Transcript: The Rocky Rollout of Legal Cannabis | Aug 21, 2019

Nam sits in the studio. She's in her early forties, with shoulder length curly brown hair. She's wearing glasses and a light gray blazer over a white shirt.

A caption on screen reads "The rocky rollout of legal cannabis. Nam Kiwanuka, @namshine, @theagenda."

Nam says CANNABIS MAY BE LEGAL AND
AVAILABLE ONLINE, BUT RETAIL
OUTLETS ARE STILL FEW AND FAR
BETWEEN IN ONTARIO. AND, OF
THOSE THAT ARE OPEN, THERE HAVE
BEEN SUPPLY PROBLEMS. IT'S LEFT
MANY CUSTOMERS STICKING WITH
THEIR ILLEGAL SUPPLIERS. HERE TO
CONSIDER HOW THE ROLLOUT OF
LEGAL WEED IS GOING:
ABI ROACH, OWNER OF THE HOTBOX
CAFE IN TORONTO AND EXECUTIVE
CHAIR OF NORML CANADA...

Abi is in her forties, with curly brown hair in a bun. She's wearing glasses, and a dark blue, sleeveless blouse.

Nam continues AND MARK RENDELL, CANNABIS
INDUSTRY REPORTER WITH THE GLOBE AND MAIL.

Mark is in his late thirties, with short brown hair and a full beard. He's wearing rounded glasses, a dark blue suit and a white shirt.

Nam continues WELCOME.
IS IT YOUR FIRST TIME TO THE SHOW?

Abi says IT'S MY SECOND TIME.

Nam says MARK, WELCOME.
NICE TO HAVE YOU HERE.
SO TODAY AN ANNOUNCEMENT WAS
MADE.
MORE PEOPLE WERE ABLE TO SELL
CANNABIS.
WHERE ARE THE STORES GOING TO
BE, MARK?

The caption changes to "Mark Rendell. The Globe and Mail."
Then, it changes again to "A new round of retail."

Mark says SO THERE WAS
42 LICENCES THAT WERE AWARDED
TODAY.
13 OF THEM ARE IN TORONTO.
SIX ARE ACROSS THE G.T.A. WITH
TWO IN BURLINGTON, TWO IN OSHAWA
AND SEVERAL OTHER CITIES
SURROUNDING TORONTO.
IN WESTERN ONTARIO THERE'S A
NUMBER OF STORES, TWO IN LONDON
AND OTHERS SPREAD ACROSS THE
PROVINCE.
ONE WENT TO OTTAWA IN THE EAST.
THREE SOMEHOW WENT TO INNISFIL.
AND IN NORTHERN ONTARIO ONE
STORE EACH IN TIMMINS, IN
KENORA, SAULT STVMENTED MARIE
AND IN THUNDER BAY.
THERE WERE EIGHT LICENCES ISSUED
TO FIRST NATIONS.
THESE STORES ARE NOT GOING TO
OPEN UNTIL OCTOBER, BUT THE
LICENCES WERE... I SHOULD SAY
THEY WERE GRANTED THE ABILITY TO
APPLY FOR THE LICENCES.
THE 42 PEOPLE WHO WON THE
LOTTERY ARE GOING TO MOVE TO A
PROCESS WHERE THEY GET THE
LICENCE AND OPEN UP IN OCTOBER.

Nam says ANY OTHER SURPRISES
FROM TODAY'S ANNOUNCEMENT?

Mark says NOT A TON.
I MEAN, THE WHOLE PROCESS OF
AWARDING LICENCES BY LOTTERY HAS
BEEN SOMEWHAT CONTROVERSIAL.
EARLIER IN THE YEAR THEY AWARDED
THE FIRST 25 BY LOTTERY.
THAT WAS IN JANUARY.
AND THEN THEY OPENED IN APRIL...
OR AT LEAST SOME OF THEM DID.
THERE WAS A LOT OF SURPRISE WHEN
THE P.C. GOVERNMENT SAID WE'RE
GOING TO GO WITH A LOTTERY
SYSTEM.
LAST SUMMER AFTER THE ELECTION
THERE WAS A LOT OF EXPECTATIONS
THAT WHEN THEY SHIFTED FROM THE
LIBERALS' PLAN TO HAVE A PUBLIC
SYSTEM FOR DISTRIBUTING CANNABIS
TO A PRIVATE SYSTEM, THERE WAS A
LOT OF THOUGHT THAT IT WOULD
BE... MANY MORE PEOPLE WOULD
HAVE THE ABILITY TO APPLY FOR
LICENCES.
THEN IN DECEMBER THEY CAME OUT
AND SAID WE'RE DOING A LIMITED
ROLLOUT, 25 TO BEGIN WITH.
IN THIS RECENT ROUND WE'VE SEEN
50.
WE'LL BE UP TO BY THE END OF THE
YEAR 75 STORES, WHICH IS AN
IMPROVEMENT FROM 25 BUT...

Nam says LONG WAYS TO GO?

Mark says A LONG WAYS TO GO.
IF WE THINK ABOUT THE NUMBER OF
LIQUOR STORES ACROSS THE
PROVINCE, WHERE YOU LOOK AT
OTHER PROVINCES LIKE ALBERTA,
FOR EXAMPLE, WHICH IS THE OTHER
LARGE PRIVATE RETAIL MARKET IN
CANADA.
THEY'VE TAKEN A MUCH MORE
AGGRESSIVE APPROACH TO ROLLING
OUT STORES.
I BELIEVE THEY'VE AWARDED ABOUT
270 LICENCES ALREADY.
NOT ALL OF THOSE ARE OPEN, BUT A
MUCH MORE AGGRESSIVE OF ROLLOUT
OF RETAIL STORES.
ONTARIO IS TAKING A MUCH SLOWER
APPROACH.

Nam says ABI, YOU PUT YOUR NAME
IN THE LOTTERY FOR THIS ROUND
AND ALSO THE LAST ROUND.
WERE YOU SUCCESSFUL TODAY?

The caption changes to "Abi Roach. Hotbox Café."

Abi says NO, WE WERE NOT
SUCCESSFUL.
FROM LOOKING AT THE LIST, IT
LOOKED LIKE 42 ESSENTIALLY
PRIVATE PEOPLE AGAIN ENDED UP
WINNING.
NONE OF THE CANNABIS COMPANIES
THAT ARE WELL-KNOWN AND
WELL-VERSED IN CANNABIS RETAIL
ACTUALLY RECEIVED A CHANCE TO
APPLY FOR A LICENCE, WHICH IS
DISHEARTENING.

Nam says IN WHAT WAY?

The caption changes to "Abi Roach. Norml Canada."

Abi says THAT PEOPLE WITH
EXPERIENCE, PEOPLE WITH WANT AND
ABILITY TO BE ABLE TO EXECUTE ON
A CANNABIS RETAIL STORE, BE ABLE
TO EDUCATE THE CONSUMERS
PROPERLY, BE ABLE TO PICK
PRODUCT PROPERLY, HAVE QUALITY
CONTROLS, EVERYTHING THAT COMES
WITH RUNNING A CANNABIS
BUSINESS, PEOPLE WHO ARE FULLY
CAPABLE OF DOING IT DIDN'T
ACTUALLY GET A CHANCE TO BE
LICENSED.
WE'RE GOING TO END UP WITH MORE
PEOPLE WHO PROBABLY DON'T KNOW
MUCH ABOUT RETAIL OR CANNABIS
RUNNING CANNABIS STORES, WHICH
IS TO ME A PROBLEM FOR PUBLIC
HEALTH AND SAFETY.

Nam says THIS ROUND OF
APPLICATIONS HAD DIFFERENT RULES
TO APPLY.
WHAT DID YOU HAVE TO DO TO
APPLY?

The caption changes to "Abi Roach, @abiroach."

Abi says WE HAD TO GET A
LETTER OF CREDIT OF 250,000 dollars,
SAYING THAT WE HAD THAT
AVAILABLE TO US.
ANOTHER ONE FOR 50,000 dollars.
AND THEN OUR LEASE WHICH WAS
ALREADY THERE BECAUSE WE'VE BEEN
IN OPERATION FOR ALMOST 20
YEARS.

Nam says HOW WAS THIS ROUND
DIFFERENT FROM THE LAST LOTTERY?

Abi says IT WAS A LOT
HARDER TO GET IN, SO THE AMOUNT
OF ENTRANTS WAS A LOT SMALLER.

Nam says WHAT WERE THE FEES?

Abi says IT WAS ONLY 75 dollars
TO ENTER, BUT THE LETTERS THAT
YOU HAD TO GET FROM THE BANKS
WERE VERY, VERY DIFFICULT TO
GET.
I KNOW NOT MANY PEOPLE GOT
THROUGH AND NONE OF THE MAJOR
BANKS WERE WRITING THEM OUT.

Nam says YOU'VE BEEN WORKING IN
THIS INDUSTRY FOR 20 YEARS?

Abi says YES.

Nam says BEYOND DISAPPOINTMENT,
HOW ARE YOU FEELING ABOUT
TODAY'S ANNOUNCEMENT?

Abi says IT IS WHAT IT IS.
WE ARE IN A CRAZY TIME OF THE
CANNABIS INDUSTRY, WHERE REALLY
WE HAVE TO CONDUCT BUSINESS ON
RUMOUR, ON WHAT IF.
I THINK I READ IT AND MY LAWYER
THINKS SO.
THERE'S REALLY NO OTHER INDUSTRY
OUT THERE THAT IS FORCED TO
CONDUCT BUSINESS THIS WAY.
PEOPLE WOULD SAY TO ME: WHAT'S
YOUR BUSINESS PLAN?
IT'S IMPOSSIBLE TO WRITE A
BUSINESS PLAN IN THE CANNABIS
INDUSTRY BECAUSE THE REGULATIONS
ARE SO EVER-CHANGING AND SO
INSANE AND A LOTTERY TO PICK A
BUSINESS LICENCE, LIKE THERE'S
NO OTHER INDUSTRY OUT THERE THAT
WOULD EVEN HAVE TO DEAL WITH
THIS.

Nam says MARK, HOW WOULD YOU
CHARACTERIZE THE ROLLOUT OF THE
LEGAL MARKET SO FAR IN THIS PROVINCE?

Mark says ON THE RETAIL
FRONT, AS ABI WAS SAYING, IT'S
BEEN PRETTY HAPHAZARD IN A LOT
OF WAYS.

Nam says IS IT BECAUSE IT'S THE
FIRST TIME AROUND OR A LOT OF
CAUTION?
IS THERE SOMETHING BENEATH THE
SURFACE?

The caption changes to "Mark Rendell, @mark_rendell."
Then, it changes again to "Growing pains."

Mark says YEAH, I THINK
A LOT OF IT COMES BACK TO THE
CHANGE IN GOVERNMENT LAST
SUMMER.
THERE WAS A PLAN IN PLACE TO
ROLLOUT A PUBLICLY RUN SYSTEM.
THAT WAS SWITCHED LATE LAST
SUMMER.
AND THERE WAS A LOT OF
EXPECTATION AND EXCITEMENT ABOUT
THE PRIVATE MARKET.
I THINK ULTIMATELY GOING THE
PRIVATE ROUTE IS THE BEST
DECISION TO LET ENTREPRENEURS
LIKE ABI GET INVOLVED.
BUT IT LED TO AN ABSOLUTELY
FRENZY OF PEOPLE TRYING TO LOCK
UP LEASES.
MILLIONS OF DOLLARS WAS SLOSHING
AROUND.
PEOPLE WERE SIGNING LONG-TERM
LEASES AT WELL-ABOVE MARKET
RATES, ALL IN THE EXPECTATION
THAT THERE WOULD BE ALL OF THESE
LICENCES GRANTED, AS THEY KIND
OF INITIALLY SIGNALLED.
AND THEN CAME DECEMBER WHEN THEY
SAID WE'RE MOVING TO A LOTTERY
SYSTEM, THAT IS TIED TO SUPPLY
ISSUES IN THE LEGAL MARKET,
WHICH I'M SURE WE'LL TOUCH ON
LATER IN THE PROGRAM.
BUT ACROSS THE LEGAL MARKET
THERE HAS BEEN SIGNIFICANT
SHORTAGES IN BOTH OVERALL AND
ALSO SHORTAGES IN HIGH-QUALITY
CANNABIS AND HIGH-THC CANNABIS
THAT CONSUMERS WANT.
AND IT'S LED, AT LEAST THE WAY
THE ONTARIO GOVERNMENT HAS
DESCRIBED IT WAS THEY COULDN'T
IN GOOD FAITH KIND OF ROLLOUT
HUNDREDS OF STORES IF THERE
WASN'T SUPPLY TO FILL INTO THOSE
AND HAVE BASICALLY BANKRUPTCIES
AND ALL OF THAT.

The caption changes to "Connect with us: Twitter: @theagenda; Facebook, agendaconnect@tvo.org, Instagram."

Nam says ABI, THE FIRST ROUND OF
STORES WERE SUPPOSED TO OPEN BY APRIL 1.
HOW MANY MET THAT DEADLINE?

Abi says I THINK IT WAS ONE.
AND EVEN NOW THERE'S ONLY 24 OUT
OF THE 25 THAT ARE OPEN, AND
ESSENTIALLY THE ONE THAT HASN'T
OPENED STILL HAS A CHANCE TO
OPEN.
THEY DIDN'T LOSE THEIR CHANCE TO
OPEN AND GIVE UP THEIR SPOT TO
THE NEXT PERSON IN LINE.

Nam says DO WE KNOW WHY IT'S
TAKEN SO LONG?

Abi says I DON'T KNOW.

Nam says MARK, CAN YOU FILL US IN?

Mark says I THINK IT WAS
THE WAY THE LOTTERY WAS
STRUCTURED.
THE FIRST ROUND ALL YOU NEEDED
WAS 75 dollars AND WITH THAT LOW ENTRY
FEE, YOU HAD I THINK IT WAS
ABOUT 17,000 PEOPLE ENTER THE
LOTTERY.
SO THE PEOPLE WHO WON THOSE
FIRST 25 LICENCES, MANY WERE NOT
PEOPLE WITH RETAIL EXPERIENCES.
MANY WERE NOT PEOPLE WITH ACCESS
TO CAPITAL TO KIND OF GET A
BUSINESS ROLLING IN THE SHORT
THREE-MONTH PERIOD THEY HAD.
WHAT WAS INTERESTING AFTER THE
LAST LOTTERY AND I EXPECT YOU'RE
GOING TO SEE IT AFTER THIS
LOTTERY AS WELL, IS A NUMBER OF
LARGE CANNABIS RETAIL CHAINS,
MANY WHO ARE BASED IN ALBERTA
WENT AROUND ESSENTIALLY BIDDING
TO FRANCHISE... GET THEIR NAME
ON THESE VARIOUS CANNABIS STORE
WINNERS IN ONTARIO.
SO THE RULES ARE SUCH THAT YOU
CANNOT TRANSFER THE LICENCE.
SO IF I WON A LOTTERY, I CAN'T
SELL IT RIGHT AWAY, BUT I CAN
COME UP WITH SOME SORT OF
FRANCHISE LICENSING AGREEMENT.
SO YOU SAW ESSENTIALLY A NUMBER
OF THESE LARGE CHAINS THAT ARE
SOME WHO HAVE 20 STORES OUT WEST
WHO ARE AIMING TO ESSENTIALLY
SPILL OUT ACROSS THE COUNTRY,
PAY EXORBITANT AMOUNTS OF MONEY
TO SLAP THEIR NAMES ON THESE
STORES.

Nam says SO THE MONEY IS GOING
TO ALBERTA THEN?

Mark says NO, PAY A LOT
OF MONEY TO FRANCHISE THE STORE
WINNERS IN ONTARIO.

Nam says IT'S LIKE FRANCHISING A
MCDONALDS OR A SUBWAY?

Mark says YEAH, IT'S A
WAY OF LIMITATIONS ON THE
OWNERSHIP, THAT THESE LARGE
CAPITALIZED CHAINS COULD GET A
FOOTPRINT IN THE ONTARIO MARKET.
THERE WAS ANOTHER RULE THAT
PRODUCERS OF CANNABIS WERE NOT
ALLOWED TO ENTER THE LOTTERY,
BUT YOU HAVE SEEN OTHER KIND OF
LICENSING AGREEMENTS BETWEEN
LARGE LICENCE PRODUCERS AND
LOTTERY WINNERS FROM THE LAST
25, WHICH IS HOW WE HAVE THE
TOKYO SMOKE STORE DOWNTOWN
TORONTO.
THAT IS A BRAND THAT IS OWNED BY
CANOPY GROWTH CORP., THE BIGGEST
CANNABIS PRODUCER.
THEY DON'T OWN THE STORE, BUT
THEY HAVE A BRANDING
RELATIONSHIP.
SO I THINK YOU'RE GOING TO SEE A
LOT OF THAT IN THE NEXT 42
LICENCES AND THE LICENCES TO
FIRST NATIONS IS... PROBABLY
BIDDING WARS HAVE ALREADY
STARTED... OR I KNOW BIDDING
WARS HAVE STARTED BETWEEN THESE
CHAINS TO GET THEIR STAMP AND
THEIR NAME OUT IN THE ONTARIO
MARKET.

Nam says ABI, HEARING ALL OF
THIS, AS SOMEBODY WHO'S BEEN
WORKING IN THIS INDUSTRY AND
PROVINCE FOR SO LONG, HOW DO YOU
ADVOCATE FOR YOURSELF?
HOW DO YOU ADVOCATE FOR AN
OPPORTUNITY TO GET A CHANCE TO
PARTICIPATE IN THIS MARKET?

Abi says YOU KNOW, I JUST
HAVE TO KEEP DOING WHAT I'M
DOING.
A LOT OF THE HARD WORK THAT THE
PEOPLE LIKE MYSELF PUT IN IN THE
LAST DECADE OR TWO RESULTED IN
PRIVATE RETAIL, RESULTED IN
LEGAL CANNABIS, RESULTED IN THE
PUBLIC CHANGE OF OPINION ABOUT
CANNABIS, RIGHT.
I'M HOPING THAT THE PEOPLE WHO
ENTERED THIS ROUND OF LOTTERY
WILL GET A CHANCE TO JUST APPLY
LIKE A REGULAR BUSINESS.
THAT WOULD BE THE DREAM.
YOU KNOW, THERE'S A... AS MARK
WAS SAYING, THERE'S ALWAYS A WAY
AROUND THE REGULATIONS THAT ARE
CREATED, WHICH SHOULDN'T BE,
RIGHT.
THERE SHOULD JUST BE POLICY THAT
MAKES SENSE AND LICENSING
OPPORTUNITIES THAT ARE... THAT
WORK AND MAKE SENSE.

Nam says SO WHAT WOULD BE A
POLICY THAT MAKES SENSE?

Abi says HAVING AN
APPLICATION THAT HAS SOME KIND
OF MERIT BASE TO IT.
THAT WOULD BE A GREAT START, AS
OPPOSED TO A RANDOM LOTTERY THAT
JUST HAS RANDOM PEOPLE THAT WILL
SELL THEIR OPPORTUNITY, WHILE
PEOPLE LIKE MYSELF HAVE TO KEEP
TRYING TO SURVIVE TO PAY THE
RENT UNTIL THE NEXT LOTTERY OR
THE NEXT OPPORTUNITY, WHICH IS
VERY, VERY DIFFICULT.
YOU KNOW, COMPANIES LIKE MY OWN,
WE'RE STILL OPEN FOR BUSINESS,
WE'RE STILL PAYING THE RENT, AND
WE HAVE TO SEND 200 TO 300
PEOPLE A DAY DOWN TO SOMEONE
ELSE'S STORE TO DO WHAT WE WANT
TO BE DOING AND WHAT WE FOUGHT
TO BE DOING FOR THE LAST 20
YEARS.

Nam says MARK, WHEN YOU HEAR
THAT, WE HEAR THAT THERE'S BEEN
PRODUCT SHORTAGES, BUT IF YOU
HAVE PEOPLE LIKE ABI THERE, HOW
DOES THAT MAKE SENSE?

Mark says IT'S KIND OF
ROOTED IN THE WAY THAT
RECREATIONAL LEGALIZATION ROLLED
OUT.
IT DIDN'T... IT WASN'T DESIGNED
TO MEET THE EXISTING MARKET
WHERE IT WAS.
SO WE HAVE NO SHORTAGE OF
CANNABIS IN THIS COUNTRY.
THERE IS A LOT OF PEOPLE IN THE
BLACK MARKET OR THE GREY MARKET
OR ILLICIT MARKET WHO ARE
GROWING PRETTY GOOD CANNABIS AND
HAVE BEEN SUPPLYING THE COUNTRY
FOR DECADES.
THE MARKET WASN'T REALLY
DESIGNED WITH THOSE PEOPLE IN
MIND.
IT WAS DESIGNED TO TAKE A NUMBER
OF LARGE, WELL-CAPITALIZED
MEDICAL CANNABIS FIRMS THAT
EMERGED AFTER 2014 AND
ESSENTIALLY HAND THEM THE LEGAL
MARKET.
AND THEN ALSO BRING NEW PEOPLE
INTO THE MARKET.
SO A LOT OF THE SHORTAGES ARE...
I MEAN, THEY'RE ROOTED IN A
NUMBER OF THINGS, ONE OF WHICH
IS THESE COMPANIES HAD A REAL
DIFFICULT TASK WHICH WAS SCALING
UP FROM BEING A MEDICAL COMPANY
THAT'S SERVICING 10,000, 20,000
PATIENTS, TO ALL OF A SUDDEN
BEING ABLE TO SERVICE A MUCH
LARGER CUSTOMER BASE.
IN DOING SO, THEY WENT AROUND
AND RAISED A TON OF MONEY,
BOUGHT GREENHOUSES, VEGETABLES
GREENHOUSES THAT THEY TRIED TO
CONVERT AND STARTED GROWING IN A
SHORT AMOUNT OF TIME INDUSTRIAL
CANNABIS.
IT HASN'T GONE TERRIBLY WELL.
THE QUALITY IS NOT THERE TO
COMPETE WITH THE EXISTING
MARKET.
THERE'S BEEN A LOT OF CROP
FAILURES, A LOT OF PROBLEMS WITH
DISEASE AND PESTS.
THESE PROBLEMS ARE NOT
INSURMOUNTABLE AT ALL.
WE ARE VERY GOOD AT INDUSTRIAL
AGRICULTURE IN THIS COUNTRY.
WE WILL ABSOLUTELY GET THERE
WITH CANNABIS AS WELL.
BUT IN TERMS OF THE RAMP-UP TO
GET SUPPLY ONLINE, IT RELIED
ON... YEAH, IT RELIED ON
INFRASTRUCTURE THAT WASN'T
NECESSARILY ABLE TO GROW.
AND THEN THE OTHER POINT I WOULD
WANT TO MAKE IS A LOT OF IT HAS
TO DO WITH KIND OF MISSING
EXPECTATIONS.
A LOT OF THESE COMPANIES... IT'S
LARGELY OF HOW THEY RAISED
MONEY.
THEY WENT TO... BANKS WOULDN'T
GIVE THEM MONEY.
THE ONLY PEOPLE WHO WOULD GIVE
THEM MONEY WAS BROKERAGES AND
FIRMS THAT SPECIALIZE IN HIGH
RISKS.
OIL AND GAS FINANCING AND HEDGE
FUNDS, ALL THESE PEOPLE WHO CAN
PUT THEIR MONEY IN AND OUT OF
THESE COMPANIES QUICKLY DEMANDED
THEY HYPE THE HECK OUT OF
THEMSELVES.
THESE LEGAL CANNABIS COMPANIES,
MEDICAL CANNABIS COMPANIES SENT
THE LAST TWO YEARS SENDING OUT
ENDLESS PRESS RELEASES, SIGNING
CONTRACTS THEY WOULDN'T
NECESSARILY BE ABLE TO FILL,
TELLING THE MARKET, WE CAN DO
THIS, WE CAN DO EVERYTHING,
PROMISING THE SUN, MOON, AND
STARS, AND OF COURSE THEY'RE NO
DIFFERENT THAN ANY OTHER
AGRICULTURAL BUSINESS.
THEY STILL HAVE TO GROW PLANTS.
SO A LOT OF THE SUPPLY SHORTAGE
WE'RE FEELING HAS TO DO WITH THE
EXPECTATION THAT WAS CREATED BY
THESE COMPANIES, WHICH IS A
FUNCTION OF HOW THEY RAISED
MONEY, VERSUS THE REALITY OF
RUNNING AN AGRICULTURAL
BUSINESS, WHICH IS HARD.
AND ESPECIALLY IT'S HARD IF
YOU'RE USING PLANTS THAT
AREN'T... HAVEN'T BEEN BRED, DO
NOT HAVE THE GENERIC ENGINEERING
TO BE GROWN IN THESE MASSIVE
GREENHOUSE ENVIRONMENTS.

Nam says IT SEEMS MESSY.

Abi says IT IS, FOR SURE.
I THINK THE SIMPLEST WAY TO PUT
IT IS THE OPPORTUNITY WAS GIVEN
NOT TO THE EXISTING MARKET.
IT WAS GIVEN TO A GROUP OF
PRODUCERS THAT HAD ACCESS TO
CAPITAL, LEGAL ADVICE, LOBBYING
ABILITY, AND THEY RAISED MONEY
BY MAKING BIG PROMISES AND THEY
HAVEN'T, AT LEAST IN THE SHORT
TERM BEEN ABLE TO LIVE UP TO
THESE PROMISES.

Nam says ABI, I SEE YOU NODDING.
WHAT WOULD YOU LIKE TO ADD?

Abi says CANNABIS IS A
CONSUMER PACKAGED GOOD.
IT IS A LEGAL PRODUCT AS IT IS
SOLD THROUGH RETAIL CHANNELS,
AND I THINK A LOT OF THE
MARKETING, THE PRODUCT BRANDING,
AND THE RETAIL IS REALLY MISSING
THE MARK.
FOR A CONSUMER TO CONVERT FROM
THE... I GUESS THE ILLICIT
MARKET, THE CURRENT MARKET, INTO
THE LEGAL MARKET, THEY HAVE TO
HAVE A PRODUCT THAT THEY TRUST,
BRANDS THAT THEY TRUST, A
RETAILER THAT THEY TRUST, AND
PROFITS THAT THEY ACTUALLY WANT.
SO I THINK ON TOP OF MISSING THE
MARK AND REALLY FOCUSING ON
CAPITAL INSTEAD OF THE PRODUCT,
THEY'RE ALSO MISSING THE MARK IN
HOW TO GET THE CONSUMER TO WANT
THEIR END PRODUCT.
SO I THINK THAT'S WHERE THE
INDUSTRY HAS REALLY HIT KIND OF
A SNAG, WHERE YOU HAVE PEOPLE
WHO COME FROM PHARMACEUTICAL,
TOBACCO, AND ALCOHOL RUNNING
CANNABIS, WHO MOST HAVE NEVER
CONSUMED CANNABIS AND DON'T
UNDERSTAND THE CULTURE AND ARE
RUNNING C.P.P. AND RETAIL.

Nam says THEY DON'T UNDERSTAND
THE PRODUCT.

Abi says THE PRODUCT OR
THE CONSUMER.

Nam says I WANT TO COME BACK TO
THE LEGAL AND ILLEGAL MARKET IN
A SECOND.
ONE OF THE COMPANIES THAT HAS
BEEN IN THE NEWS IS CAN TRUST.
CAN YOU TELL US WHAT'S GOING ON
WITH THEM.

The caption changes to "Subscribe to The Agenda Podcast: tvo.org/theagenda."
Then, it changes again to "In the weeds."

Mark says THEY'RE A
LARGE PRODUCER THAT TRANSITIONED
INTO THE RECREATIONAL MARKET.
THEY HAD GOTTEN IN TROUBLE WITH
HEALTH CANADA.
THEY WERE FOUND TO HAVE GROWN A
LARGE AMOUNT OF PRODUCT, VALUED
50 MILLION dollars OF PRODUCT IN ROOMS
THAT WERE NOT YET LICENSED BY
HEALTH CANADA.
THIS HAS LED TO HEALTH CANADA
INVESTIGATION, INVESTIGATION BY
THE ONTARIO SECURITIES
COMMISSION, AND AN ABSOLUTE
COLLAPSE IN THE COMPANY'S STOCK.
THEY FIRED THE C.E.O.
THEY ASKED THEIR CHAIRMAN TO
RESIGN.
IT'S BASICALLY FULL MELTDOWN
MODE.
IT'S A VERY STRANGE STORY
BECAUSE THIS COMPANY WAS IN THE
WORLD OF LICENSED PRODUCERS,
VERY, VERY HIGHLY REGARDED.
IT WAS THE COMPANY THAT HAD
SIGNED PARTNERSHIPS WITH FIRMS
LIKE APATEX, BREW 2 BEVERAGE.

Nam says SO A LARGE PLAYER?

Mark says THEY HAD A LOT
OF MEDICAL PATIENTS, VERY HIGHLY
REGARDED.
A LOT OF PEOPLE ARE SCRATCHING
THEIR HEADS AND SAYING WHY WOULD
YOU TAKE THE RISK AND GROW IN
ROOMS THAT HADN'T BEEN LICENSED
IN A VERY OPEN MANNER?
I'M NOT SURE WHAT THE ANSWER TO
THAT IS.

Nam says DO YOU THINK THAT HARMS
THE CANNABIS MARKET SINCE IT'S A
NEW THING HERE?

Mark says HUGELY.

Nam says IN WHAT WAY?

Mark says IN A NUMBER OF WAYS.
WHENEVER THERE IS A BIG
REGULATORY BREACH, REGULATORS
WILL LOOK AT THEIR PROCESSES AND
TIGHTEN UP THEIR PROCESSES FOR
EVERYBODY.
THE MORE IMMEDIATE ISSUE IS THIS
COMPANY HAD GONE AND RAISED A
LOT OF MONEY FROM LARGE BANKS,
RBC BEING ONE, A NUMBER OF BANKS
IN THE STATES, CITIBANK, BANK OF
AMERICA.
THESE BANKS HAD BEEN UNWILLING
TO FINANCE THE CANNABIS SPACE
BECAUSE IT WAS RISKY.
AND THEN THEY JUMPED IN AND
PICKED WHAT THEY THOUGHT WAS THE
MOST REPUTABLE COMPANY.
SO THEY FINANCED CAN TRUST.
TWO MONTHS LATER IT EXPLODED.
THAT SENT THE BANKERS RUNNING
FOR THE HILLS BECAUSE THEY NO
LONGER WANT TO BE INVOLVED
BECAUSE THEY WANT TO DO MORE DUE
DILIGENCE ON THE CANNABIS SPACE.
SO IT'S AFFECTING THE REST OF
THE SPACE PERHAPS IN TERMS OF
MORE REGULATORY SCRUTINY COMING
OUT, BUT ALSO MAKING IT MORE
DIFFICULT TO RAISE MONEY.
AND HE IS ON TOP OF THE LAST SIX
MONTHS, ESSENTIALLY CAPITAL
MARKETS HAVE DRIED UP FOR A LOT
OF CANNABIS FIRMS THERE.
IT WAS VERY EASY TO RAISE 20
MILLION dollars ON NOTHING BUT A NAPKIN
BUSINESS PLAN A YEAR AGO,
BECAUSE YOU COULD RAISE THAT
MONEY AND GO HYPE IT TO THE
MARKET.
IT'S BECOMING VERY DIFFICULT TO
DO THAT TODAY.
SO UNLESS YOU'RE ESSENTIALLY ONE
OF THE BIG FIVE OR SIX LARGEST
CANNABIS COMPANIES, THE ABILITY
TO RAISE MONEY IS HARD AND CAN
TRUST HAS MADE THAT HARDER.

Nam says ABI, WHAT IS YOUR
REACTION TO THE CAN TRUST STORY?

Abi says AGAIN, I THINK A
LOT OF WHAT MARK IS SAYING...
AND I THINK THEY WERE DESPERATE
TO BRING BACK A RETURN FOR
INVESTORS, RIGHT.
SO WHEN... AGAIN, WHEN YOU TAKE
AN ENTIRE INDUSTRY, YOU REGULATE
IT IN CRAZY WAYS THAT MAKE NO
SENSE AND MAKE IT REALLY
DIFFICULT TO CONTINUE AND TO
CONDUCT BUSINESS, IT LEAVES
PEOPLE REALLY DESPERATE TO DO
DESPERATE THINGS.
IT LEFT A HUGE COMPANY DOING
SOMETHING QUITE DESPERATE JUST
TO TURN A PROFIT AND SHOW THEIR
INVESTORS THAT THE MONEY WAS
WELL INVESTED.

Nam says LET'S TALK ABOUT WHERE
PEOPLE GET THEIR CANNABIS.
STATISTICS CANADA RELEASES A
SURVEY EVERY QUARTER LOOKING AT
CANNABIS USE ACROSS THE COUNTRY.

A slate appears on screen, with the title "Buying cannabis. Nearly 6500 survey respondents."

Nam reads data from the slate and says
THEY SURVEYED NEARLY 6500 PEOPLE
AND FOUND 42 percent HAVE PURCHASED
SOME CANNABIS FROM ILLEGAL
SOURCES, 48 percent HAVE PURCHASED SOME
FORM OF A LEGAL SOURCE, 28 percent HAVE
PURCHASED A LEGAL SOURCE ONLY.
MARK, DO THESE NUMBERS SURPRISE YOU?

The caption changes to "The black market."

Mark says AT FIRST LOOK,
THEY SURPRISED ME, AT FIRST
GLANCE.
IT SEEMED LIKE THE FOUR IN TEN
PEOPLE BUYING FROM ILLEGAL
SOURCES SEEMED LOW.

Nam says YOU THINK IT'S HIGHER?

Mark says MUCH.

Nam says HOW?

Mark says I THINK THE
BIGGEST THING TO NOTE IS THE
NUMBERS ARE NOT ASKING HOW MUCH
DID YOU BUY.
IT IS ASKING DID YOU BUY A
LITTLE BIT, A GRAM OR A JOINT
FROM THE LEGAL OR ILLEGAL
MARKET.
I THINK THE MORE INTERESTING
NUMBER TO FOCUS ON IS THE 30 percent
THAT ONLY BOUGHT FROM THE
ILLEGAL MARKET.
THINK ABOUT IT IN TERMS OF THE
ALCOHOL MARKET.
IF YOU HAVE A MATURE MARKET,
IT'S NOT LIKE I SAY I BUY A BIT
OF BEER FROM THE L.C.B.O., BUT I
HIT UP MY BUDDY BASEMENT FOR
MOON SHINE.
THAT'S NOT WHAT A MATURE MARKET
LOOKS LIKE.
SO WHEN WE SAY 30 percent, ONLY 30 percent
BOUGHT ONLY FROM THE LEGAL
MARKET, THAT DOESN'T SUGGEST TO
ME THAT IT'S A PARTICULARLY
MATURE MARKET.
I THINK THE OTHER PERHAPS BETTER
NUMBERS TO LOOK AT WHEN YOU'RE
LOOKING AT THE SIZE OF THE
ILLICIT MARKET VERSUS THE LEGAL
MARKET IS THE G.D.P. NUMBERS
THAT CAME OUT IN THE LAST
QUARTER OF 2018 WHICH SAID OF
TOTAL HOUSEHOLD SPENDING, ABOUT
1.5 BILLION dollars OF CANNABIS, ONLY
300 MILLION dollars WENT TO THE LEGAL
MARKET.
NOW, THE OTHER 1.2 BILLION HAVE
BEEN SPENT IN THE ILLEGAL
MARKET.
LEGAL SALES HAVE BEEN GROWING
MONTH OVER MONTH, HEALTH CANADA
TRACKS THAT, WE HAVE SEEN
GROWTH.
BUT WE'RE STARTING FROM A
RELATIVELY LOW STANDPOINT, THE
MAJORITY CAPTURE, 80 percent OF THE
MARKET GOING TO THE ILLICIT
MARKET, 20 percent GOING TO THE LEGAL
MARKET, THAT WAS FROM SEVERAL
MONTHS AGO.
YOU HAVE A BIT OF
MONTH-OVER-MONTH GROWTH, BUT I
WOULD BE BLOWN AWAY IF WE WERE
CLOSE TO 50 percent.
I WOULD PROBABLY... I MEAN, IT'S
ANYONE'S GUESS, BUT THE... I
GUESS DON'T BE FOOLED BY THE
NUMBER THAT SAYS 50 percent BOUGHT FROM
THE LEGAL MARKET, 42 percent BOUGHT
FROM THE ILLEGAL MARKET, BECAUSE
THAT DOESN'T SAY WHERE THE
MAJORITY OF CANNABIS IS BEING
SOURCED FROM.

Nam says ABI, DO YOU THINK A
COST OF CANNABIS IS A FACTOR IN
THOSE NUMBERS?

Abi says I THINK SOMETIMES.
ILLEGAL CANNABIS CAN BE VERY
EXPENSIVE.
I PURCHASED SOME CANNABIS AT AN
LEGAL STORE.
I PAID ALMOST A THIRD AS I WOULD
HAVE FROM, FRANKLY, AN ILLICIT
SOURCE.
I THINK ACCESSIBILITY IS NUMBER
ONE.
PEOPLE DON'T WANT TO WALK BLOCKS
AND BLOCKS TO GO TO ONE STREET
THAT HAS TWO STORES.
AND THEN...

Nam says MAYBE YOU LIVE
SOMEWHERE...

Abi says OR THERE'S NO
STORES AT ALL.
AND I THINK A LOT OF THE LEGAL
CANNABIS THAT WAS PURCHASED IS
PROBABLY ONLINE PURCHASES IN
SMALL TOWNS, WHERE PEOPLE DON'T
HAVE A CHOICE.
THERE IS NO ILLEGAL DISPENSARY
AND MAYBE THERE'S THE ONE DRUG
DEALER THAT WAS OUT OF TOWN FOR
A WEEK AND THEY WENT TO THE
WEBSITE, RIGHT.
AND THEN ACCESSIBILITY, PRODUCT
VARIETY, THOSE ARE REALLY
IMPORTANT, AND PRODUCT QUALITY.
THOSE ARE REALLY IMPORTANT
FACTORS.
ONLINE, ILLICIT SALES ARE VERY
MUCH THERE.
THERE IS A LOT OF ONLINE
RETAILERS CAN OFFER
FANTASTIC-QUALITY PRODUCT AT
LOWER PRICES AND MUCH MORE
VARIETY.
SO WE'LL SEE NEXT YEAR WHEN MORE
PROVINCES GET MORE RETAIL ON
BOARD.
WHEN PHASE 2 PRODUCTS COME INTO
PLAY, TOPICALS, EDIBLES, VAPE
PENS, EXTRACTS, WHEN THOSE COME
INTO PLAY, THAT WILL HAVE A HUGE
FACTOR IN VARIETY.
THAT WILL ATTRACT A LOT MORE
PEOPLE TO THE LEGAL MARKET.
ALL YOU CAN BUY IS FLOWER, A
PRE-ROLL, THAT'S YOUR VARIETY.

Nam says THAT NEEDS TO BE DONE
TO CONVINCE PEOPLE TO BUY FROM
LEGAL SOURCES?

Abi says AGAIN, ACCESSIBILITY.
SO THE LARGE PROVINCES WITH THE
MOST POPULATION HAVE THE LEAST
AMOUNT OF RETAIL STORES, RIGHT,
ONTARIO, QUEBEC,
BRITISH COLUMBIA BARELY HAVE ANY
RETAIL, WHERE ALBERTA HAS MUCH
LESS POPULATION, THEY HAVE I
THINK 250 RETAIL STORES NOW,
RIGHT.
WE NEED BETTER-QUALITY PRODUCTS,
WE NEED MORE VARIETY OF
PRODUCTS.
AND AGAIN, THE MARKETING HAS TO
BE MORE AUTHENTIC AND MORE IN
TOUCH WITH WHAT PEOPLE ACTUALLYWANT

The caption changes to "Producer: Katie O'Connor, @KA_OConnor."

Nam says THANK YOU, MARK AND
ABI, FOR BEING HERE AND HELPING
US UNDERSTAND WHAT'S GOING ON IN
THE INDUSTRY.

Mark says THANK YOU

Watch: The Rocky Rollout of Legal Cannabis