The government announced a huge policy change that revolutionized the face of business in profound ways. This was back in 1993 when the Alberta government decided to privatize liquor sales. Up to that point, liquor sales were done in a cold, formulaic way that only a government could. The government of the day decided to open up the market to private enterprise, and everywhere you looked, everyone you talked to, people saw opportunity and money. I watched the whole thing unfold with rapt attention. Lately, when the subject of marijuana legalization comes up in conversation, I see that same interest and attention in the market, on the news, and amongst my circle of friends and I think back to 1993. I’m expecting to see the same patterns.
Let’s talk about what we know. At the moment, any proposed marijuana legislation is still a mystery. Much has been talked about, and while some things have been suggested, what the final form will take is still anyone’s guess. Here are my expectations of how things are going to unfold.
Weeding out applications
According to the government’s online records, as of May 25, 2017, the government has received 1665 applications to grow medical marijuana. I find it unlikely that the rules for producing marijuana for a non-medical crowd will be relaxed in any substantial way. While many applications are still being processed, the current number of companies in Alberta that have received approval to produce medical marijuana is 2.
Based entirely on my conversations with businesses waiting for inspections, the time they’ve been waiting for an inspector to show up to even look at their facility is about a year and a half. Even though the government has been stepping up approvals, this means that only people and companies with deep pockets can sustain a business for a year and a half without any sales.
Rolling into retail
Retail is the area that reminds me so much of the liquor craze of 1993. Back in 1993, everyone rushed out to open their own liquor store. Interestingly, there were no large industry players at first, so the playing field was pretty flat. I remember liquor stores opening on every block by dreamers with dollar signs in their eyes. Even my uncle considered opening one in his hometown but stopped when he realized there was already three applications for stores in a hamlet with less than 350 people. Once the market was fully saturated, large corporations figured out a way around the legislation. Companies like Superstore, Safeway, and Sobeys built separate buildings in their parking lots to comply with the provincial regulations. Once they entered the market, the weakest liquor players started to fall and everyone went into survival mode.
Fast forward to more modern days and the retail liquor industry has largely stabilized. The big grocery stores still make up a large chunk of the sales, while the smaller liquor stores either merged with other locations to form buying groups or turned into larger liquor chains. You can still find the odd small liquor store that keeps their costs very low and manages to make a small amount of money. Look for this pattern when marijuana gets legalized.
Opening up a joint
Currently, there are already a few big players like Shoppers Drug Mart that are interested in selling marijuana. Expect them to have a big impact on the market share. We also have BC-based marijuana stores like the Green Room setting up in Edmonton and Calgary that are looking to expand their store numbers. Small players with limited budgets are going to struggle to make an impact unless they do something to stand out. This is not going to be the easy path to riches.
I don’t want to be all doom and gloom though. Marijuana based products and services are definitely going to be big business in Alberta. Select businesses with the right market strategy and the right funding will be able to successfully maneuver the retail and manufacturing boom. However, don’t forget about opportunities in the business-to-business market as well. There are going to be plenty of opportunities to make money through services to help or supply to those businesses. Keep your eyes open for opportunities others have missed and stay in contact with Business Link for help in realizing those haze-filled dreams.
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