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1

Ontario's Retail Lottery Mess

The Alcohol and Gaming Commission of Ontario announced the winners of the second REC retail lottery. Winners are not guaranteed licenses, and will be subject to background checks.
AGCO, Twitter—Jameson Berkow

The draw took place as planned on Tuesday, but—with no explanation—they did not release the results until the next day. After massive response to the last lottery in January, the Ontario government introduced stricter conditions this round.
Twitter—AGCO, Globe and Mail

The AGCO allowed multiple applications by different people and companies to file the same address. There were no restrictions on proximity to other REC stores.

Of the 13 winners in Toronto, five are on Queen Street. Of those, three are on Queen West, where two of the city's five REC stores are already located. Optimists wondered whether that would make Queen West a cannabis destination. GrowthOp

Three winners in rural Toronto suburb Innisfil, population 36,566, won lottery spots at 1982, 1988, and 2008 Commerce Park Drive.

  • Lawyer Trina Fraser said, "It wouldn’t be in the regulator’s interest to have three stores located that closely together. […] They just can’t let that happen.”
    Global News

The highest profile winner was numbered company 11180673 Canada Inc, whose secured retail site was the Harbord Street location of Toronto raid-flouting unlicensed dispensary CAFE. CBC Toronto, CityNews

One location is the same spot at which former premier Kathleen Wynne's government proposed a government-run Ontario Cannabis Store location. Noting the location was 400 metres from a public school, then aspiring premier Doug Ford raised the store during a televised debate, saying, "I won’t put [cannabis retail] beside schools like you did. It was beside a school on your watch."
Global News

Two winners were connected with major LPs: Cory Floyd Cacciavillani, who won a spot in the Greater Toronto Area, is the son of Aphria co-founder Cole Cacciavillani, while Najla Guthrie, who won a spot in Toronto, is CEO of clinical research company KGK Science, owned by Auxly Cannabis.
Financial Post

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2

Lottery Aftermath

Critics noted the separation of provincial applications into multiple regions failed to result in any of the 42 stores being located in large suburbs Etobicoke and North York. Kitchener-Waterloo in Southern Ontario, home to more than half a million people, finally got its first REC store after nine months of legalization.
Global News

Hotbox Lounge owner Abi Roach was shut out of the lottery, despite being one of Toronto's most prominent and longstanding cannabis advocates and businesspeople who has operated within the law for 20 years.

  • In an appearance on TVO's The Agenda also featuring Globe and Mail cannabis reporter Mark Rendell, Roach lamented that the lottery format forced the province's small number of cannabis experts to compete at the same level as well-funded businesspeople who know nothing about cannabis but want to get cannabis-wealthy.
  • Rendell noted while LPs and private REC retailers weren't allowed to enter the lottery, the sole-proprietors who won will nearly all partner with major REC retail companies like Fire & Flower and National Access Cannabis.

In a Twitter thread, Cannabis Act podcast host Jon Liedtke compared Ontario's retail rollout to Alberta's and concluded Ontario's ineffective REC retail rollout owes to the Ford government's abrupt changes to the Wynne government's established plan.
Twitter

The Globe and Mail editorial board lambasted the lottery as a failure that began with the Ford government's poor response to the supply shortage in the winter. Following a second widely derided lottery, the Ministry of the Attorney General told MJ Biz Daily they intend to move to a system of allocating stores based on market demand, because there have been "moderate improvements in supply."

  • MJ Biz's Matt Lamers said, "This sloppy lottery is probably, and thankfully, the last."
    Twitter

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3

Who's Behind the Ontario Cannabis Store Curtain?

In a Toronto Star op-ed, Brock University business professor Michael J. Armstrong assailed the Ontario Cannabis Store—crown corporation and holder of the provincial monopoly on cannabis wholesale—for its distinct lack of transparency.

  • The OCS has made only four announcements on its website since January, takes weeks to respond to email requests for information and only then redirects the public to its media office.
  • Armstrong noted most of what we know about OCS comes from Statistics Canada and from the Ontario ombudsman, who received more complaints about the OCS than any other provincial institution.
  • The reason Ontario has allotted REC retail via lotteries has been its claim of continuing supply shortages, but the OCS does not make public data about shipments and inventory, nor does it post its pricing policies as does sister agency the Liquor Control Board of Ontario.
  • There was also no public tender for warehousing and distribution after the LCBO was separated from the Ontario Cannabis Store.
    Twitter—Presumably Paul

Quick Hits

  1. Police have shut down a huge portion of the country's physical dispensaries, but online dispensaries are a bigger challenge. Some hope the legal market improving will dry up online demand. Globe and Mail
  2. MED patients in Halifax say dispensary raids infringe their human rights.
    Halifax Today, Global News

4

CMA Controversy Over MED Commentary

The Canadian Medical Association courted controversy with another canna-conservative editorial in its magazine CMAJ. (CMAJ provoked argument in October when it published an editorial protesting legalization.)

  • In the new opinion piece, three rheumatology MDs address sensible concerns such as lack of reliable clinical evidence about the effect of MED on various conditions, the politicization of a medical subject, and the power of MED corporations to influence public perception of medical need.
  • The piece enters stranger territory when the authors lament, "The perception of cannabis as being safer than opioids may have been reinforced by its recent legalization for recreational use in some jurisdictions."
  • The authors decry the "emergent medical cannabis industry" as non-medical. They also criticize patients who expect doctors to be knowledgeable about cannabis.
  • ER physician Ian Mitchell identified connections between one author and oft-fined pharma producer UCB, and noted other pharma producers spent fortunes to oppose MED legalization before profiting from it.
    Twitter
  • Trina Fraser, Deepak Anand, and Wildfire Canada CEO Mark Spear all attacked the piece.
    Twitter

Quick Hits

  1. Global News explored cannabis addiction in detail.
  2. A survey of focus groups found most proposed health warnings for edibles were understandable, but many misunderstood visual warnings to avoid pairing alcohol and cannabis as a suggestion one might enjoy doing just that. They also thought the phrase "start low and go slow" sacrificed dosage information in favour of rhyming. iPolitics

5

CannTrust: Insult to Injury

Ouragan_Sandy_1_Oasis_Cuba_Playa_Del_Resort_Bucanaro.JPG

CannTrust said half its stock and a quarter of its plants have been suspended by Health Canada, and warned its Q2 results will be "materially impacted" if that inventory is destroyed.
Financial Post

Denmark's sole MED importer, Stenocare A/S, says it no longer believes the CannTrust products it bought were produced in pesticide-free environments as the company guaranteed they were.

  • Denmark requires MED to be completely pesticide free. In a press release, Stenocare A/S wrote, "It now appears that CannTrust introduced a more general use of Health Canada approved pesticides in the new greenhouse where cultivation of medical cannabis plants is located."
  • CannTrust ended an exclusive brokerage agreement with alcohol giant Breakthru Beverage's subsidiary Kindred Partners, which the two companies launched as a CannTrust brokerage arm. During that process, Breakthrough bought more than 900,000 shares of CannTrust at $10.23. They are now trading in the $3.50-range. Globe and Mail

CannTrust's master grower, operations manager, and VP quality operations all departed this week. Seven anonymous employees told the Financial Post that following the management shakeup last fall that saw Tangerine Bank CEO Peter Aceto take the CEO, the workplace culture shifted toward the demand for productivity "at all costs."
Financial Post

Quick Hits

  1. Despite having hired more staff, Health Canada is overwhelmed by the volume of research-license applications. It has caused backlogs of research projects waiting for Health Canada's irrationally hard-to-achieve approval.
    GrowthOp, CBC Kitchener-Waterloo, Science

6

US Just Says No to CBD-carrying Canadian

A Canadian traveller—unnamed pending resolution of her case—was barred from entering the U.S. because she was carrying CBD oil. She said she did not realize CBD oil was illegal to carry into the U.S. Though the US Farm Bill removed industrial hemp from the list of controlled substances last December, CBD is still considered cannabis.
CBC Politics

  • The woman reported the Customs and Border Protection officer asked her if she was carrying "leafy greens," which she interpreted to mean cannabis in bud form, or cannabis products containing THC. When a search of her belongings discovered CBD oil, she was fined $500 for failing to declare it, fingerprinted, and denied entry to the U.S.
  • If she wishes to return, she must make a $600 application.

Quick Hits

  1. It's easier than it used to be to treat an epileptic child with CBD, but there's still popular resistance to giving even non-impairing MED to kids.
    The Star
  2. Teens aged 12 to 17 caught with less than five grams of REC won't be criminally charged, those caught with more than five grams are unlikely to be incarcerated.
    The Leaf
  3. Edmonton police claim the reason they're ticketing increasing numbers for drug-impaired driving while numbers remain flat everywhere else in the country is that they're better trained to recognize stoned drivers. On an unrelated note, this weekend Edmonton will host a demonstration of the newly federally approved Abbot SoToxa saliva-tester, which is as questionably accurate and constitutional as its predecessor, the Drager DrugTest 5000.
    CBC Edmonton, CTV News

7

Canopy Execs Did OK Last Fall

Compensation for Canopy Growth's top-six executives spiked after legalization last fall, earning them a combined $28.5M, compared with a combined $11.3M in fiscal 2018, and $4M for 2017.

  • Ousted CEO Bruce Linton was paid $9.33M in the fiscal year ending March 31, compared with $2.52M the previous year. Canopy paid him an additional $1.5M when they fired him in July.
  • Of Canopy, Linton said, "She broke up with me. I'm still digging her," and said he hoped the next CEO would be a woman from the tech sector.
    Yahoo Finance

Canopy terminated a proposed partnership with the Mohawk Council of Kahnawake to build a cultivation site in the Montreal-adjacent Kahnawake Mohawk Territory. The company is also selling an indoor cultivation facility, located in BC's Okanagan Valley, for $13M.
Two-Row Times, Globe and Mail

Quick Hits

  1. Even if you've never had either, everyone knows what a beer or a joint is. But cannabeverages are new to nearly everyone, and as such they're hard to market.
    Globe and Mail
  2. Food farmers are facing off with cannabis farmers again, arguing cannabis is a commercial product, not a crop, and should not receive lower agricultural tax rates. The provincial government says they're looking into changing the tax rates for LPs.
    CBC Calgary, Edmonton Journal

8

Is BMO Edging Out of Cannabis?

Wildfire Collective founder Mark Spear reported receiving an internal BMO memo dated August 9 saying the bank—one of the few to work consistently in the sector—was no longer interested in new business with the cannabis industry, regardless of whether companies are licensed. Spear later added the memo "related specifically to retailers and it is unclear how it relates to cultivators."
Twitter

Quick Hits

  1. No single LP has captured investors' interest—yet. They're hoping one will soon. Financial Post
  2. CEO Brendan Kennedy promised Tilray will hit profitability in Canada in "the next quarter or two."
    Bloomberg

9

550 Kilos Contaminated with Mould, Rubber Gloves

https://www.flickr.com/photos/94881716@N00

Zenabis revealed through its Q2 financials that it had returned 554 kilos of cannabis it acquired from Sundial because the product contained mould, pieces of rubber gloves, and foreign bodies. Sundial went public on Nasdaq on August 1 with a USD$1B valuation, and did not mention the half-ton of returned, contaminated cannabis returned in its IPO filing.

Quick Hits

  1. Consumers don't seem to be abandoning alcohol for cannabis.
    Global News
  2. Quebec health minister Lionel Carmant said he believes no one smoked cannabis during Quebec City's summer festival concerts featuring Gucci Mane, Diplo, Voivod, Jason Bonham's Led Zeppelin Evening, and mysteriously beloved Quebec grindcore act Blasting All Rotten Fuckers (B.A.R.F.).
    Journal de Montréal—In French

10

REC Sales Continue to Increase

https://sites.google.com/site/thebrockeninglory/

Following a dip in January ($54M) and February ($49M) during the supply shortage, legal REC sales continued increasing. In June ($85M) they eclipsed May ($79M) and April ($67M), the two most successful months previous.

  • Ontario led in REC retail sales with $25.8M ($1.80 per capita), followed by Quebec with $18.5M ($2.20 PC) and Alberta with $18.3M ($4.24 PC). The legacy market remains strong in BC, which spent only $4.1M ($0.82 PC) on legal REC.
  • More than 9,000 Canadians work in the sector, compared with 2,630 in fiscal 2018 and 1,438 in fiscal 2017. Bloomberg

Quick Hits

  1. It's unclear whom you can complain to if you're sold an empty container of REC. Leafly
  2. If you've only just now decided to open a REC store, you're probably going to need to do a lot more than read this how-to guide from Maclean's.

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