Cannabis industry will take time to build

Photo by Drake Lowthers -- Frank MacMaster, president and master grower at Highland Grow Inc. in Ohio East, Antigonish County, tends to his cannabis plants that have recently entered their flowering stage.

Two recent stories have highlighted how far Canada has gone in terms of cannabis legalization and how far this country still has to go.

On February 26 in Nova Scotia Supreme Court, the cannabis company Tasty Budd’s, which has an outlet in Antigonish, pleaded guilty to trafficking of a controlled substance and was issued a $50,000 fine. In exchange, all charges were dropped.

The outlet’s owner Gillian Sampson, 29, of Pomquet, was charged as a result of an eight-month investigation headed by Halifax RCMP’s Street Crime Enforcement Unit that led to 69 charges, involving 10 people and nine searches on August 24, 2017. Police say the individuals involved were using the dispensaries to commit a variety of criminal activities, setting up a criminal network, and were generating revenue to purchase proceeds of crime.

Sampson faced charges of trafficking of a controlled substance, possession for the purpose of trafficking, and possession of property obtained by the proceeds of crime. She entered not guilty pleas to all of her charges during an election and plea hearing in February 2018. With a charge involving more than three kilograms of product, Sampson’s lawyer Alexander Mackillop said she was facing a maximum sentence of 14-years.

In addition to not following through on her legal challenge, Sampson was also forced to close the local operation.

Mackillop recognized that Sampson “was putting herself out there” by pointing out the holes in the access regime, but he’s glad she accepted the offer. Rather than handing out 10 year sentences, the lawyer said courts are now offering corporate pleas, which involve criminal discharges and fines. He considers this a step in the right direction.

Although he was pleased with the resolution, Mackillop does question why medical dispensaries are not regulated. Nova Scotia has cannabis in some retail Nova Scotia Liquor Corporation (NSLC) locations, but Mackillop said that doesn’t provide access to those with medical issues. He believes that private shops and dispensaries should be regulated to allow patients access to their medication and provide them with product more appropriate to their medical circumstances, rather than the current recreational cannabis which does not contain sufficient Cannabidiol (CBD) levels, the therapeutic properties of cannabis.

It is understandable, but unfortunate, that Tasty Budd’s didn’t proceed with its legal challenge. Mackillop explained that if successful, their case would have set precedent in Nova Scotia and possibly in other jurisdictions.

Aside from not giving patients reasonable access to their medicine, it’s questionable whether Nova Scotia is maximizing the financial benefits from cannabis legalization under the current business model.

Since becoming legalized on October 17, cannabis has brought in $17.4 million in sales for the NSLC, with the Antigonish outlet raking in a modest $730,000, which is unfortunately on par with smaller stores across the province.

According to the third quarter results released on February 19, recreational cannabis sales totaled $17,382,156 in the first two-and-a-half-months of legalization. This involved a total of 456,822 transactions with an average dollar value of $38.05.

Cannabis sales accounted for 9.6 per cent of the total NSLC sales in the quarter, and sales of cannabis produced in Nova Scotia was $1 million or 5.9 per cent of total cannabis sales. One of the licenced growers which NSLC purchases from includes Highland Grow Inc. in Antigonish County.

NSLC communications advisor Beverley Ware told The Reporter that their sales projections were off by approximately 30 per cent, due in no small part to challenges in consistently securing inventory for their stores.

Despite conducting $17.4 million in sales, the corporation isn’t turning a profit quite yet after figuring in the cost of buying the product, operating expenses, and labour costs from hiring and training new employees.

The NSLC currently operates 12 cannabis outlets across the province, but recently Finance Minister Karen Casey asked the crown corporation to look at increasing the number of outlets due to lower than expected on-line sales.

Although Ware said the NSLC prefers to wait for more sales data to gain a clear understanding of where they stand before looking at opening more stores, those numbers will not tell them anything more than the current statistics.

If people are not able to gain reasonable access to a product, and the product being sold is not acceptable, that will negatively affect sales. The NSLC currently has products on its shelves that are both low in THC (the psychoactive ingredient of cannabis ) and CBD, and those shelves are rarely full.

The fact that the province opened only 12 stores across this province has also negatively impacted sales. People are not prepared to drive hours for this disappointing and expensive product. And those without access to transportation and technology are completely left out.

If Nova Scotia opens more stores in more communities, it will increase sales and force the black market out of business. Because consumers will be able to buy cannabis closer to home, it will lessen the reliance on on-line sales.

With more stores and more product in the market, hopefully the above mentioned problem with the cost of the product, can also be addressed. Because of the expensive mark-up the NSLC is putting on cannabis, the cost per gram in Nova Scotia is higher than it was before legalization, and black market sellers are selling it cheaper than the NSLC. That has to change if the legal market is going to flourish.

And while this is taking place, Nova Scotia can also tackle the regulation of private stores and dispensaries.

The fact there are many patients across the province who need cannabis for their conditions and have prescriptions, but can’t get fair access to their medicine, makes this an urgent call.

Although it needs to start immediately, the regulation of private businesses will require time, research, study, and deliberation. This is important legislation, and cannot be rushed even if there are many Nova Scotians who require new rules.

In the meantime, Nova Scotians will have to live with this flawed model and remind themselves that a cannabis industry will not be built in a day.