Transcript: The Business of Pot | Feb 08, 2018

Steve sits in the studio. He's slim, clean-shaven, in his fifties, with short curly brown hair. He's wearing a gray suit, pink shirt, and purple tie.

A caption on screen reads "The business of pot, @spaikin, @theagenda."

Steve says WITH THE LEGALIZATION
OF MARIJUANA FAST APPROACHING, A
REMARKABLE SHIFT HAS TAKEN
PLACE.
POT HAS GONE FROM BLACK MARKET
TO STOCK MARKET, AS COMPANIES
ARE RAISING MONEY AND JOCKEYING
FOR POSITION TO SUPPLY WHAT'S
EXPECTED TO BE ROBUST DEMAND.
JOINING US NOW FOR A LOOK AT THE
BUSINESS SIDE OF LEGALIZATION:
MITCHELL OSAK, MANAGING DIRECTOR
OF STRATEGIC ADVISORY SERVICES
AT THE ACCOUNTING FIRM GRANT THORNTON...

Mitchell is in his late forties, clean-shaven, with short curly brown hair. He's wearing a gray suit and purple shirt.

Steve continues AND SIMON ROMANO, PARTNER IN THE
CAPITAL MARKETS AND MERGERS AND
ACQUISITIONS GROUPS AT LAW FIRM
STIKEMAN ELLIOTT LLP.

Simon is in his sixties, clean-shaven, with short blond hair. He's wearing a gray suit and white shirt.

Steve continues GENTLEMEN, GOOD TO HAVE YOU BOTH
HERE AT TVO TONIGHT.
HOW LONG HAVE YOU BEEN A LAWYER?

Simon says 1989.

Steve says 1989. SO A LONG TIME.
DID YOU EVER IMAGINE THAT YOU
WOULD BE DOING MERGERS AND
ACQUISITIONS IN THE CANNABIS
SECTOR?

The caption changes to "Simon Romano. Stikeman Elliott LLP."
Then, it changes again to "Cannabis goes to Bay Street."

Simon says PROBABLY NOT UNTIL THE LAST
YEAR OR SO. BUT I'VE DONE
MERGERS AND ACQUISITIONS IN
MANY, MANY SECTORS.

Steve says BUT NOT THIS SECTOR.

Simon says WELL, YES, THIS SECTOR.
JUST ONE RECENTLY.

Steve says I MEAN NOT...

Simon says OVER A LONG PERIOD OF TIME.

Steve says EXACTLY, EXACTLY.
IS THERE A CERTAIN PART OF YOU
THAT FINDS THE WHOLE THING FANTASTIC?

Simon says TO ME IT'S LIKE ONE OF THOSE
THINGS THAT HAPPENS LIKE
DOT-COM, LIKE BITCOIN, BIG
FLASH, LOTS OF EXCITEMENT, A TON
OF PEOPLE MAKE A LOT OF MONEY,
MAYBE A LARGER OR SMALLER AMOUNT
OF PEOPLE LOSE A LOT OF MONEY.
IT'S ONE OF THOSE THINGS THAT HAPPENS.

Steve says MITCHELL, WHAT DO YOU DO?

Mitchell says I'M MANAGER OF STRATEGIC...
IN OTHER WORDS, I'M A CONSULTANT.

Steve says IN THE CANNABIS SECTOR?

Mitchell says WE DO A LOT OF WOULD, IN THE
CANNABIS SECTOR, YES.

Steve says THIS JOB OF YOURS
DIDN'T EXIST A FEW YEARS AGO.

Mitchell says THAT'S CORRECT.

Steve says IN THIS SECTOR.
IT'S ALL NEW?

Mitchell says THE LEGAL PART OF THE
BUSINESS.
THE ILLEGAL PART HAS BEEN AROUND
FOR THOUSANDS OF YEARS.

Steve says DO YOU SEE CANADA
BECOMING A LEADER IN THE
CANNABIS SECTOR WORLD WIDE?

The caption changes to "Mitchell Osak. Grant Thornton."

Mitchell says I DON'T SEE CANADA BECOMING A LEADER.
I SEE CANADA AS A LEADER RIGHT
NOW.

Steve says IT ALREADY IS?

Mitchell says YES, ABSOLUTELY.

Steve says EXPLAIN.

Mitchell says WELL, WE ARE THE FIRST G-20
COUNTRY TO LEGALIZE RECREATIONAL
MARIJUANA AND RIGHT NOW, IF
THERE IS SUCH A THING AS BEST
PRACTICES IN THE INDUSTRY, WE
ARE THOSE BEST PRACTICES.
AND I'M PROUD TO BE A PART OF THAT.

Steve says YOU'VE OBVIOUSLY
CONSULTED IN MYRIAD OTHER
SECTORS OF THE ECONOMY.
BUT THIS ONE'S NEW.
IS IT DIFFERENT?

Mitchell says IT'S DIFFERENT AND IT'S NOT NEW.
CANNABIS CONSUMPTION HAS BEEN
GOING ON FOR THOUSANDS OF YEARS.

Steve says BUT YOUR ROLE IN IT
WOULD BE NEW.

Mitchell says OUR ROLE IS ABSOLUTELY NEW.
WHAT'S VERY INTERESTING AND THE
WAY WE LOOK AT IT IS, MUCH LIKE
THE DOT-COMS AND BITCOIN, WE'RE
WITNESSING AN EMERGENCE OF THE
BIRTH OF A NEW INDUSTRY BASED ON
OLD HABITS, AND THAT'S EXCITING.

Steve says DO YOU HAVE A SENSE
YET, SIMON, AS TO WHO IS GOING
TO MAKE MONEY?
YOU JOKED SOME WILL MAKE MONEY,
SOME WILL LOSE MONEY.
WHO IS GOING TO BE MAKING MONEY
IN THIS?

Simon says I WAS REFERRING TO INVESTORS.
NOW I THINK YOU'RE TALKING ABOUT
COMPANIES.

Steve says COMPANIES, SECTORS.

Simon says I DON'T THINK SO YET.
REALLY, NOBODY HAS ANY SALES YET
OR MODEST SALES.
NOBODY IS MAKING MONEY YET.
THEY'RE ALL SUFFERING LOSSES FOR
THE MOST PART.
AND I'M, YOU KNOW, LOOKING AT MY
TOMATO PLANTS AND THINKING IT'S
ACTUALLY HARD TO GROW STUFF, TO
GROW STUFF THAT DOESN'T HAVE
FUNGUS ON IT... YOU KNOW, THOSE
KINDS OF... IT'S AGRICULTURE,
RIGHT?

Steve says IF FARMERS GET IT RIGHT...

Simon says INDOOR FARMING.
BUT THEY HAVE PROBLEMS AND BUGS
COME.
IT'S GOING TO BE VERY
INTERESTING AS TO WHO MAKES
MONEY AND WHO DOESN'T AND HOW
MUCH THEY MAKE.
IT'S GOING TO BE VERY
INTERESTING.

Steve says IS IT A SLAM-DUNK
THAT GOVERNMENT'S GOING TO MAKE
A FORTUNE ON THIS?

Simon says I THINK SO.
YOU TAKE ANYWHERE, 6 BILLION DOLLARS,
10 BILLION DOLLARS, IT'S REALLY KIND OF
ILLEGAL, SO WHO KNOWS?
YOU TAKE THAT REVENUE BASE AND
YOU PLUNK IT INTO THE CAPITAL
MARKETS AND SAY, "HAVE FUN,
FELLAS," THAT'S REALLY WHAT
WE'RE SEEING RIGHT NOW.
AND EVERYONE IS GUESSING AND
HOPING AND NOT WANTING TO MISS
OUT.

Steve says TAKE US THROUGH THE
SORT OF SUPPLY CHAIN IN THIS NEW
EMERGING BUSINESS.
HOW DOES IT ALL WORK?
HOW DOES THE MONEY GET MADE?
WHAT HAPPENS?

Mitchell says THAT'S A FANTASTIC QUESTION.
I DON'T THINK WE KNOW WHERE THE
MONEY IS GOING TO BE MADE YET.
WE, BASED ON THE WORK THAT WE'VE
DONE WITH MORE THAN A DOZEN
LICENSED PRODUCERS, WE HAVE
CERTAIN IDEAS.
BUT THE SUPPLY CHAIN ESSENTIALLY
STARTS WITH A SEED AND SOIL AND
WATER AND CONTROLLED GROWING
CONDITIONS, AND EVENTUALLY,
HOPEFULLY ON JULY 1, IT WILL END
UP IN A STORE ONLINE OR PHYSICAL
RETAIL STORE...

Steve says WE KNOW IT WON'T.
JULY 1, WE KNOW IT'S GOING TO BE
DELAYED.

Mitchell says CORRECT.
NONETHELESS, IT STILL WILL GET
TO A STORE AND GET TO A CONSUMER
SOMETIME RIGHT AFTER THAT, AND
IT WILL BE A VERY SOPHISTICATED
SUPPLY CHAIN BACKING THAT UP.
IT WILL BE HIGHLY REGULATED,
HIGHLY SECURE, WITH A
SIGNIFICANT AMOUNT OF GOVERNMENT
INVOLVEMENT.
SO IT IS A COMPLEX INDUSTRY,
EVEN THOUGH THE PRODUCT IS
WELL-KNOWN AND HAS A HIGH DEGREE
OF PENETRATION AMONG CONSUMER
GROUPS.

Steve says THERE ARE STOCKS
BEING TRADED, OBVIOUSLY,
ALREADY, RIGHT, IN THE CANNABIS
MARKET?

Simon says A LOT.
A LOT.

Steve says DO THEY TRADE ON...
WELL, WHICH EXCHANGES DO THEY
TRADE ON?

The caption changes to "Simon Romano, @StikemanElliott."
Then, it changes again to "Reefer stock madness."

Simon says THEY TRADE ON THE TORONTO
STOCK EXCHANGE, SOME OF THEM.
THE TSX HAS HAD SOME TREPIDATION
ABOUT TRADING STOCKS THAT HAVE
U.S. ACTIVITIES.
PEOPLE WHO ARE THINKING ABOUT
THAT TEND TO MIGRATE TO THE
CANADIAN SECURITIES EXCHANGE,
THE CSE.
THOSE ARE THE TWO MARKETS
THEY'RE REALLY TRADING ON.

The caption changes to "Connect with us: @theagenda, TVO.org, Facebook, YouTube, Periscope, Instagram."

Steve says AND IN THE STATES?

Simon says NO, NO.

Steve says NO?

Simon says NO.

Steve says WE REALLY ARE AT THE
FOREFRONT OF THIS?

Simon says YEAH.

Steve says DO YOU THINK THAT'S COOL?

Simon says IN THE STATES YOU CAN'T...
IT'S A CASH BUSINESS.
YOU CAN'T USE FEDERAL BANKING
SERVICES SO PEOPLE WALK AROUND
WITH SUITCASES FILLED WITH MONEY
IN THE STATES.
YOU CAN'T GO ACROSS STATE LINES.
IT'S VERY, VERY RIGID AND
FEDERALLY ILLEGAL AND STATE-WIDE
LEGAL IN SOME STATES.

Steve says ARE THERE CANADIAN
COMPANIES DOING BUSINESS IN THE
STATES?

Simon says THERE ARE CANADIAN COMPANIES
WITH U.S. OPERATIONS.

Steve says HOW ARE THEY DOING?

Simon says WE'RE NOT TALKING ABOUT
REVENUE OR PROFIT BECAUSE THAT'S
STILL TO COME.
IN TERMS OF MARKET
CAPITALIZATION AND EXCITING
STOCK PERFORMANCE, SUBJECT TO
SOME RECENT DOWNTURNS, THEY'VE
BEEN DOING VERY WELL.
PEOPLE ARE INVESTORS, MAINLY
RETAIL INVESTORS, BUT
INSTITUTIONS ARE WANTING TO HAVE
A PIECE OF THIS AND THEY
SOMETIMES SPREAD THEIR MONEY
AROUND, NOT KNOWING WHICH WILL
BE SUCCESSFUL, SO THEY INVEST IN
SEVERAL.

Steve says FOR ALMOST 100 YEARS
YOU TALK AUTO INDUSTRY AND TALK
BIG THREE, IT'S G.M., FORD, AND
CHRYSLER.
DO WE HAVE A BIG THREE IN THE
CANNABIS INDUSTRY YET?

Simon says WE DO.
WE HAVE CANOPY, WHOSE TRADING
SYMBOL IS WEED.
THAT'S THE BEST SYMBOL, I THINK.
AND AURORA AND APHRIA.
THEY'RE THE BIG THREE BY MARKET
CAP RIGHT NOW.

Steve says CAN YOU PUT A NUMBER
ON THE MARKET CAP, WHAT YOU
THINK IT'S WORTH?

Simon says IT'S IN THE BILLIONS.
I DON'T HAVE A NUMBER AT HAND.

Steve says IT'S ALREADY IN
THE BILLIONS?

Simon says EACH OF THE COMPANIES IS IN
THE BILLIONS.
YOU ADD THEM TOGETHER THEY'RE IN
THE TENS OF BILLIONS.

Steve says WHAT IS THE SORT OF
STATE OF THIS SECTOR IN TERMS OF
ITS MATURITY AT THIS STAGE OF
THE GAME?

The caption changes to "Mitchell Osak, @MitchellOsak."

Mitchell says I WOULD SAY IT'S APPROACHING
MATURITY, DEPENDING ON HOW YOU
DEFINE "MATURITY."
THESE ARE LEGAL ENTITIES.
MANY OF THEM ARE GROWING.
RIGHT NOW MANY OF THEM ARE
GROWING QUITE RAPIDLY SELLING
MEDICAL CANNABIS AND THEY'RE
RAPIDLY EVOLVING THEIR BUSINESS
MODELS TO PRODUCTIZE AND
CREATING BRANDS AROUND THEM AND
STRATEGIC ALLIANCES WITH OTHER
FIRMS.
WHEN WE TALK ABOUT THE BIRTH OF
AN INDUSTRY, WE ARE LITERALLY
SEEING IT.
WHAT MIGHT TAKE A CONSUMER
PRODUCTS VALUE CHAIN FIVE YEARS,
WE'RE SEEING THAT EVOLVE IN
ABOUT ONE TO TWO YEARS.

The caption changes to "Watch us on Facebook Live: Weekdays at 8 PM."

Steve says SO HAPPENING AT A
MUCH ADVANCED RATE.

Mitchell says ABSOLUTELY.

Steve says THE STOCK, HOW SORT
OF TOPSY TURVY WOULD THE STOCK,
SHARE PRICES BE AT THIS POINT?

Mitchell says I'M NOT A FINANCIAL ANALYST
SO I CAN'T REALLY COMMENT ON
THAT.
I WOULD SAY EACH OF THESE
STOCKS, AS WELL AS THE CATEGORY,
IS HIGHLY VARIABLE FOR A LOT OF
GOOD REASONS, AND BECAUSE
THERE'S A LOT OF UNCERTAINTY
RIGHT NOW IN THE MARKETPLACE.

Simon says VERY, VERY VOLATILE.

Steve says VERY VOLATILE?

Simon says WE HAD A HOSTILE TAKE-OVER
BID, THE FIRST IN THE SECTOR.

Steve says WHO OF WHOM?

Simon says AURORA MADE A BID FOR
CANNIMED.
CANNIMED IS THE ORIGINAL MEDICAL
SUPPLIER TO THE GOVERNMENT OF
CANADA FOR 16 YEARS.
THEY MADE A BID FOR THEM, PAPER
BID, ALL SHARES, NO CASH, TO START.

Steve says WHAT HAPPENED?

Simon says WELL, THE BID HAS TO BE OPEN
FOR 105 DAYS.
IN 105 DAYS OF WILDLY SWING
VOLATILITY, IT WAS ALMOST
GUARANTEED THAT THE STOCK PRICE
WAS GOING TO GO THROUGH THE BID,
IN WHICH CASE THE BID IS TOO
CHEAP AND IT WON'T SUCCEED.
LOTS OF FIGHTING AND ARGUING,
TYPICAL HOSTILE BID STUFF, AND
THEN THEY CAME TO TERMS ON A
SWEETENED BID AT ABOUT TWICE THE
ORIGINAL PRICE.
PRICES ARE HARD TO MEASURE,
AGAIN, WHEN YOU'RE DEALING WITH
STOCKS THAT GO UP AND DOWN WITH
140 MILLION DOLLARS IN CASH AS WELL.
IT WENT FROM A LOW VALUE
ALL-PAPER BID TO A HIGHER VALUE
CASH AND PAPER BID.

Steve says SO THE SHAREHOLDERS
DID OKAY?

Simon says IT'S STILL NOT COMPLETED YET.
THE SHAREHOLDERS LOOK TO BE
DOING WELL, THE SHARES OF
CANNIMED, YEAH.

Steve says AURORA IS THE NEW
COMPANY THAT SWALLOWED UP THE
OTHER ONE.

Simon says IT WILL BE.
IT HASN'T CLOSED YET.
THEY HAVE AGREED.
IT HAS TO GO OUT 35 DAYS OR SO
AND CLOSE.

Steve says GOTCHA.
MITCHELL, LET ME TALK TO YOU
ABOUT ADVERTISING.
HOW IS THAT GOING TO WORK?

The caption changes to "Growth opportunities."

Mitchell says GREAT QUESTION.
WE DON'T KNOW.
THERE HAVE BEEN GUIDELINES
ISSUED BY THE GOVERNMENT.
THERE HAS BEEN SUGGESTIONS BY
MANY LICENSED PRODUCERS AS WELL
AS INDUSTRY ASSOCIATIONS ABOUT
WHAT THAT COULD BE, BUT THE
TRUTH OF THE MATTER IS, NO ONE
KNOWS UNTIL THEY START PRODUCING
ADVERTISING AND IT STARTS BEING
REVIEWED BY THE GOVERNMENT, WHAT
ACTUALLY WILL BE ALLOWED AND
WHAT WON'T BE ALLOWED.
THERE ARE CERTAIN SPECIFICS.
YOU WON'T BE ALLOWED TO
ADVERTISE TO MINORS.
YOU WON'T BE ALLOWED TO APPEAR
TO BE ATTRACTING NON-USERS TO
THE CATEGORY.
SO IF YOU IMAGINE TOBACCO AS THE
MOST RESTRICTIVE, IT WON'T BE
THAT.

Steve says TOBACCO HAS A
PROHIBITION ON THAT...

Mitchell says CORRECT.

Steve says THERE WILL NOT BE A
PROHIBITION...

Mitchell says THERE WILL NOT.
YOU WILL BE ALLOWED TO CREATE
BRANDS.
THE QUESTION IS: WHAT IS A BRAND
AND HOW IS THAT MANIFESTED
ITSELF IN TERMS OF THE
MARKETPLACE?
BUT AT THE SAME TIME YOU LIKELY
WON'T SEE BEER AND ALCOHOL
ADVERTISING EITHER.
IT WILL BE SOME PLACE WITHIN
THAT CONTINUUM.

Steve says BRAND NAMES.
ANYBODY GIVEN THAT ANY THOUGHT YET?

Mitchell says WITHIN THE INDUSTRY, THERE'S
A HECK OF A LOT OF THOUGHT GIVEN
TO THAT.

Steve says CAN YOU SHARE SOME
IDEAS THAT ARE OUT THERE THAT WE
MAY NOT KNOW?

Mitchell says NO, BECAUSE I DON'T
NECESSARILY KNOW THEM.
THEY'RE PROJECTS IN DEVELOPMENT
RIGHT NOW.

Simon says THERE'S ONE WELL-KNOWN, UP
CANNABIS, WHICH IS THE
TRAGICALLY HIP HAVE ASSOCIATED
THEMSELVES WITH NEWSTRIKE AND
THEIR BRAND IS UP CANNABIS.
THERE'S ONE BRAND BUT...

Steve says IT JUST OCCURRED TO
ME THAT THE BEER BUD IS A GREAT
NAME FOR THIS BUT IT'S TAKEN.

Simon says IT'S TAKEN FOR BEER.

Steve says BUT THEY COULD USE
IT FOR CANNABIS?

Simon says I DON'T KNOW IF ANYONE HAS
TRADEMARKED THAT.

Steve says SNOOP DOGG IS
INVOLVED IN THIS, ISN'T HE?

Mitchell says HE IS.

Steve says WHAT IS HE DOING?

Mitchell says HE, I BELIEVE, ENDORSED SOME
OF THE CANOPY BRANDS AND IS
SERVING AS A SPOKESPERSON.

Steve says YOU'VE SAID ALREADY
WE'RE NOT SURE WE'RE GOING TO
SEE BRAND IDENTIFICATION,
ADVERTISING ON TELEVISION.
BUT OF COURSE SOCIAL MEDIA IS
THE WILD, WILD WEST.
WE ANTICIPATE THAT THIS WILL BE
HUGE ON SOCIAL MEDIA, I GUESS.

Mitchell says YES.

Steve says DO YOU SEE HOW THAT
WORK IS GOING FORWARD, WHO IS
GOING TO BE DOING THAT?

Mitchell says THERE WILL LIKELY BE, AND I'M
NOT GIVING AWAY ANY TRADE
SECRETS WHEN I SAY THIS, BECAUSE
THIS HAS BEEN PUBLICIZED IN A
VARIETY OF PLACES, THERE WILL
LIKELY BE KEY INFLUENCERS THAT
WILL SORT OF DIRECT TRAFFIC AND
DIRECT BUZZ TOWARDS CERTAIN
PRODUCTS AND CERTAIN STRAINS.
WE WILL PROBABLY SEE THAT.
THAT'S VERY DIFFICULT TO CONTROL
IN CYBERSPACE.
YOU WILL LIKELY SEE LEADERSHIP,
WHICH IS VERY IMPORTANT AROUND
THE GOOD USES OF RECREATIONAL
CANNABIS, AND THAT IS SOMETHING
THAT THE GOVERNMENT WANTS TO
SEE, PROPER EDUCATION.
SO THERE WILL BE SOME POSITIVE
BRAND ELEMENTS WITHIN THIS.
BUT IT'S ALL EVOLVING AND THE
PLANS ARE EVOLVING BASED A LOT
UPON WHICH PROVINCES ARE GOING
TO MARKET FIRST AND AT WHAT TIME LINE.

Steve says YOU GUYS ARE
OBVIOUSLY NOT PR GUYS, YOU'RE IN
A DIFFERENT PART OF THE ECONOMY,
BUT YOU CAN IMAGINE A
CONVERSATION WITH A VERY FAMOUS
PERSON AND HIS OR HER AGENT
SAYING, WE'VE BEEN ASKED TO DO
AN AD CAMPAIGN OR ENDORSE ON
SOCIAL MEDIA THIS PRODUCT.
SHOULD WE DO IT?
HOW DO YOU IMAGINE THAT
CONVERSATION GOING?

Simon says WELL, BEING A LAWYER, WE'LL
HAVE TO LOOK AT THE PRECISE
RULES AND TELL THEM WHETHER THEY
SHOULD LEGALLY BE GOING THIS WAY
OR NOT.
BUT THAT REMAINS TO BE
DETERMINED.

Steve says WHAT DO YOU THINK?

Mitchell says IT'S A GREAT STRATEGIC QUESTION.
I'M AN EX-BRANDER.
IF I WAS A LICENSED PRODUCER AND
I WANTED TO PURSUE THAT KIND OF
STRATEGY, I'D BE VERY CAREFUL IN
TERMS OF WHO I WOULD WANT TO
SPEAK TO AND WHAT WOULD THE COST
OF GETTING THEM TO ENDORSE MY
PRODUCT AND TALK ABOUT IT.
THE JUICE IS NOT ALWAYS WORTH
THE SQUEEZE WHEN IT COMES TO
PRODUCT ENDORSEMENTS AS WE'VE
HEARD WITH FOLKS LIKE TIGER
WOODS AND SO ON.
AT THE SAME TIME, AS AN
ENDORSER, YOU KNOW, DEPENDING
WHAT MY PERSONAL BRAND IS LIKE,
I'M NOT SURE I'D WANT TO BE
ASSOCIATED WITH THIS INDUSTRY
RIGHT NOW, PARTICULARLY IF I'M
APPEALING TO YOUNGER AUDIENCES.
THE GOVERNMENT HAS BEEN VERY
STRICT IN TERMS OF NOT DIRECTING
ANY PROMOTION, SPONSORSHIP
TOWARDS YOUNG PEOPLE UNDER THE
AGE OF MAJORITY, WHICH IN
ONTARIO IS 19.

Steve says RIGHT.
I MEAN, ATHLETES ARE OF COURSE
HUGE IN THIS AREA, ADVERTISING
ANY NUMBER OF PRODUCTS.
IF YOU'RE AN ATHLETE, WOULD YOU
WANT TO BE ASSOCIATED WITH
CANNABIS?

Mitchell says MAYBE.

Steve says MAYBE?

Mitchell says DEPENDS ON THE ATHLETE.
DEPENDS ON THE SPORT.

Simon says ROSS REBAGLIATI.
REMEMBER HIM?

Steve says ROSS REBAGLIATI, YEAH,
THE SNOWBOARDER... THE OLYMPIC
GOLD-MEDAL SNOWBOARDER.

Simon says HE HAS A STORE IN WHISTLER,
GOLDEN BUD, OR SOMETHING,
SELLING PARAPHERNALIA.

Steve says ROSS IS NO LONGER A
PARTICIPANT IN PRO SPORTS.

Simon says BUT HE WAS HUGE WHEN HE DID.

Steve says HE SURE WAS.
HE LIKED HIS BUD.
COULD YOU IMAGINE SOMEONE FROM
THE OTTAWA SENATORS OR THE MAPLE
LEAFS, AN UP-AND-COMING PLAYER,
ENDORSING?

Mitchell says I CAN IMAGINE.
I'M NOT SURE IF I WAS AUSTON
MATTHEWS, CONSIDERING HIS BRAND
AND WHAT HE REPRESENTS TO YOUNG
PEOPLE.
ABSOLUTELY.
I WOULDN'T LIMIT IT TO ATHLETES.
THERE COULD BE ACTORS.
A WIDE VARIETY OF PEOPLE.

Steve says IS THERE ENOUGH R and D
HAPPENING RIGHT NOW, RESEARCH
AND DEVELOPMENT, HAPPENING IN
THIS FIELD TO GIVE US A SENSE...
I MEAN, PEOPLE UNDERSTAND, WITH
ALCOHOL, YOU CAN'T BLOW OVER 80.
ONCE YOU'VE BLOWN OVER .80,
YOU'RE DRIVING ILLEGALLY.
DO WE UNDERSTAND SIMILAR LIMITS
WHEN IT COMES TO CANNABIS?

Mitchell says YOU MEAN SMOKING AND DRIVING
AND INGESTING?

Steve says YES.

Mitchell says THERE ARE A NUMBER OF PILOTS
I'M AWARE OF THAT ARE HAPPENING
RIGHT NOW IN ONTARIO THAT'S
TESTING VARIOUS TECHNOLOGIES TO
GET A BETTER SENSE OF YOUR
ABILITY TO DRIVE UNDER THE
INFLUENCE OF CANNABIS.

Simon says SALIVA TEST.

Steve says SALIVA TEST.
THE CULTURAL CHANGE WE'RE ABOUT
TO POTENTIALLY EMBARK ON IS
REALLY... WELL, I WONDER.
YOU SHOW UP AT A DINNER PARTY
NOW WITH A BOTTLE OF WINE.
ARE WE GOING TO BRING HASH
BROWNIES TO FUTURE DINNER
PARTIES?
HOW IS THIS GOING TO WORK?

Simon says I THINK THE FOODS AND THE
OILS ARE THE MOST INTERESTING
PART.
A LOT OF PEOPLE ARE NOT GOING TO
WANT SMOKING IN THEIR HOUSE,
RIGHT, THE SMELL.
THAT'S THE MORE INTERESTING
PART.

Steve says HAVE YOU IMAGINED
DOING THIS?

Simon says I'M GOING TO HAVE A BIG POT
PARTY WHEN THEY LEGALIZE IT AND
INVITE ALL MY FRIENDS.

Steve says THIS WAS THE
QUESTION THAT I DIDN'T KNOW
WHETHER I SHOULD ASK, BUT MAYBE
I SHOULD.
YOU GUYS ARE OBVIOUSLY IN THE
BUSINESS OF SEEING THIS THING
SUCCEED.
BUT WHEN YOU SAID I'M GOING TO
HAVE A BIG POT PARTY, I JUST
ASSUMED YOU WERE GOING TO BE
INDULGING YOURSELF.
IS THAT THE CASE?

Simon says I WILL, YOU KNOW, WHEN IT'S
LEGAL, I'LL INVITE MY FRIENDS
AND HAVE A POT PARTY.

Steve says MITCHELL, YOU TOO?

Mitchell says I'LL LIMIT...

Simon says I'LL INVITE MITCHELL.

Mitchell says THANK YOU.
I'LL LIMIT MY POT PARTY TO A
POTLUCK PARTY.
I HAVE A YOUNG FAMILY AT HOME.
I AM NOT A CONSUMER OF CANNABIS.
BUT AT THE END OF THE DAY IT IS
A LEGAL... IT IS A LEGAL PRODUCT
AND I KNOW IT'S CONSUMED BY
MILLIONS OF CANADIANS VERY
RESPONSIBLY AND I DON'T HAVE ANY
VALUE JUDGMENTS FOR AND AGAINST.
HAVING SAID ALL OF THAT, I DON'T
THINK WE HAVE FULLY SEEN THE
EFFECTS OF AN ILLEGAL DRUG
EXPERIENCE MOVING INTO LEGAL
COMMUNITIES WHERE PEOPLE
INTERACT.
SO IT'LL BE INTERESTING TO SEE
HOW IT EVOLVES.
I CAN'T WAIT.

Steve says THAT EVOLUTION IS
INTERESTING BECAUSE IT'S NOT
EVERYTHING ALL AT ONCE, RIGHT?

Mitchell says CORRECT.

Steve says WHAT'S THE BREAKDOWN HERE?

Mitchell says WELL, FLOWER AND OILS, 2018.
YOU'LL HAVE TOPICALS AND SOME OF
THAT OTHER STUFF.
YOU'LL START TO SEE WHAT I
BELIEVE IS A REVOLUTION IN TERMS
OF THE USAGE OF THIS PRODUCT BY
DEMOGRAPHIC, BY USAGE TYPE, BY
AGE AND SO ON AND SO FORTH.
SO WE THINK OF CANNABIS VERY
OFTEN AS AN INDIVIDUAL OR A
SOCIAL STIMULANT.
BUT IN REALITY, IT COULD BE
SOMETHING COMPLETELY DIFFERENT.

Steve says YOU KNOW WHY THEY
CHOSE TO STAGGER THE DIFFERENT
KINDS OVER NUMEROUS YEARS?

Mitchell says I DON'T.
DO YOU KNOW?

Simon says THEY ORIGINALLY WEREN'T GOING
TO ALLOW EDIBLES AT ALL AND I
THINK A LOT OF PUSHBACK.

Steve says SO THEY LISTENED AND
CHANGED THEIR MINDS.
GOT IT.
SIMON, HOW DO YOU SEE THIS
SECTOR MATURING ONCE
LEGALIZATION IS FIRMLY IN PLACE
AND PERHAPS THE CULTURAL SHIFT
WE JUST REFERRED TO STARTS TO
UNFOLD?

Simon says I THINK OF THE INDUSTRY AS
BEING IN ITS LATE ADOLESCENCE
STAGE RIGHT NOW, AND AS YOU
WITNESSED IN THE FROTHY MARKETS.
I THINK AS WE SEE PEOPLE EVOLVE
AND STRATEGIZE WITHIN THE LIMITS
OF WHAT THE DIFFERENT PROVINCIAL
GOVERNMENTS ALLOW, I DON'T KNOW
WHAT THE ONTARIO STORES ARE
GOING TO LOOK LIKE.
IS IT GOING TO BE LIKE BUYING
LIQUOR IN THE '50s.
I DON'T THINK IT'S LIKE BUYING
LIQUOR TODAY.
SOMEWHERE IN BETWEEN.
HOW MUCH BRANDING, HOW WILL
BRANDING HELP, HOW MUCH?
I THINK WE HAVE A LOT OF
LEARNING TO DO OVER THE NEXT
TWO, THREE YEARS, AND THEN WE'RE
GOING TO HAVE THINGS LIKE
PRODUCT PROBLEMS AND RECALLS
AND... I MEAN, THEY'RE MAKING
FOOD ITEMS.

Steve says A NORMAL PRODUCT
LIKE ANYTHING ELSE.

Simon says YEAH.
SO ALL KINDS OF THINGS AND WHO
WILL BE ABLE, WHO WILL PROVE
ABLE TO GROW IT WELL AND
EFFECTIVELY AND MAKE A PROFIT
AND WHO WILL NOT.
SMALL COMPANIES ARE GOING TO
HAVE A HARDER TIME UNLESS THEY
CAN REALLY GET A NICHE GOING.
AS ALWAYS, IT'S HARD TO COMPETE
WITH G.M. OR FORD.
SO I THINK IT'S GOING TO BE VERY
INTERESTING AND IT'S HAPPENING
AT A BREAKNECK PACE.

Steve says IN TERMS OF THE
SALES, YOU WERE MAKING THE
COMPARISON A SECOND AGO.
TODAY ALL THE PRODUCT IS ON THE
SHELVES FOR ANYBODY TO SEE AND
TOUCH AND EVEN SAMPLE.
SOME PLACES IN THE LCBO, THEY
GIVE YOU A FREE SAMPLE.
BACK IN THE '50s AND '60s,
THERE WAS NO PRODUCT IN SIGHT.
YOU FILLED OUT A LITTLE CHIT AND
THEY KEPT IT ALL IN THE BACK.
DO YOU KNOW WHETHER THAT'S THE
PLAN FOR THIS?

Simon says I DON'T KNOW YET AND I THINK
IT'S GOING TO... WELL, IT'S
GOING TO VARY BY PROVINCE.
ONTARIO IS GOING TO HAVE 40
STORES IN THE WHOLE PROVINCE?
THERE WAS A TIME ON QUEEN STREET
THERE WERE 40 ON QUEEN STREET.
THERE'S NOT GOING TO BE ENOUGH
STORES TO DEAL WITH THIS.
I'M NOT SURE PEOPLE ARE REALLY
GOING TO WANT TO BUY IT ONLINE,
HAVE IT DELIVERED TO THEIR
HOUSE, AND ALL THIS
RECORDKEEPING AND NAMES, I.D.
SHOWING.
IT'S GOING TO BE INTERESTING...
SO THE BLACK MARKET WILL
CONTINUE FOR SOME TIME TO COME
UNTIL WE HAVE A FULLY ROLLED OUT
RETAIL STRATEGY AND YOU SEE IN
THE LIQUOR, THEY'RE STARTING TO
MOVE IT INTO GROCERY STORES.
YOU KNOW, WILL THAT HAPPEN A LOT
FASTER IN THE POT SECTOR?
WHO KNOWS?
IT'S POSSIBLE IT'S A BIG ROLLOUT
THAT TURNS FROM 40 STORES INTO
2,000 STORES.

The caption changes to "Producer: Liane Kotler, @LianeKotler."

Steve says INDEED.
THANK YOU, GENTLEMEN, FOR COMING
IN, HELPING US UNDERSTAND THIS
SECTOR A LITTLE BIT BETTER.
MITCHELL OSAK, FROM GRANT
THORNTON, LLP; SIMON ROMANO
FROM STIKEMAN ELLIOTT, LLP.
APPRECIATE IT.

Mitchell says PLEASURE. THANK YOU.

Watch: The Business of Pot