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Legal REC: Way More Expensive

Tomasz Piwowarek BioPub / https://commons.wikimedia.org/w/index.php?curid=5644521

Canadians buying legal cannabis pay about $10 per gram, versus $6.37 per gram for those buying illegal product, according to Statistics Canada’s Q1 Crowdsourced Cannabis Prices report.

  • A slight majority of 54% continue to buy from illicit sources, allowing daily users to pay $7.55 per gram (across all sources) and occasional users (all sources) to pay $9.55.
  • Half of those still buying illicit cannabis do so because it’s cheaper, while others said it was easier to get, and better quality.
    Global News
  • The average price per gram of cannabis increased by roughly 17% from $6.85 before legalization to $8.04 afterward.
    CBC Business
  • Legal REC prices appear to be rising as illicit prices are in steep decline.
    The Leaf
  • Brock University business professor Michael J. Armstrong told Globe and Mail’s $1,000-per-year Cannabis Professional newsletter that illicit prices in decline are an indicator that price competition is beginning to emerge in the Canadian REC market. Presumably he expects legal REC will decline accordingly.
    Twitter—Rob Gilroy
  • Twitter user "Ethical Guru"—an anonymous retail supply-chain veteran now working with a MED provider—argued government agencies "are going to increasingly be under the gun to validate and justify the costs; huge gaping costs to be saved vs current mismanagement and bloated payrolls."
  • BC Centre on Substance Use postdoctoral scholar Jenna Valleriani criticized those bemoaning the strength of the illicit market six months after legalization. "Stop using [the argument], stop. It takes time[. …] If 25-30% are now purchasing legally, that’s a policy win for 180 days."
    Twitter—Jenna Valleriani
  • Lift & Co VP strategy Nick Pateras added, "The StatsCan data point of 20% of Q4 sales went through legal channels was not celebrated enough. If true, that's tremendous."
    Twitter—Nick Pateras, Yahoo Finance

Ontario Budget: Gambling, Booze, and Pre-Qualification for New REC Retailers


Doug Ford’s Conservative Ontario government tabled its budget. It introduces a pre-approval plan for the next set of REC retailers.
Global News

  • Aspiring retailers will be pre-qualified before the next set of licenses becomes available, which the province may repeat assigning by lottery—this time to those actually qualified to run stores.
  • There is no new date on which to expect Ontario will begin issuing new REC licenses, meaning the 25-store cap will be in place until December, as initially announced.
    Twitter—David George-Cosh
  • The government will only authorize new stores after it has determined there is enough supply.
    MJ Biz Daily
  • Retailers weren’t moved by the announcement, which many said didn’t contain any new information. Fire & Flower CEO Trever Fencott said, "What’s the point of pre-qualifying if you don’t have any commercial visibility on when the market is going to open up?"
  • Lawyer Trina Fraser said the budget confirmed "what I've believed all along...if there is another limited allotment of stores beyond the first 25, they'll be selected from a pool of 'pre-qualified' operators (NOT a repeat of the initial lottery process)."
    Twitter—Trina Fraser
  • The Ontario Cannabis Store is projected to lose $25M in this fiscal year.
  • Building on a statement in the budget that "national cannabis supply shortage [was] brought on by the federal government’s mismanagement," Ontario Finance Minister Vic Fedeli railed against Ottawa, saying, "They went ahead and legalized it Oct. 17 without the proper supply. […] This was just a blunder and a failure on their part."

Get Ready to Wait Longer for Edibles


Edibles—as well as extracts like vape pens, and topicals—will likely not be legal to purchase on October 17, analysts said, building on warnings from Bill Blair earlier in the year that once the legislation comes into force, it could be a matter of several months before the products are available.

  • Some believe the government will publish Health Canada’s finalized rules for new cannabis products this summer, ahead of the federal election.
  • Cannabis Compliance regulatory director Brenna Boonstra stressed that after the rules come into force, producers will have to amend their licenses, which will require a Health Canada inspection of the first batch of products. After that process is complete, producers must give 60 days notice in writing before beginning to sell the products.
    Globe and Mail—Paywall, Bloomberg
  • The extracts segment of the industry—which includes enormously popular vape pens—is expected to quickly take the lead among products. A GMP Securities analyst said the products will eventually represent half of cannabis products sold in Canada.

House of Commons Debates Record Suspensions vs Expungements

The House of Commons began second-reading debate of Bill C-93, An Act to provide no-cost expedited record suspensions for simple possession of cannabis. Activists remain insistent the bill does not go far enough, since suspended records may still be accessed by agencies like US Customs and Border Control. They're calling for record expungements.
Twitter—House of Commons

Quick Hits

  1. Despite its rollout hiccups, by many measures legalization has been essentially successful. Some think Justin Trudeau’s unwillingness to take credit for it suggests lingering stigma.
  2. Bill Blair appeared to rule out whether Ottawa might subsidize cannabis production to make the industry more competitive with the illicit market.
    Twitter—Sol Israel
  3. Canadian Border Services said in an internal report that the number of seizures of illegal cannabis coming into Canada from the US has gone up since legalization, and blamed supply shortages. Illicit cannabis exports also grew between legalization and December 31, 2018.
    CBC Politics
  4. Trump ally and US federal "opioids czar" Kellyanne Conway has twice repeated a falsehood originating in a 2015 Vancouver police department press release, claiming incorrectly the powerful opioid fentanyl was being found in cannabis.
    Globe and Mail—Paywall
  5. Police have new powers to stop drivers without probable cause and test them for impairment, including testing their saliva for the presence of THC.
    Lift & Co, CBC Quirks and Quarks

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Sector Still Slow to Grow


The Canadian cannabis market isn’t going to grow as quickly as many predicted, according to a report from US firms BDS Analytics and Arcview Market Research. The forecast suggests by 2024 Canadians will spend roughly USD$5.2B (CAD$6.9B) on cannabis, down from the $7B predicted in a Deloitte report from last summer, and decried the patchwork of regulations from province to province. BDS had previously predicted the market would be worth USD$5.7B (CAD$7.6B).
The Leaf, Global News, Bloomberg

Consumers Don't Know Brands--
And LPs Can't Advertise

Public Domain

Too few shoppers have any familiarity with the brands on offer—which analysts said is the consequence of Health Canada’s aggressive anti-marketing regulations.
Globe and Mail—Paywall

  • Health Canada has received 117 complaints about cannabis promotions that breach its strict marketing regulations, and has issued four warning letters and three compliance letters as a result. The agency also made 40 "compliance promotion" calls to "various regulated parties" in response to complaints or to answer compliance questions. MJ Biz Daily

Banks Get Feet Wet

BMO has been one of the pioneering major banks for the cannabis sector, and recently—after legendarily turfing Canopy in 2015 because it was a cannabis business—the Royal Bank of Canada has began making its first deals in the industry this winter. Neither, however, will do business in the US sector until new laws appear to protect banks who work with federally illegal cannabis companies from prosecution.

Crop Insurance is Available For Cannabis

Burnstown Farms CEO Mark Spears held a very interesting Ask-Me-Anything session about growing and extraction on the Cannalysts’ Reddit page. Fuse Insurance’s Kevin Lea told me, however, that Spears misspoke when he said crop insurance was not available for cannabis. "Crop insurance is available for indoor grown cannabis for both catastrophic perils (think fire or hail) and for crop specific issues like mold or infestation," Lea said. "Most cannabis insurers offer it, and I even got confirmation from the AFSC (Alberta's government backed crop insurer) that they could cover outdoor grows for cannabis or hemp (with differing pricing of course)." Reddit

With US Companies Rising,
Canadian Opportunities Abroad

US cannabis sales risk eclipsing Canada’s, as six of the top ten cannabis producers by revenue are now American. Canadian firms, meanwhile, are smarting over lack of access to the enormous US market. Santé Cannabis co-founder Erin Prosk noted on Twitter, "Both Colorado and California markets pre-date Canada’s. Higher revenue not the measure of market leadership. Yet to see any significant research investment and productivity from any of these American 'leaders.'"
Bloomberg, Twitter—Erin Prosk

Energy-Hog LPs Face Efficiency Challenge


For both boutique growers like Flowr and Tantalus Labs and major producers like Aurora, energy efficiency in growing is a make-or-break issue. That’s helping the drive toward captured rainwater and outdoor growing.
Globe and Mail—Paywall

Quick Hits

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Co-Founder, HelloMD
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HelloMD on Instagram, Facebook

Spencer Vodnoy
CEO, Critical Mind Inc. Adelanto, CA

Affiliations: CA State Bar; Board Member, Adelanto Growers Association
Critical Mind, Inc. is a Medical Cannabis Cultivation and Manufacturing Facility located in Adelanto, CA. Providing the highest quality Cannabis products. Compliance without Compromise!



After BC opened its part in the Canadian Agricultural Partnership to cannabis producers (see below), Alberta is debating whether it should follow suit, though it will not decide before the provincial election next week.
MJ Biz Daily


An Arcview Market Research analyst said BC’s enormous and entrenched illicit market would “hold back, to some degree, the legal market in that not all (illicit) operators will either get licensed or go away.”
Vancouver Sun

BC opened its part in the Canadian Agricultural Partnership, a $3B federal-provincial system of agricultural cost-sharing grants, to cannabis producers.
MJ Biz Daily

BC’s cannabis prices rose the least after legalization.
Global News

BC public safety minister Mike Farnworth said he wouldn’t apologize to REC stores for the long vetting process whichdelaying the speed at which they open.

Vancouver parks board commissioner Tricia Barker said 2019 will be the last year 4-20 is held in a city park, and organizer Dana Larsen responding that he intends "to be back at Sunset Beach next year, the year after and the year after that."
Vancouver Sun

Cypress Hill will play a free show at Vancouver’s 4-20 celebrations at Sunset Beach, this year celebrating their 25th anniversary and legalization with a promise of free weed for attendees.
The Straight Cannabis


Leafly profiled Toronto’s first REC store, the Hunny Pot.

Of the 25 REC stores in development for Ontario, only 11 have opened.

A dozen Ontario REC stores were fined $12,500 for not opening April 1.
CBC Toronto

The city of Toronto—whose bylaw officers took over enforcement of cannabis retail in March—continued raiding the city’s roughly 27 remaining illicit dispensaries after raiding four last week, with two raids early this week. The city does not need warrants to raid stores that reopen, and owners face up to two years in prison. The representative for the city’s bylaw officers promised "aggressive enforcement […] for the foreseeable future."
Global News, The Star, CTV News, CBC Toronto

Of the 41 warrants for raids on illicit dispensaries executed by Ontario Provincial Police’s cannabis task-force, 22 have been in the city of Hamilton. The OPP said it aims to have closed all Hamilton’s illicit dispensaries sooner than "the next year or so."
Hamilton Spectator

Der Habs

Ontario’s new license-plate slogan, formerly "Yours to Discover" for as long as anyone my age can remember, will be "A Place to Grow." The Winnipeg Free Press’s Sol Israel pointed out this could refer to the majority of Canada’s legal cannabis supply.
Youtube, The Star, Twitter—Sol Israel


Quebec sent municipalities a letter informing them they would receive funding to compensate for expenses related to legalization. The funding equals $1.20 per resident, meaning Montreal will receive $4.83M.

  • What surprised recipients was the government letter that stressed "Any portion of this money not used” to meet needs caused by legalization must be returned to the province," which is not usually how funds are apportioned.
  • Some municipal leaders worried that in spite of excise taxes transferred to the provinces, there is no plan in place for municipalities to continue receiving funding for legalization-related expenses.
    Radio-Canada—In French

A Montreal mother was refused custody of her children due to her six-joint-a-day cannabis use.
La Presse—In French


A representative from CannabisNB explained how small producers can plan toward getting their edibles into New Brunswick’s provincial REC stores.

The first Indigenous owned and operated licensed REC store in Newfoundland opened its doors on the Miawpukek First Nation, about a five-and-a-half hour drive from Saint John’s.
CBC Newfoundland


A Saskatoon web designer developed a website to keep track of REC prices in the city’s eight stores. The service has caught on and half Saskatoon’s store email him with price updates.
CBC Saskatoon


Customer loyalty cards—such as those available from some Manitoba REC stores—may be illegal.


A Whitehorse REC store is cleared to be Yukon’s first REC retailer and said they will be open by next Wednesday—three days prior to 4-20.
CBC North

Agmedica Bioscience, with its REC brand Vertical, became the second REC supplier to Nunavut.
Nunatsiaq News

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