Strategies in Manitoba differ for looming pot legalization

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This article was published 22/01/2017 (3358 days ago), so information in it may no longer be current.

Last month’s release of the federal government’s task force report on legalized recreational marijuana is prompting wildly different approaches from players looking to position themselves for the eventuality of legalization.

With such a massive potential market that could all of a sudden open up to the mainstream, there are plenty of business opportunities that are getting queued up.

A recent comprehensive survey done by Deloitte estimated the Canadian market could be worth about $9 billion in annual marijuana sales and nearly $23 billion per year including ancillary businesses such as security, transportation and other things.

A Vancouver company called Erbachay has recently put up a number of billboard ads around Winnipeg and in Brandon featuring a marijuana leaf background that only includes the company’s name — in phonetics — its website address, the words “must be 19+” and “Canada Wide Delivery.”

Erbachay operates a marijuana dispensary in Vancouver and a national mail-order medical marijuana business.

“We want to normalize the conversation about marijuana use,” said company president Darcy Delainey.

Erbachay gets its medical marijuana from many different suppliers, including individuals who are licensed to grow their own and who have excess supply.

Asked if that was legal, Delainey said, “I guess not.”

He said Erbachay is positioning itself to be able to take advantage of upcoming legalization. The Trudeau government has said it will have legislation to present to Parliament sometime this spring.

While Delainey takes that to mean it will be legal by the spring, others are taking a more conservative approach.

John Arbuthnot, president of Delta-9 Biotech, the only licensed medical marijuana producer in the province, believes the legislative process is probably going to mean actual legalization is not going to occur until 2018.

His company recently raised an additional $1.35 million in new equity and is busy building out additional production space. The company has recently designed a new production process using hydroponics and stacked metal shipping containers.

Arbuthnot said it is the most cost-effective way to increase production and meet all of the Health Canada inspection approvals that must occur before each new container goes into production in the company’s 64,000-square-foot leased facility in Transcona.

“We hope to have 100 operational by mid-2018 and 600 by 2020,” Arbuthnot said.

Delta-9 can produce about 40 kilograms of high-quality marijuana per year per container that can be stacked up to three-to-four high.

One hundred containers in production would generate $30 million in annual revenue, and 600 would boost revenue to $150 million. It would also mean increasing the company’s workforce from about 25 today to more than 400.

Arbuthnot said Delta-9 is also planning to open its first medical-marijuana clinic in the city in Osborne Village in the spring.

Arbuthnot is a strong proponent of the regulatory regime that currently exists for medical marijuana and does not have high regard for the dispensaries that are growing in popularity across the country, and he questions the quality control applied in those facilities.

But just as the grey market dispensaries such as Erbachay are getting ready to sell to the recreational market, so is Delta-9.

“We’re excited about the potential to supply the recreational market,” said Arbuthnot. “But there are lots of question marks.”

Arbuthnot said Delta-9 intends to leave its options open as to what role it will play in that market — as a distributor, integrated retailer or some kind of wholesaler.

He believes the medical-marijuana business will get more “medical,” perhaps with the more production of oils or pills or other forms of more traditional delivery of pharmaceuticals.

martin.cash@freepress.mb.ca