December 10, 2019

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Opinion

Legal cannabis has vast pot-ential

Economic development will be key impact of marijuana's new status

RUTH BONNEVILLE / WINNIPEG FREE PRESS</p><p>Businesses such as Delta 9 Cannabis have invested millions into new facilities in Winnipeg to take advantage of the large market for legalized marijuana.</p>

RUTH BONNEVILLE / WINNIPEG FREE PRESS

Businesses such as Delta 9 Cannabis have invested millions into new facilities in Winnipeg to take advantage of the large market for legalized marijuana.

On Wednesday, across the country, the novelty of the first day of legal cannabis was playing itself out in strip malls and storefronts (except in Ontario, where it’s mail-order only for now).

Because of the previous black-market status of the product and the stereotyped down-market image of its consumers, there was a public-spectacle feel to the birth of this newly licit industry.

While provincial governments pile up restrictive regulations on public consumption and others remain concerned about public health issues, society as we know it is not likely to break stride.

And regardless of all the expensive market research and consultants’ reports, no one really knows what the demand will be or how well the supply chain will work.

What is undeniable, however, is that like the introduction of any new mass consumer product, it is causing economic development to occur.

To what extent and how sustainable it all is remains to be seen. Most of the estimates of the national economic impact are well over $10 billion per year.

Overnight, Canada has become the world leader in legal pot.

It’s not to say that the Canadian cannabis industry is going is replace oil and become the new petro-dollar, but just in Winnipeg alone, long vacant warehouses are being filled, retail spaces that were previously begging for tenants are now commanding top dollar and hundreds of new jobs are being created within the industry. Not to mention all the ancillary jobs that go with it.

Those stylish turn-of-the-century buildings, which local tourism marketing professionals love to highlight to bolster our image as a sophisticated city, still need to be repurposed somehow.

The Winnipeg Cold Storage building, for instance, might not have lasted much longer, propped up beside the Slaw Rebchuk bridge, if the licensed producer Bonify — one of only about 115 in the country — did not come along.

The company has invested millions of dollars into outfitting that 320,000-square-foot building with state-of-the-art equipment to grow and distribute cannabis.

On the far eastern reaches of the city, Delta 9 Cannabis just paid more than $6 million for a swath of marginalized industrial land on the fringe of CN’s Transcona properties, to turn it into the permanent home of that company’s growing cannabis campus.

Delta 9 has now perfected a production style, remanufacturing shipping containers into Health Canada-approved production pods.

It’s proved to be so popular and cost-effective that Delta 9 is now building and shipping them to third-party producers.

What was once a cluster of low-value, low-volume warehouses is now a bustle of activity with more than 100 of Delta 9’s own employees and dozens of other contracted journeymen on site installing precision electrical, HVAC and hydraulic systems into the shipping container/production pods.

If consumer demand for cannabis is only a fraction of the estimated volume, Delta 9 will have to keep those contracted tradesmen on hand for many months building more pods.

It’s been a long-standing habit of commercial real estate landlords to thumb their noses at any potential tenant that might be off-putting to high-rent national clients, who would regularly include conditions in their rental agreements precluding landlords from renting nearby space to anyone with even a whiff of counterculture.

Industry professionals say that a year ago, when the legalization process was just beginning, there was a stigma about the potential presence of a cannabis store in a traditional retail setting.

Notwithstanding legislation now in place restricting where they can go, once landlords started to realize that not only would cannabis stores pay top rent, but would also incorporate high-end designs, fancy millworked cabinetry and leasehold improvements far exceeding what the average retailer would spend, that stigma started evaporating.

Canadian governments’ propensity to intensely regulate the end of marijuana prohibition has likely made the process of getting to this point more arduous and costly to the practitioners. The social impact will be closely observed and the actual market demand will probably take some time to become predictable.

But in the meantime, instead of looking the other way from what was estimated to be a $5 billion-plus underground economy, there’s now going to be plenty of commercial activity conducted and taxes collected for the benefit of all of society.

martin.cash@freepress.mb.ca

Martin Cash

Martin Cash
Reporter

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

Read full biography

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