(This is the fourth installment in a collection over the subsequent few months that may take a look at the marijuana markets in every of Canada’s provinces and territories. Other installments: Alberta, New Brunswick and Ontario.)
Quebec’s nascent marijuana business could also be house to a disproportionately small variety of licensed producers and off-limits to entrepreneurs in the retail sector, however that doesn’t imply the province lacks alternative.
You simply have to know the place to look, notably amongst cannabis-related ancillary companies.
The province’s medical market, for one, has nowhere to go however up.
And, pending legalization this summer time, Canada’s second-most populous province might be residence to the largest leisure market outdoors Ontario.
“For private companies in provinces like Quebec, there are still opportunities beyond sales and the large scale traditional cultivation/LP (licensed producer) role,” famous Louis Barré, president of Ottawa-based Cannab Intel, a cannabis consultancy.
He pointed to ancillary enterprise alternatives together with greenhouse gear, safety and accounting – on prime of Canada’s proposed new licensing system paving the means for small cultivators and processors.
Legal specialists warn that retaining an area lawyer in the province is a should, as a result of sure peculiarities exist in Quebec’s company regulation that complicate doing enterprise there.
Quebec has been a laggard when it involves medical marijuana use.
The province has by far the lowest variety of affected person registrations in Canada as a ratio of its inhabitants – simply 75.eight registrations per 100,000 individuals. (The subsequent lowest is British Columbia, at 188.1, however that in all probability boils right down to the prevalence of that province’s black market.)
By distinction, Quebec’s leisure market might explode into Canada’s second largest come legalization this summer time.
A report produced by the Parliamentary Budget Office (PBO) in November 2016 paints a tough image of what the authorized cannabis market in Quebec might seem like after adult-use legalization is carried out.
Aggregate cannabis consumption in the province in 2019 might fall between 100,000 kilograms (110 tons) to 200,000 kilograms, in response to a PBO estimate — the second-most in Canada.
When adjusted for the province’s working-age inhabitants, Quebec might see annual leisure cannabis gross sales of round the 150 million Canadian dollars ($120 million) in 2019 – however that may boil right down to how a lot the regulated market wrestles from the black market.
Estimates of leisure cannabis customers in Quebec after legalization vary from 1 million by the PBO to over three million in 2019 based mostly on polling knowledge.
That isn’t going to translate right into a windfall for the Quebec authorities’s coffers, nevertheless, principally because of excessive upfront prices related to constructing out a state-run retail monopoly and a separate authorities wholesale provide chain.
Quebec has stated it might absorb as a lot as CA$100 million per yr in tax income, however that could be far-fetched provided that Ontario – with virtually double the inhabitants – tasks the similar quantity.
Zero retail alternatives
Quebec launched laws that might initially funnel retail gross sales by means of 20 government-run shops and ban shoppers from rising marijuana at residence.
By comparability, Saskatchewan has one-seventh the inhabitants and plans to start out with 3 times extra storefronts than Quebec.
The province’s retail scheme prompted marijuana entrepreneur Jodie Emery to name Quebec’s laws “the most restrictive model we’ve seen yet.”
Quebec’s retail plan has some key factors of consideration:
- Recreational marijuana can be bought by way of the Société Québécoise du Cannabis (SQC), serving as an arm of the province’s alcohol monopoly.
- SQC staff can be topic to a felony background verify.
- The company can be allowed to promote dried marijuana, oil, concentrates, equipment and specialised cannabis publications.
- Fines as much as CA$750 can be imposed on those that violate the ban on residence rising.
One caveat is that Quebec’s Cannabis Regulation Act features a provision permitting the minister of finance to authorize a pilot undertaking on the retail sale of cannabis.
So in principle, a minimum of, the minister might contemplate privately-owned cannabis retailers down the street.
Other alternatives and ancillary
Just as a result of retail is off-limits to entrepreneurs and normal cultivation licenses take years to accumulate, that doesn’t imply the province lacks marijuana enterprise alternatives.
“Importantly, Canada’s proposed licensing system provides for a great differentiation of roles in the supply chain,” Barré of Cannab Intel stated. “These new licensing streams should ease the barriers to entry and enable industry niches and specialization to evolve.”
Some alternatives would exist for:
- Micro-cultivation license holders, who might be licensed for the similar actions as normal cultivators, however on a smaller scale.
- Nursery license holders, who could possibly be permitted to supply seeds and seedlings, together with clones, on the market to different licensed producers and researchers.
- Micro-processing license holders might produce cannabis oil on the market to different LPs and researchers.
- The similar license will even permit for packaging and labelling product gross sales to the public.
Pierre Killeen, vice chairman of Quebec-based Hydropothecary, a licensed producer, agreed.
“When you account for Quebec’s economic production advantages, we could see big growth in micro-cultivation here,” he stated.
Analysts famous that, identical to in different provinces, ancillary alternatives exist in greenhouse gear, safety providers, delivery and distribution, advertising/branding, authorized and accounting providers.
Killeen stated the province has main benefits for native cultivators, together with low prices for electrical energy, water, land and extremely educated individuals, in addition to Quebecers choice for locally-made items.
“Quebec has a natural advantage in all of those areas. Some of the lowest-priced hydro in the country, low water rates, an abundance of affordable land and we have highly trained people,” he stated.
Quebec is residence to solely 4 licensed producers: Aurora Cannabis (TSE: ACB), Canopy Growth (TSE: WEED), Agri-Médic ASP and Hydropothecary (TSX Venture: THCX), although extra are in the licensing stage.
“Population-wise, it’s the second biggest market in this country. If you look at Ontario, with 50 licensed producers, and you look at Quebec with four … that spells economic opportunity,” stated Killeen.
Matt Lamers may be reached at [email protected]
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