By Heather Exner-Pirot
What has sparked the sudden interest in cannabis as an economic opportunity?
The plan for legalization of marijuana by the Liberal government is the primary trigger. But there’s also been more research on medicinal uses of the plant and its use in general becoming much more mainstream.
Equally important, there’s lots of room for growth. There’s a gap in the supply for medicinal marijuana; the industry produces 250,000 kgs annually, but many estimate there’s demand for 1 million kg, and growing at 30% each quarter. That’s just medicinal. There’s a lot of speculation on what the recreational market will be once it’s legalized – one guess is that the selling of dry herb could be a $6 billion business by 2021.
We’re starting to see big players from industry moving in, buying up smaller companies. There’s still a lot of uncertainty because the actual legislation hasn’t passed, however, licensed producers will be the only way to supply the recreational market. It’s going through Parliament now, but there’s still time for First Nations to get a foothold in the industry before it gears up.
What are the main business opportunities?
There’s quite a spectrum. There’s the production side, whether medical or recreational marijuana. For that, you need to be a licensed producer. There’s also a lot of work being done on developing different forms and hybrids of the plant, with different levels of cannabinoids. The most well-known is THC and CBD but there are many more cannabinoids that aren’t well understood or used yet. The research & development into cannabis as a medicinal plant is still in its early stages.
Outside production, there’s retail distribution, paraphernalia, and the value-add side. There’s currently a lot of discussion on what kinds of products, other than the more familiar dried herb, we will start to see in the market, such as lotions, tinctures, oils, and edibles – basically different delivery methods of THC and CBD (the main cannabinoids), and products that don’t require smoking. I expect we will see growth in those products as people’s comfort, understanding and ability to access cannabis increases.
How can First Nations get involved in the cannabis industry?
There are opportunities from seed to store and everything in between. Some First Nations are interested in becoming licensed dispensaries. The province recently approved licenses to communities based on population – the threshold was 2500 – so only Onion Lake, Peter Ballantyne and Lac La Ronge were pre-qualified. And Saskatchewan’s regulations will allow for online retail sales as well. It may eventually be like tobacco sales on reserve, where a community can charge lower taxes or recoup levied taxes for themselves.
There are also opportunities in growing cannabis plants. There may be some competitive advantages to locating on reserve in terms of tax breaks. Also many First Nations have good access to land and labour.
First Nations might not have the capacity to do the technical research & development themselves, but could be partners or investors in companies that do have that expertise.
Is it labour intensive or highly mechanized?
Of course there is the potential for mechanization. That requires a bigger front end investment. But the industry has the potential to be a good job creator. First Nations could leverage their access to land and pool of lower skilled labour to compete on the production side.
Your company NGK biologix recently acquired a confirmation of readiness for production of marijuana. What did that process entail?
The process in the past was mainly focused on quality control and quality assurance since the product would be going to medical patients, and a high level of security to ensure no diversion of product into illegal markets. The application process itself was very difficult, time intensive and very specific to deal with all of Health Canada’s concerns and safety requirements.
On average the process to become a licensed producer is taking 3 years or more, it’s not a quick process. The criteria is heavily focused on the security side and many more applications have been refused than accepted. If you miss or change anything such as land location, it goes back to the start. Currently, the application process costs approximately $180,000-$250,000.
Does the hype match the reality?
I think it does, but we all have to be careful, First Nations in particular, because there is potential to be exploited. I heard of one company that sold franchise licenses, worth $100,000, to about 100 interested franchisees. But no company can hold more than five licenses! So speculation makes for stupid decisions. We need to conduct our due diligence, and educate ourselves on the industry before we proceed.
This industry does pose risks. For a small producer, one bad crop can sink your company. And the quality has to be very consistent. These are finicky crops and you have to grow to specification – the THC and CBD levels have to be the same, every time. You need quality assurance standards in place. There will be a lot of regulation, but the legislation hasn’t come out yet. We’re still waiting to see what that will entail. But for a lot of businesses, cannabis will be a big profit-maker.