Experts predict surge of pot shops across Canada after Trudeau win

Theglobeandmail.com
Nov. 11, 2015
By Mike Hager

The day after the Liberals won the federal election, cannabis consultant Eric Nash’s inbox was hit with 20 e-mails from people across Canada asking for guidance on how to open marijuana dispensaries.

Until now, the growth of dispensaries - which remain illegal under federal drug laws - has generally been concentrated in Vancouver and Victoria, where local governments and police have largely allowed them to flourish.

But a handful of stores began operating in other provinces over the past several weeks and experts predict dozens more could open across the country in the wake of Prime Minister Justin Trudeau’s pledge to legalize and regulate recreational sales - something that could take at least two years to become a reality.

Mr. Nash, whose e-mail traffic has slowed to about four requests a day, said the first thing he tells prospective dispensary owners to do is to get a lawyer, because the law hasn’t changed.

“There’s a public perception of definitely a more lenient approach toward enforcement and laying charges,” said Mr. Nash, who has been licensed by Health Canada under previous rules to grow medical marijuana on Vancouver Island since 2002.

“With the U.S. moving that way, that perception bleeds over into Canada here and then you’ve got the current government saying they’re going to legalize,” added Mr. Nash, who has been called to Federal Court as an expert witness in an ongoing challenge to the existing medical-pot regime.

About 150 to 200 illegal dispensaries and compassion clubs now offer Canadians the face-to-face sale of cannabis products. They are unrelated to the licensed federal system of commercial growers, whose mail-order sales are overseen by Health Canada.

David Brown, communications director at Vancouver-based Lift, said his startup has received a handful of calls in the past two weeks from new dispensaries in Metro Vancouver and the Toronto area asking to be added to its online database of Canada’s dispensaries.

“I wouldn’t say an explosion, but there’s certainly a noticeable increase and I think a lot of people are going for it now,” Mr. Brown said. “We will see people continue to be less concerned with enforcement and then trying to get their place in the market before regulations come along.”

Khurram Malik, an analyst with Toronto-based Jacob Securities, an investment bank that services the marijuana sector, said the long-term success of such ventures will vary depending on their region, because legalization will likely mean a provincially regulated distribution system. The Liberal federal government hasn’t said what marijuana legalization will look like or how it will be taxed.

Even if traditional pharmacies are soon permitted to sell medical marijuana, discerning clients may also stick with these grey-market retailers, said Mr. Malik. He said dispensary and compassion-club owners could have a competitive advantage over pharmacies by selling a host of illegal derivative products, such as edible baked goods and highly potent concentrate.

He also suggested some customers could be afraid that if they register with a federally licensed medical pot producer “somewhere down the road, a life insurance company can get a hold of that information.“

“They’ll use any excuse to increase your premiums or slot you into different categories in terms of your risk profile,” Mr. Malik said. “Currently with cannabis, whether you eat it or you smoke it or you vaporize it, it’s considered bad for your health as far as insurance companies are concerned.”

Chris Clay said he has had no problems since opening the Warmland Cannabis Dispensary three months ago just outside the Vancouver Island community of Duncan. Mr. Clay was charged two decades ago for selling pot seedlings at his London, Ont., hemp store, but said the time and location seemed right to re-enter the industry after years as an IT professional.

After consulting with authorities, he said he decided to forgo trying to get a business licence in Duncan and opted for nearby Mill Bay, where he was embraced by the regional district and now is a proud member of the South Cowichan chamber of commerce.

Since opening, Mr. Clay said he has turned down requests from six dispensaries in Eastern and Atlantic Canada “trying to line up a supply” of prized B.C. bud.

“It seems like everyone and their brother wants to open one,” he said.

A dispensary’s success often depends on the individual community that surrounds it, not necessarily the province, he said. A Saskatoon compassion club was raided at the end of last month by the city’s drug squad, while police in the nation’s capital said they wouldn’t wade into a “legal grey zone” to shut down a dispensary that made headlines when it opened there earlier this month.

“I don’t have any neon pot leaves in the window,” Mr. Clay said. “People have to find us: We have a very visible location on the highway, but, unless you know what we are, just driving by you’d think it was a cafe or bakery or something.”

There are roughly 500,000 medical cannabis users in Canada over the age of 25, according to a survey commissioned by Health Canada. Less than 24,000 people were registered under the federal government’s mail-order medical pot system at the end of last June.

That means, for now, illegal dispensaries and compassion clubs are likely supplying between 100,000 and 200,000 patients while a remaining 300,000 or so people continue to turn to the black market, according to Mr. Nash.