Proposed new cannabis rules would open the way for Canada’s craft growers

For months they’ve been speaking out and lobbying. Now, if federal government proposals become law, Canada’s small craft producers of marijuana will get what they want: the ability to participate in the legal recreational market.

On November 21, 2017, Minister of Health Ginette Petitpas Taylor announced Canada’s Proposed Approach to the Regulation of Cannabis. The points covered in the Proposed Approach include: adding different types of licences that will make room for small producers; and easing security clearance rules and the on-site security requirements for small producers.

The Proposed Approach is welcome news to Liberty Leaf. Our aim is to build a seed-to-sale network of cultivators, processors and supply chain management. We have been actively seeking small, licensed growers and others with late-stage ACMPR (Access to Cannabis for Medical Purposes Regulations) applications, such as North Road Ventures, acquired last year – as well as our recent acquisition of Just Kush Enterprises, a craft cannabis grower.

Health Canada proposes four different types of production licences: large-scale growers; micro-cultivation licences; nursery licences; and licences to grow low-tetrahydrocannabinol (THC) industrial hemp.

Those licences and other regulation changes will cover all the bases, from cultivation, processing and research, to packaging, branding and distribution – and will fit very well with Liberty Leaf’s business model.

 

Here are other highlights of the Proposed Approach:

Security clearance changes mean that people who may not meet rigorous ACMPR standards would still be able to work in the cannabis industry. They might even be able to qualify for cultivation licences.

In other changes, it would be legal to produce edibles and other forms of extracts (e.g., hash, shatter and wax) for the consumer market, not just the edible oils permitted by ACMPR.

Packaging will be tightly controlled, as it is now for cigarettes, with strict rules for labelling, health information, tamper-proof packaging and a standardized cannabis symbol for labelling edible products. Within those rules, there will still be room for producers to produce distinct brands.

In short, the proposed new rules will broaden the cannabis playing field and enable a diverse mix of cannabis businesses to take part in the market.

Along with the announcement, Minister Taylor also declared a 60-day consultation period so the government could hear from Canadians, provinces and territories, municipalities, industry stakeholders, patients and more on its legalization plan. Take part in the consultation here.

Further reading:

• Full text of the Proposed Approach to the Regulation of Cannabis
• Georgia Straight article on licences for small growers of cannabis
• Global News story on craft cannabis growers’ fight for a legal role

 

Yes, Canada has recently seen hectic activity in cannabis investing – but, in fact, it’s all quite rational and the future looks good for our industry

In late November, the Canadian Marijuana Index surged from around $405 to a record high of $475. Then, abruptly, it fell right back again, reaching a low of $375 – before bouncing up again to $425.

 

What’s behind all this recent volatility?

Here’s what’s happening –and it’s far more rational than it might seem. For starters, recreational marijuana is not yet legal in Canada. It’s legal in only in a minority of American states. So, investors – many of whom are speculators – for now perceive the market as having a high degree of risk. And because the market is largely speculative, the market moves up and down very quickly on news and events in the cannabis sector.

For instance, the market soared in late October after Constellation Brands, a huge global alcohol maker and distributor, bought a $245 million stake in Ontario-based Canopy Growth.

Canopy is Canada’s pre-eminent marijuana stock and the world’s largest medical cannabis company. This was the first time a major alcohol company had entered the cannabis market. It signalled the possibility of more such large deals. It also re-affirmed alcohol companies’ concern that legal recreational cannabis could cut into their sales by hundreds of millions of dollars.

Once that news cooled, so did the market. However, the market then began grappling with new concerns, such as:

• What kind of demand will there be after legalization?
• Will black-market prices undercut the legal market?
• Will legalization happen on schedule, or will there be delays?

There are other concerns. Maybe valuations will be too high. The four biggest cannabis stocks in Canada are trading at an average sales-to-price ratio of 55, leading some analysts to ask if cannabis stocks are in a bubble.

Nevertheless, even with all those concerns, Canada’s cannabis stock index is up over 30 percent so far in 2017. And the future looks solid for a number of reasons:

• Cannabis is being accepted as a part of the Canadian economy
• The Canopy-Constellation deal is a sign that more and bigger deals are coming and that larger companies are going to be eagerly looking for smaller companies to acquire
• As more large deals happen, more investors will be attracted to this sector.

And Liberty Leaf, continuing our growth as a vertically-integrated cannabis company, plans to be an integral part of this deal-making.

 

Further reading:

• Marijuana Business Daily article on Constellation’s “transformative” purchase
• Business News Network article on rising value of cannabis stocks as legalization nears

Yahoo Finance article on deal-making in the cannabis industry hitting an all-time high.

Cannabis supply, demand, distribution and consumption: In a new industry, the savvy way to track the trends is ultra-efficient and ultra-safe

When Canada legalizes recreational marijuana in 2018, there will be regulation and rigorous tracking and accounting requirements for the new industry. And so there should be.

That’s where the innovative digital system blockchain may come in – if government follows up on a proposal by IBM.

Blockchain consists of encryption and complex algorithms to create unfalsifiable, ineradicable records of transactions. Those transactions could include: large money transfers between banks; contracts; payments by bitcoin, the cryptocurrency and worldwide payment system; and even sales of cannabis products. Blockchain could cover all the tracking from growers to distributors, and from retailers to consumers.

IBM made its blockchain proposal in a submission to the Province of British Columbia. The multinational technology company explained that blockchain could reliably track movement down to the fine details, for example, of cannabis seeds to plants in nurseries, then to harvested buds and product sales. According to IBM, blockchain’s relevance to regulating cannabis “is similar to its many chain of custody applications in areas such as pharmaceutical distribution and food chains.

“The core to those supply chains is the same, assuring health and safety of consumers, preventing fraud and counterfeiting while creating a foundation of transparency upon which to base regulation.”

Data collected would help those in the cannabis sector analyze and make projections about supplies, demand, distribution and consumption trends. Blockchain would keep all information anonymous – and therefore ultra-safe in a way traditional tracking methods can’t guarantee.

 

Further reading on blockchain:

• Digital Journal on blockchain’s potential application to Canada’s cannabis industry
• Fortune on IBM’s new blockchain to track marijuana sales
• The Forbes beginner’s guide to understanding blockchain