With a mission to inform, empower, celebrate and advocate for British Columbia's current and aspiring business leaders, BCBusiness go behind the headlines and bring readers face to face with the key issues and people driving business in B.C.
Issue link: http://digital.canadawide.com/i/1273655
( the informer ) W hen it comes to can- nabis, Canadians sometimes think we're the starship Enterprise— exploring strange new worlds, seeking out new life and so on. We were the first G7 country to go all-in for legalizing the demon weed on a national basis, right? Sure. But Canada is hardly the only place in North America to allow recreational cannabis use, nor were we the first. In fact, it could be argued that Canada has been late to, well, the pot party. As much as it pains us, we must acknowledge that gun- toting libertarian states like Colorado and Alaska were on board for full legalization years before we tabled C-45. So can we learn anything from looking at U.S. jurisdictions that beat us to the punch? Perhaps, but it's almost impossible to make an apples- to-apples comparison. There are now only three remaining U.S. states where cannabis for any purpose is strictly illegal. However, the other 47 are far from consistent in their approach. Some, like Arizona and Ar- kansas, only allow medical use. Others, like Texas, have cre- ated an impenetrable matrix of rules; although recreational use is illegal in the Lone Star State, several of its urban centres have so-called cite-and-release programs. Combine that with a truly bizarre treatment of medi- cal cannabis (you can possess CBD oil as long as it has at least 10-percent CBD), and it's clear that someone is smoking more than Marlboros in Austin. But even comparing B.C. to the 12 so-called Level 1 jurisdictions—where medical and adult recreational use is permitted—doesn't necessarily provide any easy extrapola- tions. "We actually break it down into different states and different provinces," says Liz Stahura, co-founder and president of BDS Analytics, a Colorado-based cannabis market research firm. The clos- est comparison between the B.C. market and those in the U.S.? Unsurprisingly, it's likely California. "In B.C., there is still a thriving legacy or illicit market," Stahura notes. "That's pretty similar to what we see in California." As with B.C., the initial roll- out in California wasn't particu- larly smooth. The difficulties were amplified by having to make the leap from a vibrant unregulated market to one defined by, some would argue, regulatory excess. By the end of 2017, there were about 3,000 cannabis retailers and service providers operating in Califor- nia. Then legalization kicked in. "The clock reset on January 1 of 2018, so all of those [exist- ing] retailers had to get a new licence in order to legally oper- ate," Stahura says. The results were predictable. "By the end of January, there were less than 200 licensed retailers in the entire state." The upshot, of course, is that instead of killing the un- derground cannabis economy, legalization provided a con- vincing reason for its continued existence. The same holds true in B.C., where the black and grey markets proved to be incredibly resilient post-legalization. Understandably, there are costs to doing business in a tightly regulated space, and they're inevitably passed on to the consumer. Again, Califor- nia's experience mirrors our own. "In 2018, we saw up to 77 percent added to the price of a gram of flower out of a licensed shop, as opposed to an illicit shop," Stahura says. In B.C., the pricing gulf between the licensed and so-called legacy retailers is even more extreme: as of late last year, according to Statistics Canada, dried can- nabis from a legal seller cost almost double what you'd pay on the illicit market. Still, we've done a lot right. The most profound difference between the American expe- rience and ours is the most obvious: in Canada, federal legalization allows for nation- wide corporate strategies. Not so down south. "If you want to have a multi-state presence in the U.S., you essentially have to build up your operations and infrastructure in each state," Stahura says. "It makes it much more difficult for national brand awareness." Not to men- tion access to capital markets. Yet we need to remind our- selves that these are early days. On both sides of the border, we're boldly going where no one has gone before. Full speed ahead, Mr. Sulu. n P O T S HO T S JULY/AUGUST 2020 BCBUSINESS 19 SUHARU OGAWA My American Cousin With cannabis legalization, like many things, Canada and the U.S. only have so much in common by Guy Saddy