates – “There is no analogous moment in our industrial history to what is about to happen”.

Blair Gibbs is a policy advisor at Volteface based in Canada. Tweets @BlairG1bbs

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