Brian Sterling is the founder and president of SCS Consulting, a boutique business advisory firm focused on the food and cannabis industries.
July has been a tough month for the newly minted cannabis industry – and we are only at the halfway mark.
First, one of the most-recognized leaders in the business, Bruce Linton, was shown the door by Canopy’s board. Then, one of the first Canadian medical cannabis companies, CannTrust, has had roughly 12.5 tonnes of finished product sequestered because a part of the growth cycle occurred in production rooms that had not been licensed.
We have yet to hear how or why five of the 12 grow rooms at CannTrust’s production facilities were not licensed at the same time as the others. Clearly, the company has seriously damaged its brand; but, is it alone in creating the conditions that led to this result?
And these two headline-grabbers are only the tip of the iceberg. Investors must be asking themselves (and management) why making and marketing a product that has been around for nearly four thousand years is so difficult.
Give credit to Health Canada for launching a legal cannabis framework just nine months ago. Canada is showing another way with cannabis besides total prohibition or the wild west.
There are 3 objectives to the Cannabis Act: Control and regulate cannabis, keep it out of the hands of youths/kids, and eliminate the illegal market. All three speak directly to public safety and, as most people appreciate, achieving these outcomes will take time.
However, Health Canada and provincial governments seem almost obsessed with eliminating all risk by over-managing minutia, when government’s best course now is to get out of operations and focus on education and enforcement.
There is more to building positive outcomes than attempting to remove all risks. Conquering nearly a century of prohibition and stigma is not easy. It is simple: figure out what the consumer wants, then deliver it; but that does not make it easy.
Here is the contrarian view to the whole scenario that is creeping into the discourse. Is it possible that Canadians, after being assured that legal cannabis will be more available at more reasonable market prices, are being duped? It is spectacularly obtuse to believe you can eradicate illegal sources when your legal product is 80% more costly (according to StatsCan). Who thinks like that?
The core issues of access and eliminating illegal cannabis are being missed in a morass of policy flip-flops, impractical regulations, interminable licensing processes, naïve consumers, and exquisitely uninformed and inflexible bureaucrats.
Health Canada continues to foot drag when it comes to approving licenses and product for sale. The Ontario government finger points at the feds while hopping from one foot to the next on retail licensing.
It would be laughable, if it were not so serious.
And the recently released federal regulations on cannabis edibles (and other products) amply demonstrated to the food and beverage industry that the nation’s government does not value their expertise, nor their suggestions. All of which combines to tell us why many large food companies are saying to heck with edibles.
So much for open access and removing illegal sources. Judging by the results so far, it is clear those who work for Canadians have no interest in achieving the objectives of eradicating the illegal market and enabling reasonable access to legal products.
The focus is on micro-control and kid access in a misguided attempt to eliminate all possible risks. Good luck with that.
At some point (perhaps during the federal election?), people will want a first-year anniversary retrospective. They would do well to examine the overall approach being used by governments in Canada, the layering of regulations and taxes, the time and effort to gain licenses, why prices for legal products are relatively high, and why Canada is losing its lead in the global cannabis industry.
We are squandering a generational market opportunity and our governments do not seem to care.
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