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1

Happy New Year, Legal Cannabis

Jesse Staniforth
Day One, 2018

Thursday marked the first anniversary of REC legalization. Among many articles assessing the year in review, some found the results of legalization relatively positive, while others defined legalization by its ethical failures, and still more noted consumers dissatisfied with prices, quality, and product availability.
Transform Drug Policy Foundation, The Star, Maclean's, The Leaf

  • Among the toughest appraisals of the last year came from NORML Canada, who used the anniversary to launch their post-legalization platform, demanding improved consumer access to REC and MED products, assistance for those wishing to move from the legacy market to the legal market, full expungements and more.
  • Researchers said it would take roughly five years before we can assess changes to demands on the health care system resulting from legalization.
    Journal de Montréal—In French

In 2018, police made 34,441 arrests under the Controlled Drugs and Substances Act and 1,370 arrests under the Cannabis Act—the lowest such numbers since 1969-1970.
Statistics Canada, Twitter—Chris Goodwin

Physical REC stores are the engine for most sales, and because outside of Alberta the REC retail rollout has ranged from slow (Quebec) to protracted (Ontario), that's kept sales low. However, having opted against a central-warehouse distribution system like Ontario's, Quebec's SQDC monopoly became profitable in Q1 of its second year.
The Conversation, Bloomberg

Indigenous cannabis sellers remain "in legal limbo" thanks to a complex patchwork of Supreme Court decisions regarding First Nations' rights. CBC Indigenous

2

Everyone's a Critic

https://www.flickr.com/photos/144957155@N06

With 9,200 people employed (and numbers increasing) in an industry that contributes $8.26B to the Canadian economy and plenty of taxes, aspects of legalization can be celebrated as successes. Other smaller-ticket achievements include a faster (though more restrictive) Health Canada licensing process, and provincial and municipal governments softening on retail and processing. Those good things help offset the parts of the last year that stank:
Botaniq, Bloomberg, Twitter—CannaTom

The industry remains frustrated and confused with Health Canada's strict-yet-vague advertising regulations. Among the unclear regulations that came into effect on Thursday are new rules limiting REC retail logos and brand elements to no larger than 300 square centimetres, or about the size of a shoebox lid--but without clear guidance on the places that rule was to be applied.
CTV News

The illicit market remains "vibrant" according to virtually all estimations, helped by minimal REC retail rollouts and prices nearly half that of the legal market.
CBC Politics

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3

The Ebbu Files: A WeedWeek Exclusive

A WeedWeek Exclusive by founder Alex Halperin:

"A high-profile Colorado marijuana start-up misled prospective investors and promoted an investment structure that may have violated state laws, according to internal company documents and emails leaked to WeedWeek. The company, Ebbu, subsequently rewarded its investors when it sold its assets [to Canopy Growth] in a cash-and-stock deal worth roughly $250 million."

4

New Products Legal But Not Available

https://www.flickr.com/photos/51035806117@N01

As of this October 17, extracts (and vape pens), ingestibles, and topicals are now legal for licensed parties to produce and sell—once they get Health Canada approval on new products. That'll take some time--minimum 60 days.
Globe and Mail, CTV News, Financial Post

Edibles are experiencing an uptick in interest as a result of the US vaping-illness (VAPI) crisis. A new Ipsos poll found 63% of Canadian cannabis users are concerned about the safety of vaping, while 73% say they're likelier to use ingestibles instead of vaping.
Ipsos, The Star

Edible and beverage products will likely come to market later, and they will be limited to a maximum of 10mg THC per package. There will be no stronger-dose edible products for MED patients.
Globe and Mail, CBC British Columbia

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5

Vive la Différence

https://www.flickr.com/photos/14923694@N07

Quebec always has to do things its own way, which is why my home province will be banning all extracts with more than 30% THC—effectively banning all extracts and vape pens.

  • The CAQ government's regulations will also cap edibles and beverages at 5mg per serving with maximum 10mg per package, and ban all sweetened edibles. They will allow "granola bars" and "bran muffins," however.
    La Presse—In French
  • Since the SCDC won't be allowed to sell vape pens and many other products that will shape legalization 2.0 for the rest of the country, the crown corporation will begin by stocking mostly cannabis beverages, as well as hashish no stronger than 30% THC.
    Journal de Montréal—In French
  • The CEO of the Société Québécoise du Cannabis, Jean-François Bergeron, hopes to cut long lineups at SQDC outlets, hence their recent plan to nearly double the number of stores (from 22 to 43) by April.
    Montreal Gazette


Despite la belle province's confused feelings about legalization, Quebec's REC users prefer the illicit market for the usual reasons: Montreal's delivery services are fast, friendly and cheap, while visits to SQDC outlets (all of which close at 9:00 pm) require waits in long lines. Those who shop at the SQDC are generally happy with the crown corporation, however. (Meanwhile, at least you can smoke cannabis outside in Montreal. Quebec City has given 97 tickets and $150 fines to people smoking cannabis in public places.) Leafly, Montreal Gazette, Ici Radio-Canada—French

  • Quebec police used blood tests to detect the presence of cannabis in 113 drivers believed to be impaired—up from 73 the previous year. (Tests cannot confirm impairment.) Montreal Gazette

In the midst of its own troubles, SQDC principal supplier Hexo announced the launch of Original Stash, a budget brand boasting the lowest-cost legal REC in Canada with 28-gram bulk bags selling for $125.70 with sales taxes included, or $4.49 per gram (less than half the national average of more than $10 per gram). These are the first one-ounce (28 gram) REC packages available in Quebec.
Globe NewsWire

Quick Hits

  1. Inexhaustible Globe reporter Jameson Berkow crossed Quebec and into the maritimes, profiling LPs as he went.
    Globe and Mail
  2. Canadian legalization has been a catalyst for interest in legalizing from a variety of other governments, including Mexico, Luxembourg, Australia, New Zealand, and the US.
    GrowthOp, Associated Press

6

Ontario Cannabis Store Angling for Private Wholesale

https://www.flickr.com/photos/45123325@N04

The Ontario Cannabis Store announced it was consulting with LPs and REC retailers about "increasing private sector participation in the delivery of [REC] to stores across Ontario." This will likely eventually end the OCS's central warehouse and role in wholesaling, and allow LPs to sell directly to retailers. It would also make the brick-and-mortar REC retail sector fully private.
OCS

Everyone agrees Ontario needs more REC stores, though analysts aren't sure precisely how many. Is it twice as many? Ten times?
CanTech Letter, Globe and Mail

Quick Hits

  1. Lawyer Jodi Butts—wife of Justin Trudeau's close friend and former principal secretary Gerry Butts—was nominated to Aphria's board, and will likely be confirmed on November 14. She'll be compensated with $150,000 cash and another $150,000 worth of deferred share units.
    National Post
  2. Darryl Dexter, former NDP premier of Nova Scotia who now advises on cannabis issues, called on Ottawa to get involved with complaints from the sector that banks are refusing access to and closing accounts of cannabis businesses.
    MJ Biz Daily

7

CannTrust to Destroy $75M in Stock

https://www.flickr.com/photos/43717618@N00

Scandal-plagued LP CannTrust announced it will destroy $12M in unlicensed biological assets and $65M in unlicensed inventory in order to regain regulatory compliance.
New Cannabis Ventures, CBC Business

  • Previously the company estimated it would lose $51M worth of assets that were non-compliant.
  • Turns out if you want to destroy $77M worth of cannabis, you can't just "put it in a big pile outside the building and spark it up." (Not even if you keep the children upwind?) Instead, the material may be mulched, buried in landfills, mixed with kitty litter, or torched in an industrial incinerator. National Post

Quick Hits

  1. Once worth $4.40 (December 2017), MYM Neutraceuticals' stock is now trading at $0.12. That's bad news for the Quebec municipality of Weedon, where MYM was going to build a 1.5M square-foot production site. Construction stopped last fall and hasn't restarted.
    Journal de Montréal—In French
  2. MED researchers continue to complain about Health Canada's glacial clinical trial approval process. Some say it's now faster to go to the US and endure the DEA's three month wait for clinical trial approval.
    Twitter—Jonathan Page

8

Aphria: Still Doing OK

With cannabis stocks at their lowest point since 2017, industry investors are desperate for good news. They found it in Aphria's report of their second profitable quarter, despite analyst predictions of a coming loss.
Bloomberg, PR NewsWire, Bloomberg

Quick Hits

  1. Canopy became the first LP to be allowed to bulk-import MED directly to its UK distribution hub.
    Financial Times
  2. Cronos share prices spiked as much as 40% overnight on Wednesday following a series of block purchases, prompting a Stifel analyst to upgrade the stock and dub it "the new king of the north."
    Market Realist, Yahoo Finance, Bloomberg, Barron's, Investor's Business Daily

9

Legalization Winner: The Housing Market

https://www.flickr.com/photos/27031977@N04

Real-estate company RE/MAX released its 2019 Cannabis Survey, concluding the cannabis industry is resulting in localized housing-market "micro-booms" in communities surrounding major cannabis production sites like Smith's Falls and Leamington. The result has been spiking prices and some housing shortages.
NewsWire, Re/Max Huffington Post

Quick Hits

  1. The Alberta Cannabis Micro License Association, an upstart micro-cultivators association, hopes to turn their affiliation into a canna-tourism attraction, like the Niagara wine region.
    GrowthOp
  2. Pharmacy corporation Rexall entered the sector as its online wellness subsidiary Well.ca received a sales license from Health Canada. Rexall's parent is multinational health care behemoth McKesson, whose 2018 revenue was $208B.
    Twitter—Deepak Anand, David George-Cosh

10

THC Vaping Becomes Legal During US Crisis

http://www.flickr.com/photos/145932970@N06

Contrary to rumours Health Canada would stall legalization of vape pens, those products became legal this week along with edibles and topicals. Nonetheless, some doctors are warning Canadians against using even legal, regulated REC vape products.
The Star

  • The fact that three very different products (nicotine e-cigarettes, cannabis oil-pens, and dry-herb vaporizers) are all referred to as "vaping" is not helping anything.
  • The Council of Chief Medical Officers of Health expressed concerns about "the substantial rise of [nicotine] vaping" among teenagers, and the likelihood that those who vape nicotine products will become smokers.
  • One Canadian case of VAPI has been confirmed, while another is suspected. Both are connected with nicotine e-cigarettes.
    Ici Radio-Canada—In French, CTV News

Quick Hits

  1. Health Canada is working with Strainprint Analytics to understand how patients use MED.
    NewsWire
  2. MED patients complained some cannabis clinics have refused to register them with LPs of their choice due to alleged "education agreement" kickbacks.
    Twitter—SheCann, Global News

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