There is so much we still don’t know about cannabis. Up until the Liberal government’s announcement that it would in fact be legalizing the recreational use of the plant, the subject of marijuana was essentially taboo. Even many family physicians have been reticent to the idea of using medical cannabis, despite it being legal for this purpose since 2001. But that is all about to change, whether we are ready or not, and licenced producers (LPs) are the key to making sure the industry remains safe.
“We would probably be the only industry that is in favour of more regulations. We think the barrier to entry should be high, so that only the most qualified and competent companies get into the market,” says Sandy Schembri, VP, Strategic Initiatives for the Truro Herbal Company, a late-stage applicant to become a LP of medical cannabis under the ACMPR (Access to Cannabis for Medical Purposes Regulations) established through Health Canada.
And the process to become a LP in Canada is extremely difficult, as it should be, according to Schembri, who says the Truro Herbal Company began submitting the required paperwork for licencing in June, 2014. “…we submitted around 2,500 pages of documents to Health Canada and have spent over $1 million [so far] just going through the licensing process,” says Schembri.
Since the Marihuana for Medical Purposes Regulations (MMPR) was enacted in 2013, there have been over 1,700 applications Canada-wide from companies looking to become LPs. Because of the daunting process, which is not only time consuming, but also capital intensive, there are only about 100 applications still remaining, according to Health Canada data, which translates to about a 5.8 per cent success rate for anyone hoping to enter the market.
As of October, 2017, there are 67 LPs in Canada, none of which are in Nova Scotia, although that, too, will change. There are a number of companies seeking a license here in addition to Truro Herbal Company, including Aqualitas Inc., which will be based out of the old Bowater-Mersey paper mill site near Liverpool, as another late-stage applicant that is waiting for inspection by Health Canada to determine if they will get a cultivation licence.
Potential LPs must also pass detailed background and security checks of both personnel by local law enforcement, the RCMP, the Canadian Security Intelligence Service (CSIS) and Interpol, and their facilities, as well as an in-person inspection to further ensure they meet good production practices before a licence to sell is issued.
“Licenced producers are the only supply chain for authorized cannabis in the medical and [soon to be] recreational market. And the reason they are the only authorized supply chain is because they are held to very high standards for good manufacturing practices and … testing standards for the product to make sure it is safe and consistent for the consumer,” says Myrna Gillis, CEO of Aqualitas Inc.
So, that means that every dispensary currently operating in the province is 100 per cent illegal, despite how they try to present themselves to the public. And, if the government decides to distribute cannabis through a Crown Corporation, such as the NSLC, that will not change when the drug becomes legal for recreational use July 1. The biggest challenge LPs will face, however, is meeting the incredible demand everyone in the industry foresees, according to both Schembri and Gillis.
“I know that according to the studies on supply, they [government] are anticipating a 700,000 kilo supply shortage in 2018 when recreation occurs, and they don’t expect that will reach equilibrium until 2020,” says Gillis.
Schembri agrees, saying, “… the 60 [plus] current licenced producers in Canada are able to produce 80,000 to 100,000 kilograms [of cannabis per year] and we estimate that the total consumption for the whole country is closer to 1 million kilograms [per year], so the shortfall is incredible.”
What is really surprising, however, is that in Nova Scotia alone, the demand is estimated to be close to 35,000 kilograms per year. When you consider that Truro Herbal Company will initially be able to produce between 3,000 to 5,000 kilograms of dried cannabis annually, and according to Gillis, Aqualitas will initially be able to grow another 9,000 kilograms per year, even if another producer is licenced in the province, there will still be a significant shortage.
“… we are considering partnerships with other producers because not only can we grow our own …[cannabis], but our licence allows us to hold much more product in our vault. So we are able to purchase wholesale cannabis from other licenced producers and potentially distribute it to patients directly, or to the NSLC ourselves [assuming that is the route the provincial government decides to take for distribution] if we are permitted to do so,” says Schembri.
“At full capacity, with expansion, we could produce up to 125,000 kilograms a year …” says Gillis. She adds, “The rough rule of thumb is 5,000 kilograms of finished product for every 40,000 square feet of production.”
So far, only a few provinces have announced how they plan to distribute cannabis once it becomes legal. Nova Scotia launched a survey this month, which allows the public to voice their opinion on this issue, as well as several others that seem to be of concern for both government and consumers. You can take the survey, which will be available until Oct. 27, at www.novascotia.ca/cannabis.
“Ontario will use a Crown Corporation model (the LCBO), Alberta and B.C. have both indicated they are leaning toward a more private sector orientated approach. New Brunswick will use a Crown Corporation for the purpose of purchasing cannabis, but they haven’t indicated yet what the actual service delivery method will be,” says Schembri. He adds,” Newfoundland, P.E.I., Quebec and Manitoba initiated their consultation process, as did Nova Scotia, but Nova Scotia is leaning toward a Crown Corporation model, which concerns us a bit as producers, as there are a lot of challenges associated with that … there is a level of expense that is involved with government delivery of any services.”
When it comes to pricing in a Crown Corporation model, the government will be hard-pressed to break even, let alone make a profit, according to Schembri.
“What really differentiates this [cannabis] from liquor [sales] is that the public pricing toward alcohol tends toward increasing the price incrementally, like cigarettes, which are detrimental to public health. Cannabis is now primarily consumed legally as a health product, so if you are raising the prices, they [government] would be essentially making medical products less affordable. And then, on the other hand, for the recreational side, if the price-point is above the current black-market price, you’re going to have the continuation of an illicit market, which completely undermines the objectives of legalization in the first place.”
Schembri adds, “So, it’s a double-edged sword … the province will have to either pay producers a very low price in order to get close to break-even, or they will be selling cannabis at a subsidized price, which is untenable for them, politically — bad public policy. I would venture to guess that any government anywhere will have a very hard time breaking even if they are delivering the service themselves through a bricks and mortar Crown Corporation.”
And when it comes to the sale of cannabis, whether it is for medical or recreational use, both Gillis and Schembri say it is not about advertising cannabis itself, as most people understand what it is. It will be more about differentiating their product from other LPs.
“Nova Scotians are particularly fond of products that are grown locally or sourced locally, like beer and wine,” says Schembri. And their product will be grown in Truro, which he says will also help with the economic development of the area. “Right now, our staff count, between full-time and contract employees is around eight. We are just about to launch a couple of job postings in the next few weeks. Our facility will be 20,000 square feet with the capacity to produce three to five million grams per year, which will require about 50 people, and as we get further along the construction stage, closer to completion, we will start on-boarding people in early 2018.”
Gillis says, “… we [Aqualitas] are only one of three potential applicants or licenced producers in Canada that are led by a female CEO, and the majority of our directors … and half of the key positions on our medical advisory and management boards are held by women. So, that is one distinguishing feature about our company.”
Truro Herbal Company also has a pretty impressive resume with president, Evan Price, who is known in the community for the success of FiddleHop Farms, which supplied local restaurants, as well as Garrison Brewery. Price partnered with Dr. John Gillis, a leading pain management physician in Nova Scotia, who was an early consultant with one of the large cannabis producers in Ontario. Together, with David Morgan, the company’s quality assurance manager, who has a PhD in biochemistry, the trio is set to make their mark on the Nova Scotia cannabis market.
Another major distinguishing factor for Aqualitas is “… that we have a research and development company called Finleaf Technologies Inc. and we have a proprietary growing process where we use fish as the fertilizer. So, live fish provide the nutrients to the plants that are downstream and it is a closed-loop symbiotic system. We were featured in a Washington Environmental Law Institute article for our energy and environmentally responsible manufacturing processes,” says Gillis. “We are a bit distinct from the pack. Only five per cent of the licenced producers [in Canada] have organic certification. For our process, we like to call the fish the canary in the coalmine. There is no cheating because fish health would be impacted if there was something in the system that didn’t belong … it is a very delicate ecosystem.” she adds, noting that Aqualitas is also one of the few companies in Canada supported by a medical patient advisory board, which includes health professionals, researchers, patient advocates and patients.
Another licensed producer applicant in the final stages with Health Canada ACMPR is Robinson’s Cannabis, based out of Kentville. Robinson’s is committed to producing the highest quality standard and best tasting strains of dried craft cannabis flower for the medicinal and legal adult recreational marketplace, starting in late 2018.
“We have a dedicated product development process for understanding and developing the composition of our cannabis, which will help define the quality of Robinson’s,” says Andrew Robinson, founder and master grower.
What differentiates Robinson’s Cannabis is its local growing expertise. Robinson, who holds a Bachelor of Science in plant science from Dalhousie University, pioneered a medical marijuana consulting practice, teaching federally licensed growers how to safely and successfully cultivate cannabis for medicinal purposes under the guidelines of the Marihuana Medical Access Regulations Act (MMAR).
“We are also focused on incorporating energy reduction and environmental management practices into our sustainability model. Our grow system design and cultivation techniques emphasize a minimized approach toward waste generation, energy consumption and carbon emission reductions,” Robinson says.
Like Truro Herbal Company, and Aqualitas, Robinson’s Cannabis will make a significant contribution to the economic development in their community. Aqualitis will help bolster the Liverpool area, which suffered badly after the Bowater-Mersey Paper mill closed and Robinson’s Cannabis will eventually add 30 jobs in the Kentville area.
“We have started to prepare our 11-acre site located in the Kentville Business Park for construction of a 27,700-square-foot cannabis production facility, which will produce over 1,000,000 grams of high-quality craft cannabis flower, starting in late 2018,” says Robinson. “When completed, our production capacity will be 20,000 kilograms a year,” he adds.
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