Day 1: Into the light - How two prohibition-era cannabis entrepreneurs went legit

Many Canadians who have been working in the cannabis industry since the days of prohibition (i.e. prior to Oct. 17, 2018) have struggled to transition into the legal industry.

During a brief visit to Vancouver as the first stop of The Road Ahead tour, Cannabis Professional spoke with two prominent, longtime members of the local cannabis industry about their experiences transitioning into the legal regulated market.

Mike Babins started Evergreen Cannabis as a medically-focused dispensary in 2015, before the location became Vancouver’s first provincially-authorized cannabis retail store in late 2018. Jamie Shaw spent several years in cannabis-related advocacy work before joining Nanaimo-based licensed producer Pasha Brands as its chief culture officer in early 2019.

For those still struggling to find a pathway to participation in legal cannabis, they offer the following advice.

Act like you’re legal, even if you’re not

Mike Babins: We have been paying our taxes since day one and we have been paying our insurance since day one. It was hard to pay our taxes, our accountant had to play with numbers.

They got Al Capone because he didn’t pay his taxes.

We told the CRA we had a store, what we were selling, and here is your GST. We were a non-profit society and our holding company was doing the work for the non-profit society that was providing medical-grade cannabis to people in need. I was getting growers to write me receipts. We had to come up with names for them that could be traced. Lots of red tape. That is what helped us in the end, because when it came time to do all the paperwork to go through legalization [the provincial officials] do a crazy audit of everyone. At one point, they asked me why I went to Detroit in September of 2000 for only 12 hours? I told them it was the last time the original lineup of KISS performed in Detroit rock city and I wasn’t going to miss it. They checked everything.

Pay your taxes and have a clean paper trail and make sure it goes all the way back.

Jamie Shaw: You really do need to be able to shift. This is a 10,000-year-old market, but as an industry it is new. We are in this weird transitional space and the people who seem to be having the hardest time are the ones that aren’t really able to adjust quickly to a changing landscape. For example, I won’t mention names, but I did work with a dispensary chain that did manage to get a bunch of licences but really couldn’t understand the nuances between rules in one city and rules in another city and they kind of squandered an opportunity. They were looking at where they were and where they came from instead of at what was coming.

Accept that triple-digit-margin days are over

MB: [During prohibition] we were paying more than other people for our weed, because we required proof of testing, but we were still making about a 300-per-cent markup. Now you’re making a 30-per-cent mark-up just like any other store and you have to accept that. But you’re also going to sell a lot more so it balances out. Now we are definitely making more money overall.

Be humble

MB: Not everything we always knew was the truth. Coming in and saying “I’ve been smoking for 50 years” doesn’t mean anything if you aren’t also reading the news every day. We are learning new things and it is exciting that we can learn new things, but we need to drop our egos and be ready to learn those things. Grow with the industry. You have to be humble about it, just because you were working at a store when it was illegal doesn’t mean you know more than the [licensed producers]. Just because there is money behind them, doesn’t make them bad. [Complaining about the legal industry] is completely just sour grapes.

JS: After licensing was set up in Vancouver, I spent a year just getting people through the Board of Variance hearings and getting them through every step of the process, but because it is such a new industry there are lots of little gaps and fissures. When I was helping people through the [Board of Variance] process, it was because we had a gap there. Then when we got the [micro-cultivation license], and nobody really knew how to transition. It wasn’t [their mindset] at that time and that was frustrating.

Stop rebelling against authority

MB: Maybe when [Vancouver] came up with rules to sell cannabis in the city, maybe you should have followed those rules instead of suing the city? For example, we were 4 metres too close to a school, and they had a strict 400-metre rule. Anyone had the right to go before the Board of Variance and plead their case. Some stores would come in with a bunch of sick people and scream ‘we’re helping them,’ but we came in with paperwork showing support from the community, a letter from the principal of that school. It worked and we got the exemption. A lot of stores had to relocate over small variances because they didn’t go in and plead their case properly. Whining doesn’t do anything. They gave us rules so we need to learn how to interpret and follow them, not just break them anymore. You have to be a grown up and think forward.

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