Cannabis industry members hold networking event

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This article was published 17/10/2023 (702 days ago), so information in it may no longer be current.

On the heels of the release of Health Canada’s initial report on the first three years of cannabis legalization, it was a relatively happy collection of industry players in Manitoba and elsewhere who met in Winnipeg on Monday for a networking event called “Growing Relationships”.

Health Canada’s report did not raise any reg flags about safety or youth access or even impaired driving because of the legalization of pot and determined that it was successfully making headway over the black market, which is now responsible for only about 30 per cent of cannabis sales.

David Brown, co-founder of StratCann, a Canadian cannabis industry news site and organizer of the event in Winnipeg, said that while most of the headlines about the industry are about the decline of the big players, the 100-plus industry players at the Inn at the Forks on Monday were quite optimistic about their business prospects.

“The report concluded from a public health standpoint that the sky is not falling,” said Brown. “And while there are lots of pain points for companies trying to make it, there are lots of success stories as well.”

For instance, Graham Taylor of Lineage Distribution is expanding his distribution business that services 160 retailers across the province and employs about 20 people. His business is set up to service smaller producers, which make up the bulk of the producers in Manitoba.

“It’s tough to get a foothold in the industry and there are a lot going under,” he said. “So many in the industry are small independents, very small family run operations.”

Manitoba and Saskatchewan are the only provinces in the country that do not operate central distributions, so there is space for a company like Lineage. (Delta 9, the undisputed largest player in every respect in the cannabis industry in Manitoba, also runs a third party distribution operation.)

While the Health Canada report was concerned with reviewing the legislation that was in place, it did not address the regulatory aspect.

But Brown said governments have been amenable to regulatory change.

“Arguably, industry can now make some compelling arguments to regulators that maybe it’s time to ease some restrictions that are adding to their costs,” he said.

A good example was the Manitoba government’s recent decision to end the six per cent Social Responsibility Fee.

Sharon Clark, the manager of Big Buds Cannabis Sales Ltd., is one of the organizers of the newly created Retailer Cannabis Council of Manitoba that was at the forefront of efforts to get that fee repealed earlier this summer, retroactive to the start of 2022.

“We were very happy to get it rolled back to Jan. 1, 2022,” she said. “The province was talking about making it effective in 2023, but a number of independents would have gone out of business by then.”

Her group, with about a dozen members so far, is now talking to the province about changing the mandate that requires cannabis stores to cover their storefront windows.

“It is a safety issue,” she said. “If there is a robbery or a disturbance in a store and police are called, they can’t see what’s going on inside.”

It’s something that started to change in Alberta and elsewhere.

Her group is also looking to have the regulators address the tiered retail licensing regime. The first and second wave of stores required a number of expensive measures including the installation a cannabis vault, security systems and window coverings as well as making sure that no one under 19 years of age is allowed in the store.

She said, “In the last year the Conservative government granted licences to gas stations and convenience stores that only require a lockable drawer to sell cannabis and none of the enormous financial investments the original stores required.”

She said those kinds of locations also mean young people would be exposed to cannabis sales in a way that would not happen in the other stores.

While the industry continues to struggle with massive oversupply and too many stores relative to market demand, the industry is right-sizing itself. In February, one of the biggest players, Canopy Growth Corp., closed its flagship facility in Smith Falls, Ont., laying off 800 workers.

In a more modest example of that dynamic, earlier this year Delta 9 Cannabis cut back its production by about 40 per cent and laid off 40 of its 440 workers.

John Arbuthnot, CEO of Delta 9, said that while the company is in the process of mapping out a revival of production, they want to make sure they do it right.

While the industry struggles with oversupply and declining prices — something that is unique to the cannabis industry during these inflationary times — Arbuthnot said the regulatory change the industry most needs is a restructuring of the federal excise tax.

“There is little flexibility for producers and it takes up, in many cases, 25 to 40 per cent of top line revenue,” he said. “It is a strain for our industry that does not exist for others. We need to bring it back in line and give people the ability to raise prices and improve margins.”

But he recognizes that prices need to remain competitive to tackle the original goal of legalization — to displace the black market.

martin.cash@freepress.mb.ca