I promise that the title will be my only cannabis-related pun in this article.
Cannabis has been legal in Canada for six months now. The Alberta Cannabis Framework lists four overarching policy priorities for the province: keeping cannabis away from children; protecting safety on roads, in workplaces, and in public spaces; protecting public health; limiting the illegal market. However, the rules for selling, buying, and consuming cannabis have been determined by each municipality—a topic too big for one blog post. Check your municipality’s website for bylaws, or start with this primer from Global News.
How Has the Business Changed?
For entrepreneurs hoping for big changes, well, keep hoping. Currently, only dried and fresh cannabis, oil, plants, and seeds are permitted for sale. If you’re new to cannabis, this might seem like a long list, but advocates have been working hard for the legalization of edibles (food with cannabis extract cooked in) and vape pens. Why? Because these methods of consuming cannabis have fewer negative health effects than smoking, factors that are especially important for those interested in medical cannabis. The federal government has promised that edibles and cannabis concentrates will be legal on or before, but no later than, October 17, 2019. They closed public consultations on these future changes, but have not released any details.
This doesn’t mean that you need to put your dream cannabis bakery on hold for now: if you have the correct licensing, you can spend this time developing and testing your products. In fact: if you want to get in on the “second wave” legalization, now is the time to be working on your products and developing your business plan.
Where Is the Business Going?
Industries adjacent to cannabis have blossomed since October, with many entrepreneurs cashing in without actually handling cannabis. According to a report in the Financial Post, secondary markets related to cannabis could become a $100 billion dollar industry. Can you see yourself operating as a designer for packaging, or perhaps helping the government collect and parse data? Maybe you’re an artisan who wants to sell cannabis accessories, or want to import moulds and other kitchen tools for crafting edibles.
Be careful: although the legal cannabis market is predicted to be worth $24.5 billion dollars in North America by 2021, Financial Post warns against investing too heavily in a business area with low barriers to entry; these sorts of jobs are easily exportable to countries with lower labour costs. Now might not be the time to open a factory manufacturing cannabis-friendly popsicle kits.
What Have We Learned?
From October to December 2018, Canadians spent almost $1.5 billion on cannabis. 79% of that cash still went into the illegal market, with only $152 million going into the legal recreational market. Most of this is due to major shortages of product.
So, what about those shortages? According to the federal government, they should be coming to an end now that infrastructure is in place to produce 800,000 kg of cannabis each year. And, with six months of sales under our belts, local challenges in accessing the supply chain should continue to ease with experience. As with any small business, learning from others and devloping mentor-mentee relationships can be essential to your success.
What Are the Major Challenges?
Licensing continues to be a thorn in the side of many entrepreneurs and would-be shop owners. In November, the Alberta government froze permits. As the (hopefully) final kinks in the supply chain are worked out, this freeze should come to an end.
Further challenges involve preparing for that second wave of legislation. Facilities need to be created or renovated that can produce the next round of legalized products, including edibles and vape pens. Entrepreneurs will have to establish their brands—within strict marketing guidelines. How will you differentiate your gummy bears from the gummy bears down the street when advertising and primary market research are tightly controlled?
Financing also continues to be a struggle, with some lenders steering clear of cannabis entirely, and others reluctant to invest in companies developing products or businesses that are not yet legal.
One cannabis expert points to exactly that—illegality—as a barrier to creating a sustainably profitable cannabis market in Canada. He told the CBC that because many existing commercial growers are self-taught and relying on advice from illegal growers, that “their methodology is inefficient and is contributing to the high cost of marijuana. There is no question that this is an industry with huge profit potential, but it also has bankruptcy potential.”
Getting into the cannabis business continues to get easier as more experts emerge to help sort out regulations and accessing funding. The market is set to expand into new territory in the next six months, other people have already made mistakes and found solutions (so you don’t have to), and ancillary industries are available for innovation and investment. Here’s the good news: starting your cannabis business is pretty much like starting any business—do your research, build your business plan, access help or mentorship, and get in business.