HIGHLIGHTS
- Lorne Gertner, often called the “godfather of Canadian cannabis,” is launching the first of what he hopes will become a chain of cannabis consumption lounges
- Canopy Growth has taken a minority equity stake in the company and Mr. Gertner recruited Design Exchange CEO Shauna Levy to run the business
- The first location will launch without any cannabis products and experts predict it will take years before sales of infused foods and drinks might be allowed
One of Canada’s most successful cannabis entrepreneurs is moving to open the marijuana equivalent of a bar.
MoCanna, founded and chaired by Tokyo Smoke co-founder Lorne Gertner, announced its first major project on Friday morning: an 8,000 square foot cannabis consumption lounge and cultural space called byMinistry set to open at 850 Adelaide Street West in downtown Toronto before the end of this year. While the plan is to eventually have multiple locations selling cannabis-infused food and drinks in the same way bars sell alcohol, expectations for the required laws and regulations allowing such businesses to exist remain years away.
“I have been doing this a long time,” Mr. Gertner said in an interview. He first entered the legal cannabis industry in the late 1990s when he purchased 25 per cent of Prairie Plant Systems, Canada’s first licensed medical cannabis producer, which eventually became CanniMed Therapeutics before being sold to Aurora Cannabis in a $1.1-billion deal last year.
“I believe this is the future,” he said.
“If alcohol sales are going down in legal cannabis markets, then bar sales are going to go down as well, so then what is the new bar?” Mr. Gertner said. “The new bar is going to have to revolve around [cannabis] consumption, we are talking a couple of years from now in terms of normalization.”
MoCanna is not the first player in Canada’s nascent social cannabis consumption sector - the Hotbox Cafe in Toronto’s Kensington Market reopened its “potio” earlier this year as the country’s only legal cannabis consumption space - though it would be by far the most substantial. In addition to Mr. Gertner, the company boasts cultivation giant Canopy Growth among its equity investors and Shauna Levy, formerly CEO of the Design Exchange (DX), was recruited late last year to serve as chief executive.
“Just as pubs create a social environment for the safe consumption of alcohol, cannabis consumption lounges will help combat the illegal market,” Ms. Levy said. “We want to work with Ontario throughout the regulatory rollout for edibles and become the industry leader in legal, safe cannabis lounges.”
MoCanna completed its seed round last year and recently launched a Series A fundraising round at a roughly $17-million pre-money valuation, Ms. Levy said. Canopy is the lead investor in the Series A, though Mr. Gertner said he had been in discussions with the Smiths Falls, Ontario-based LP for over a year prior to Canopy taking a minority equity stake.
When the first byMinistry location opens later this year, the space will not be selling any cannabis products, but will instead be “using the language of cannabis so infusions and terpenes and all that,” Ms. Levy said.
The space will be dominated by a two-story cafe-lounge space selling “plant-forward” food and drinks, she said, but will also include a culinary school. Food made in the school “will be the food served in the lounge... and once legal we would go to offering cannabis-infused foods and beverages,” Ms. Levy said.
Existing rules might allow for businesses licensed for recreational cannabis sales to allow on-site consumption, a Health Canada official said in a late June briefing following the release of final regulations for cannabis-infused foods, drinks and vape products, which will be legally authorized for sale later this year. However, because all legal cannabis products must be shelf stable and sold in sealed packages, “it would be difficult to contemplate a scenario where a restaurant could make, and sell and serve edible cannabis,” the official said.
Mr. Gertner said the launch of legal cannabis concentrate-based products in Canada will “tell us what consumption outside of smoking dried flower is going to look like.”
“That is the first step on this journey. We are going to see the product, but where are you going to consume it? I’d say we are maybe a year or two years away from seeing legislation that will allow for that," Mr. Gertner said.
Hotbox Cafe owner Abi Roach said the two-year timeline seems realistic, “but it will be extremely complicated as it is purely speculation.”
“I have met with Toronto Public Health and have spoken with the [Ontario Health Ministry]. They are interested but don’t seem to have any clear intentions on how to proceed,” Ms. Roach said.
Ms. Levy has also been actively courting government officials for clarity on when social consumption rules might be in place and what they might entail. Earlier this week she met with Michael Wilson, chief of staff to Ontario Attorney General Doug Downy. She is also in talks with a potential partner in California about opening a byMinistry location there as state law already allows for social consumption businesses. However, Ms. Levy believes the lack of clear timeline for when relevant regulations will be passed in Canada is actually a positive for the business.
“The industry is so much in flux, but we saw that as an opportunity rather than a barrier,” she said. “We have created this model like a Trojan Horse where we can go into markets like Toronto where it isn’t legal yet, but we can establish our brand and our community."
Jameson Berkow