Who is cashing in on Canada's marijuana 'Green Rush'?

As Canada aims to legalise marijuana, producers and some controversial players race to get a piece of the market.

by

    Smith Falls, Ontario - The cannabis growing operation in Smith Falls, a small town southwest of the Canadian capital, Ottawa, is unlike most others in the world.

    Occupying 15,600sq metres in a facility that was previously Canada's first Hershey's chocolate factory, thousands of cannabis plants sit across the street from a police station.

    But as Canopy Growth Corporation, a publicly traded medical marijuana company, plans to expand to the recreational market in July, the company does not seem bothered by the police presence.

    "We have hundreds and hundreds of security cameras here," says Jordan Sinclair, the director of communications for the company.

    "We have motion detectors and tremor detectors in the floor," he tells Al Jazeera.

    "But the biggest deterrent we have is that police station."

    Inside the facility employees - wearing facemasks, hairnets and sunglasses to protect against strong artificial lighting - carefully tend to cannabis plants. Small weather stations hang from the ceilings to measure the temperature and humidity.

    In another room, workers stand on assembly lines and use shears to cut stray leaves off cannabis buds. They process 60kg of marijuana a day.

    Behind a heavy vault door, branded and packaged products are stored for shipping: vials of cannabis oil and small plastic bottles of marijuana sealed like containers of over-the-counter painkillers.

    The Smith Falls production facility employs more than 350 people. Eighty-nine medical marijuana-producers have been licensed to operate by the government and will be able to sell cannabis to retailers for recreational consumption. 

    This summer, Canada is expected to become the second country in the world, after Uruguay, to legalise the production, sale and consumption of recreational cannabis.

    And as the expected legalisation date - July 1st - approaches, already licensed producers are moving to increase production capacity as new, sometimes controversial, players try to get their piece of the market.

    One Canopy Growth Corporation facility processes 60kg of cannabis a day [Blake Sifton/Al Jazeera] 

    The rush comes at a time when there are still questions over how distribution will work and how the law will be implemented.

    "Right now, we're producing as much as we can so we can fill shelves in July," Sinclair says.

    Canopy is currently building six more growing facilities around Canada that they expect will bring their overall production space to over 520,000sq metres.

    Path to legalisation

    Canadians are among the world's largest consumers of cannabis. A study by the national agency for statistics estimates that Canadians consumed 698 tonnes of the drug in 2015.

    Medical marijuana has been legal in Canada since 2001. 

    {articleGUID}

    The legalisation of recreational marijuana was a key campaign pledge of Prime Minister Justin Trudeau during the 2015 election, with the government hoping to benefit from large tax revenues and deal a blow to organised crime.

    Financial institutions, including Deloitte, believe that the country's legal recreational marijuana market could be worth an estimated $8.7bn annually.

    In April 2017, the government unveiled its plan for recreational legalisation.

    The Cannabis Act, or Bill C-45, will allow adults to possess up to 30g of marijuana at a time. They will also be able to buy cannabis oil, plants and seeds from government-regulated retailers. Households in some provinces will be permitted to cultivate up to four marijuana plants, while home growing will remain outlawed in others. The bill must still be approved by the Senate, but is expected to pass.

    While the Canadian federal government will decide which companies get licences to legally produce marijuana, they have left it up to provincial governments to sort out multiple issues including whether it will be sold in public or private stores, how many such stores can operate, if it can be sold online and shipped, where it can legally be consumed and what the minimum legal age for purchase will be.

    Questions also remain on how existing and new restrictions will be enforced.

    The uncertainties mean producers will have to adapt as the regulations develop.

    "The unknowns don't particularly concern me," Canopy's CEO, Bruce Linton, tells Al Jazeera. "It's only the beginning."

    Most provincial authorities have yet to decide which licenced producers' cannabis will be sold in their stores and online, but Linton says he is confident that Canopy will gain access to the market.

    'The Green Rush'

    The move towards recreational legalisation has brought with it fierce competition for a slice of the new legal market and a myriad of cannabis producers, entrepreneurs and investors are clamouring to participate in what's been dubbed the "Green Rush".

    "This is a multibillion-dollar industry going from black to white," says Vahan Ajamian, an analyst with Beacon Securities in Toronto.

    "It's like the end of alcohol prohibition in the US. It's a once in a generation kind of investment opportunity."

    In October, US alcohol conglomerate Constellation Brands, which owns the Corona beer company, bought a 10 percent stake in Canopy Growth Corporation for nearly $200m (245 million Canadian dollars).

    "We have a fire hose of capital moving into Canada," says Chris Damas, editor of the BCMI Cannabis Report, a marijuana investment newsletter.

    The three largest cannabis producers in Canada have all seen their share prices more than quadruple within the last year as investment money flows in. Each now has a market valuation in the billions of dollars.

    However, Damas thinks investors' overenthusiasm is partly driving up stock values, raising the spectre of a bubble.

    "In just a few days, we can see a 50 percent increase in the share price of the major producers," Damas says. "This smells of more than just rational investing."

    Analysts estimate Canada's legal recreational marijuana market could be worth $8.7bn dollars a year [Blake Sifton/Al Jazeera] 

    Analysts believe that changes to cannabis laws in Canada are being watched closely abroad, and potential changes to legislation in other countries will present international opportunities for Canadian cannabis producers, as well.

    "Canada was a trailblazer in medical marijuana legalisation and now the dominoes are falling and other countries are legalising it," Ajamian says.

    Canadian producers now export medical marijuana to Australia, Brazil, Chile, Croatia, Germany and New Zealand. Companies also have partnerships with cannabis producers in Denmark, Jamaica and Spain.

    Ajamian believes that the way full legalisation unfolds in Canada will also have an impact internationally.

    "I think when we have legalised recreational marijuana here other countries will see that it's not a doomsday scenario and in a few years will also look to legalize it. This puts Canadian operators at a huge global advantage."

    'No apologies'

    While impending legalisation has sparked excitement among investors, not everyone is pleased with the way the process has progressed.

    "There's no pardons or amnesties or reparations or apologies. There's no admission that prohibition victims were wrongfully criminalised," says Jodie Emery, a longtime legalisation activist and part-owner of a chain of unlicensed marijuana dispensaries raided by police last spring. In December, Emery and her husband, Marc, pleaded guilty to a slew of drug-related offences in Toronto. 

    {articleGUID}

    Illegal storefront dispensaries have openly sold cannabis in many Canadian cities since it became clear that recreational legalisation was on the horizon. While many incorporate medical language into their signage, proof that customers have a medical need for marijuana is lax in many stores.

    The government has clearly stated that the dispensaries will not be allowed to participate in the legal market and security clearances are required for those applying for cannabis producing licenses, ruling out many people with criminal records for drug charges.

    "The legislation seeks to continue criminalising the industry that already exists in order to promote profit from the new emerging companies in the marijuana space," says Emery. "The green rush has become a greed rush."

    Linton has little sympathy for the dispensary owners and producers that now find themselves outside of the legal market.

    "The people who chose to open dispensaries have done extraordinarily well financially. But that process had a beginning, a middle and an end," he says. "This is the next chapter."

    While others are cut out of the legalisation process, some former high-ranking police officials who had long-opposed legalisation now occupy prominent positions in marijuana-related companies.

    Julian Fantino, the former police chief of Toronto, and Raf Souccar, the former deputy commissioner of the Royal Canadian Mounted Police, recently opened a medical marijuana business that will connect patients with producers.

    In 2004, Fantino likened legalising marijuana to legalising murder. 

    {articleGUID}

    Fantino says he changed his mind about cannabis legalisation after learning how medicinal marijuana had helped veterans suffering from PTSD and physical injuries.

    "For someone like Fantino, who so adamantly opposed legalisation, to be participating now is highly hypocritical," says Akwasi Owusu-Bempah, an assistant professor of sociology at the University of Toronto.

    "Law enforcement shouldn't be able to profit once from prohibition and then again from legalisation."

    Legal recreational cannabis sales by licensed producers and vendors are expected to be accompanied by a parallel police crackdown on the black market and dispensaries.

    Linton believes that, while the illegal market will not disappear overnight, the government won't tolerate unregulated and untaxed sales.

    "This is not like flipping a switch. It is an evolutionary path and it will take a few years."

    SOURCE: Al Jazeera News


    YOU MIGHT ALSO LIKE

    Interactive: Coding like a girl

    Interactive: Coding like a girl

    What obstacles do young women in technology have to overcome to achieve their dreams? Play this retro game to find out.

    Heron Gate mass eviction: 'We never expected this in Canada'

    Hundreds face mass eviction in Canada's capital

    About 150 homes in one of Ottawa's most diverse and affordable communities are expected to be torn down in coming months

    I remember the day … I designed the Nigerian flag

    I remember the day … I designed the Nigerian flag

    In 1959, a year before Nigeria's independence, a 23-year-old student helped colour the country's identity.