Pubdate: Sat, 19 Dec 2015
Source: Montreal Gazette (CN QU)
Copyright: 2015 Postmedia Network Inc.
Author: Tracey Lindeman
Pages: A14-15


Just 26 companies in Canada are licensed to grow or sell pot, and
Health Canada is carefully controlling who can and cannot enter this
changing landscape

Is marijuana the next billion-dollar industry in Canada?

If you ask people who work at medical-marijuana companies like Tweed
and Hydropothecary - which have invested millions of dollars to comply
with Health Canada's strict rules governing medical marijuana - the
answer is, "we sure hope so."

Last month, on Nov. 13, Prime Minister Justin Trudeau sent Justice
Minister Jody Wilson-Raybould a mandate letter asking her to work with
the public safety and health ministers to "create a
federal-provincial-territorial process that will lead to the
legalization and regulation of marijuana."

Companies that have established themselves as medical-marijuana
producers under the regulations are poised to dominate the
recreational marijuana market if and when it comes to be.

"We have a really solid chance at building a billion-dollar company,"
says Sebastien St-Louis, the CEO of Hydropothecary, a Gatineau
producer of medical marijuana.

When his company launched in 2013, St-Louis says the first $3 million
of investment came from friends and family. The next $3 million to $4
million came from Bay St. Now, on the heels of Canadian Cannabis
Corporation's $28-million acquisition of Hydropothecary, the company
is working toward securing an influx of investment from Quebec's
larger venture funds.

"It is big-money business," St-Louis says.

Hydropothecary depends on the horticultural prowess of Louis Gagnon,
the company's master grower and longtime producer of fresh-cut
flowers, to produce quality medicalmarijuana.

The company owns three greenhouses on 65 acres of land in Gatineau.
"By April, we'll be operating in just under 50,000 square feet," he
says - a sizable operation by Canadian standards.

A little over two years ago, the idea for Hydropothecary began as an
early summer fireside chat over beers with a friend who happened to
work at Health Canada. Health Canada's rules had just come into
effect, laying down an incredibly strict framework with which to
license marijuana growers and sellers.

St-Louis stayed up all night, writing down business ideas.
Hydropothecary was incorporated as a Canadian business by the end of
the summer.

"As an entrepreneur, you always have to be a little crazy," he

As one of just 26 companies licensed to grow or sell marijuana in the
country - and the only one licensed in Quebec - St-Louis's timing
could not have been better. Health Canada says 1,012 applications to
become a licensed producer have been refused or withdrawn since the
rules were introduced in June 2013. The requirements are so precise
that applicants have little room to err. Bottom line: It's really,
really hard to get a licence.

Having one of the rare licences is like having a golden ticket to see
Willy Wonka.

Ontario-based Tweed is also one of the chosen few - and, for what it's
worth, it's located in a former chocolate factory, at 1 Hershey Dr. in
Smiths Falls, Ont.

A lawyer by trade, Mark Zekulin started off as legal counsel at Tweed
in 2013; now he's the president. He never saw that coming when he was
at law school.

"I certainly did not," Zekulin says, laughing.

Tweed recently bought Bedrocan Canada - the child company to Dutch
parent Bedrocan - in an acquisition worth about $60 million. However,
the companies won't be merged; rather, Tweed, Tweed Farms and Bedrocan
Canada are sister corporations now housed under the umbrella Canopy
Growth Corporation.

Zekulin says the acquisition helps round out Tweed's friendlier
approach to the market by pairing it up with a very serious, very
medical, very established company that has been in business in the
Netherlands for more than 30 years. For the last 12 years, Bedrocan
has been under contract to supply the Dutch government with
highquality medical marijuana.

"This is the reason we acquired Bedrocan," Zekulin says. He likes that
the company has been at it for three decades, "and through that
process they've completely standardized their genetics and their
growing process."


Standardization for any form of medicine is obligatory, whether it's
grown in a greenhouse or manufactured in a lab.

The calls for standardization for recreational weed will likely
multiply as well as Canada barrels toward legalization. After all, it
would likely be perceived as gauche for a substance newly sanctioned
by government to land people in hospital ERs due to inconsistent potency.

So how can growers ensure the product they are selling is the same
every single time?

Dany Lefebvre, the owner of Vert Medical in St-Lucien, near
Drummondville, says the only way is to grow marijuana in a perfectly
controlled chamber.

Growing in greenhouses or in open fields has too many variables, he
says: sunlight hours, pests, precipitation.

"It's really important for medical cannabis to be standardized
medicine," he says.

Lefebvre has been waiting a while to get a medical-marijuana licence
from Health Canada, but he's trying not to think about the possibility
he might never get one. In 2014, Vert Medical received a hefty
investment from PharmaCan Capital, which paid for a $1-million
state-of-the-art indoor growing facility.

Having a functional facility in place is a requirement for getting a
licence from Health Canada. Among the building requirements:

- - security measures such as surveillance cameras pointed toward any
place where marijuana is present;

- -a fence around the property;

- -walls built following specific guidelines;

- -ducts and pipes must be outfitted with bars to prevent unauthorized

Having those things, however, does not guarantee the issuance of a
production licence.

Health Canada says more than 700 applications have been returned to
applicants because they failed to meet the basic requirements of the
preliminary screening.

There is no cap on the number of licences, but the strict conditions
make it impossible for people without significant financial backing to
get in on the weed game, which in turn limits the pool of people who
stand to profit from medical, and ultimately recreational, marijuana.

Then there's the idea being batted around to have it sold in liquor
stores - surely a cash grab for state-controlled corporations.
(Quebec's SAQ employees union has asked the Institut de recherche et
d'informations socioeconomiques to conduct a study on that
possibility, La Presse has reported. The SAQ itself says it has no
plans to sell pot in outlets, and that it is up to the government to
decide how and where marijuana would be sold.)

Yet, from a federal or legal perspective, having fewer players could
be a more desirable outcome, if only to have fewer people to police.

But what about a free market?


In Colorado, where weed is legal for recreational and medical use, the
opportunities for commercialization can be seen. Rapper Snoop Dogg,
for example, has his own line of premium weed products - Leafs by Snoop.

Still, the state has been very careful to make sure producers make
only enough product to meet the demands of the population.

As the executive director of the Colorado Department of Revenue,
Barbara Brohl has led the development of the state's marijuana policy.

There's no cap on the number of licences issued, and there's no
requirement that people making and selling weed have any prior
experience doing so. Even so, Brohl says the number of permits issued
on the recreational side of the market hasn't caught up to the
medicinal side. She says there are 765 cultivation permits and 201
permits for edibles on the medical side; on the recreational side,
there are 505 cultivation permits and 152 permits for edibles. "It's
been a steady, controlled rollout," she says.

In Colorado, medical marijuana is taxed at the regular state level -
2.9 per cent - while recreational weed is subject to higher taxation.
Producers pay a 15-per-cent excise tax, while recreational consumers
pay a 10-per-cent premium on top of the 2.9-per-cent state sales tax.
Since 2014, the state has collected $141 million in taxes on marijuana.

"This tax revenue doesn't go into our general fund, and that was
intentional. One, there's a cost associated with regulating this
industry and there's a social cost that is addressed by this money,"
Brohl says.

"But the real big reason, too, is because if you become reliant upon
this money (by putting it directly into state coffers), we might
become a little too reliant on it and it would not allow us to make a
good policy decision."

Here in Canada, Justin Trudeau said this week that any money that
flows to public coffers through taxation of pot should go toward
addiction treatment, mental-health support and education programs -
not general revenues. For the Liberals, legalization of marijuana is
about public health and safety, he says, and the federal government
isn't looking for a financial windfall.

Colorado has given a lot of thought to how marijuana should be
managed. The rules are strict, but are also designed to help
businesses comply while allowing for competition - something Canada
could learn from as it gets ready to legalize marijuana.

And while legalization has certainly led to an influx of pot tourists,
the state hasn't seen a massive uptake in new usage among residents.

"We are finding that people who used to consume marijuana before are
still doing it, and the people who weren't before still aren't," Brohl
says. "By and large, I think the most eventful thing in this is that
it has been non-eventful."


Marc Emery believes marijuana will be legal in Canada by

The British Columbia-based pot activist - "The Prince of Pot" to some
- - has been actively petitioning the government to legalize the drug
for most of his adult life. He's been outspokenly pro-Trudeau since
the prime minister came out in favour of legalization.

But for Emery, the impending legalization of marijuana is more than a
business opportunity: It's an affirmation that what he's been doing
for two decades has mattered - that activism can influence public policy.

It's been 25 years since a woman passed him his first joint - on Dec.
21, 1980 - and it was a love affair (with both the woman and the
marijuana) from the start.

He says he has been arrested in Canada 28 times, in nine out of 10
provinces, and has been imprisoned globally 34 times for offences
related to marijuana. Most recently, he served four years in the
American prison system for mailing cannabis seeds to Americans,
finishing out his sentence in an immigrant detention centre in the
heart of Louisiana.

"That was the worst prison. It was a dirtbag county jail where they
put people awaiting deportation," Emery says.

He likes that Trudeau has admitted to smoking pot, as has Trudeau's
mother, Margaret. To Emery, having someone who has used the drug
overseeing its legalization is comforting.

He expects the country's new marijuana laws to permit the
commercialization of the drug as it does the sale of alcohol. "Even
though alcohol causes huge social problems, legal means legal," he
says. "I have no patience for anyone who comes back with a partial

And what about the argument that legalization will make it easier for
young people to get their hands on pot? Well, Emery says, young people
have been getting their hands on illegal stuff for decades.

The next step, Emery continues, is pardoning all those who have been
arrested and convicted under marijuana charges. "We don't need new
rules for pot," he says. "We need an apology."

And once pot is legalized here, Emery will continue to fight for
legalized weed beyond Canada's borders. And to do it, he's betting on
serving more time in foreign jails.

"If it's going to be totally legal here, I'll go around the world to
help (other countries) do it," Emery says. "(I'd tell them) 'there's
nothing I'd love more than getting expelled from your country by
bringing justice to it.'"

- -----------------------------------------------------------


How to become a user of medical-marijuana

Becoming a medical marijuana user under Health Canada's rules isn't
complicated if you can find a doctor willing to write you a
prescription for weed. But that has historically been difficult in
Quebec because the College des Medecins here does not recognize
marijuana as a therapeutic treatment.

Luckily for some, that process isn't as hard as it used to be even
with the strict guidelines produced by Quebec's college of physicians.

For example, it's possible to get medical weed in the province by
participating in a medical study, and there is no shortage of
open-ended medical studies. Some medical pot providers have access to
a network of doctors who have previously prescribed marijuana - some
of whom offer Skype consultations.

Once a medical document is in hand, there are only a few more steps
separating the patient from his or her pot.

- - Registering with a licensed producer involves sending the company
your medical document and a registration form. This is a competitive
space for providers - everyone wants to offer the fastest set-up
service possible to catch the most customers.

- - Once you've registered with one producer, though, you can't transfer
to another without a new medical document. Once the application is
approved, it's time to shop. Customers can evaluate the benefits of
each strain online before ordering, as well as shop for vaporizers.

Varieties with THC are psychoactive, producing the "high" often
associated with weed, while strains with low-to-zero THC and high CBD
content can offer therapeutic effects without the euphoria. Other
cannabinoid formulations may also be offered.

Prices generally range from $6-$12 a gram - about the going dealer
rate in some Canadian cities, according to pot activist Marc Emery.
(Remote areas are more expensive.) Many suppliers offer discounted
"compassion" rates for people who can prove they earn less than a
certain amount each year (for Tweed, the threshold is less than
$29,000 a year).

Then, there's the wait for the package to come in the mail. Most
suppliers require no minimum order and offer next-day delivery.


The College des Medecins' stance on marijuana:
The College des Medecins' guidelines: Find out
if you are eligible to get medical marijuana:
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