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Marijuana Legalization in Canada: Pros and Cons for Your Business

Overview

  1. What do you mean by 'legal'?
  2. History of Legalization in Canada
  3. Opportunity Knocks
  4. Marijuana Legalization Across Canada
  5. The Cost of Doing Buisness for Restauranteurs
  6. The Grass Is Always Greener...
  7. Key Takeaways

What do you mean by 'legal'?

On October 17, 2018 Canada made history when its federal Cannabis Act went into effect, making Canada the second country in the world, after Uruguay, to formally legalize recreational use of the plant.

While several countries and states have decriminalized possession and use of marijuana, legalization allows for the government to tax legally produced cannabis and regulate its use as well as its supply chain. With the new legislation, adults in Canada who are of legal age (depending on the province or territory), will now be able to legally:

  • Purchase limited amounts of fresh cannabis, dried cannabis, cannabis oil, cannabis seeds, or cannabis plants from retailers authorized by the provinces and territories;
  • Possess up to 30 grams of dried legal cannabis or equivalent in non-dried form in public;
  • Consume cannabis in locations authorized by local jurisdictions;
  • Grow up to four cannabis plants per household (not per person) for personal use, from licensed seeds or seedlings from licensed suppliers;
  • Share up to 30 grams of dried cannabis or equivalent with other adults;
  • Make legal cannabis-containing products at home, such as food and drinks, provided that dangerous organic solvents are not used in making them.

The impact of this major public policy change could be substantial. After all, marijuana sales are a several billion dollar industry, and 4.2 million Canadians report using cannabis in the last three months with over half of those saying they were “daily” or “weekly” users. With lighting up now legal, small businesses realize that some things will undoubtedly change, the question is whether the impact will be for the better or for the worse. And more, what are the pros and cons of marijuana legalization for businesses across Canada?

But First, How Did We Get Here?

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Canada first banned cannabis in 1923, 14 years before it was made illegal in the U.S., but not because of its rampant use -- the first seizure of cannabis by Canadian police was not until 1937. Instead, it was introduced by the then Director of the Federal Division of Narcotic Control, who became convinced that cannabis would soon fall under international control after discussion at a League of Nations meeting.

Until 1961, cannabis convictions accounted for just 2% of Canada’s arrests. In the 1960s, however, convictions for cannabis shot up to 2,300 cases in 1968 and to 12,000 in 1972 – some citing the influence of “hippie culture” and increased travel to other countries where cannabis was more common. In response to the uptick, Canada passed the Narcotics Control Act of 1961 increasing maximum penalties to 14 years to life imprisonment.

The next major wave of cannabis legislation came in 2001 with Health Canada’s Medical Marihuana Access Program, later replaced by Marihuana for Medical Purposes Regulations (MMPR) in 2014. Under this regulation, individuals with a physician’s prescription could have access to marijuana to treat certain health conditions, and there were authorized producers and dispensaries that met stringent medical marijuana security requirements. In 2015, MMPR was expanded to include brownies, teas, and oil. Medical cannabis further evolved in 2016 with

Access to Cannabis for Medical Purposes Regulations, granting individuals who require marijuana for medical purposes the right to grow their own or designate someone else to produce it for them.

In 2016, fulfilling a campaign promise, newly elected Prime Minister Justin Trudeau announced his plan to get cannabis consumption and incidental possession removed from the Controlled Drugs and Substances Act. Clarifying his position on the issue, Trudeau said, “I have no doubt that Canadians and entrepreneurs will be tremendously innovative in finding ways to create positive economic benefits from the legalization and control of marijuana but our focus is on protecting kids and protecting our streets.”

The Cannabis Act, which passed the last legislative hurdles in June and went into effect in October, doesn’t just legalize recreational sale and use; it also includes serious criminal penalties for those who sell, market or provide cannabis to minors.

Opportunity Knocks

With cannabis legalized, Canadians are expected to spend $7 billion on marijuana sales in 2019, according to global accounting firm Deloitte. With those kinds of numbers, entrepreneurs are eyeing opportunities opening up in the new marketplace.

Consider that last year in California, consumers purchased $180-million worth of cannabis-infused food and drink. Meanwhile, in Colorado, where recreational cannabis has been legal since 2014, a cannabis tourism industry has blossomed – think cannabis yoga classes, cannabis oil massages and even ziplining over marijuana fields.

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Legal cannabis in Canada does not yet include edibles or infusions – that’s been promised in 2019. However recreational cannabis leads to a lot of pros and cons as well as to a lot of unknowns:

  • Should regulation of its sale and consumption be modeled after that of alcohol and tobacco?
  • How heavy a hand should government play?
  • Do local communities get a voice?
  • What's the best way to deal with employees, patrons or guests that are impaired?

It’s a social, bureaucratic, and entrepreneurial experiment with the kinds of implications not seen in the developed world since the U.S. ended Prohibition in the 1930s.

Fortunately or not, Canada’s 13 provinces and territories are each taking their own unique approach to carrying out the new legislation by setting their own rules for cannabis sale and consumption. A diverse patchwork of regulation, the provinces’ cannabis laws serve as micro experiments for what model works best. For small business owners, that means that the challenges and opportunities will vary widely across Canada. Here’s a rundown of what cannabis legalization looks like in each province so far:

Marijuana Legalization: Pros and Cons Chart

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Alberta

Alberta is one of two provinces where the legal age for cannabis is 18 rather than 19. Generally in Alberta, you can’t smoke cannabis in any place where smoking tobacco is already prohibited, and cannabis cafes and lounges will remain illegal there for now. Cannabis can be sold in private retail storefronts while online sales will be by run by the government. There is no limit to the amount of cannabis storefronts that can open, but there is a 15% cap on how much of the market each business can retain.

British Columbia

In British Columnbia, Cannabis will be sold exclusively at government-run stores, licensed private retailers, and the government’s online store. Private retail stores cannot offer online sales and delivery services for non-medical cannabis are not permitted. There is no cap on the number of storefronts but a licensee can only have an interest in up to 8 retail stores or franchises. Cannabis use is not permitted at cannabis retail locations.

Manitoba

The province’s agreement with retailers allows them to each open a maximum of 10 stores in Manitoba. Cannabis can be sold by private retail both online and by storefront yet the provincial government gave municipalities the option of conducting a plebiscite to ask residents whether they want to ban pot shops from their communities: Two southern Manitoba cities with a history of alcohol prohibition have decided to say no to cannabis. Growing marijuana at home is prohibited while most other provinces permit 4 plants per household.

New Brunswick

In New Brunswick, cannabis can be sold only at government-run retail storefronts, which are capped at 20 sites. Cannabis use is prohibited in public and can only be used in private residence, where it must be stored in a locked container or locked room.

Newfoundland and Labrador

Cannabis can only be legally purchased at stores licensed through the Newfoundland and Liquor Corporation (NLC) or online through NLC’s web portal. There will be approximately 30 licensed stores spread throughout the province. In a kind of unique retail setup known as “farm gate,” licensed cannabis producer Canopy Growth’s grow facility in St. John’s will have a retail outlet attached to it.

Northwest Territories

People 19 and over can buy cannabis at most Northwest Territories Liquor Stores. The NWT Liquor & Cannabis Commission’s website is the only legal option for purchasing cannabis online in the NWT. Cannabis use in the NWT is limited to private property where smoking tobacco is allowed; on trails or roadways (when not operating a motor vehicle); and parks when not in use for a public event. As in Manitoba, NWT communities without an existing cannabis store have options for restricting or banning cannabis by holding a plebiscite.

Nova Scotia

The Nova Scotia Liquor Corporation is the only authorized retailer of cannabis in Nova Scotia, both online and via storefronts. It’s the only province that will have co-sales of cannabis, meaning it will be sold in existing NSLC liquor stores—although the cannabis and alcohol will be sold in separate areas. In Nova Scotia, you can’t smoke cannabis in any place where smoking tobacco is already prohibited.

Nunavut

During the first year of legalization in Nunavut, online sales of cannabis will exist only online through Tweed. By 2019, the province hopes to license establishments to sell cannabis, including stores and lounges, subject to community approval. Smoking cannabis is prohibited were tobacco smoking restrictions apply.

Ontario

Ontario, which intends to allow cannabis smoking anywhere cigarette smoking is permitted, announced a private retail model that will launch April 1, 2019. Before that, online purchases will be available from the Ontario Cannabis Store. The OCS will also act as the exclusive wholesale supplier and distributor to private stores. The private sector will be required to display an Official Ontario Cannabis Retailer Seal to “help consumers identify legitimate retailers where federally quality assured products can be found.”

Prince Edward Island

The only legal way to purchase recreational cannabis is through PEI Cannabis stores, online and via 4 storefronts. Adults 19 and over can only use cannabis in a private home or yard with the owner’s permission.

Quebec

In Quebec, cannabis can only be sold at government-run stores. The Société québécoise du cannabis (SQDC) opened three outlets in Montreal and 12 across the province as cannabis became legal across Canada. There are plans to open between 150 and 160 stores in the next two to three years. The age limit, for now, is 18, but the new CAQ government is planning to raise it to 21.

Saskatchewan

The Saskatchewan Liquor and Gaming Authority (SLGA) plans to approve 51 private retail permits for cannabis sales during the first three years of legalization, and retailers must have a storefront to establish sales online. According to Lift&co magazine, the Saskatchewan government is only minimally involved in the cannabis supply chain whereas other provinces will buy supply from producers, and then sell it through their own stores or through private retailers. Consuming cannabis in public places is prohibited in the province.

Yukon

Initially, the Yukon Liquor Corporation will run one physical storefront in Whitehorse and an online store. The province reports that additional options may be available through private licences once regulations are complete. Adults 19 and over can only use cannabis in a private home or yard with the owner’s permission.



Price Wars and the Black Market

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While cannabis has been selling out across the country, there’s a wide discrepancy of prices according to province. The most expensive cannabis is in Northwest Territories, where it sells for $11.46 a gram vs. the national average of $6.83 per gram.

Consumers are dismayed at the high prices. “I paid $71 for seven grams,” one man told the CBC. “It’s cheaper to go to my dealer.” Some believe that as long as cannabis is prohibitively expensive to buy through legal retailers, the black market will thrive as will its gang violence and potentially tainted products.

Even if cannabis does disappear from the black market, others are concerned whether another illicit substance will take its place. “We have escaped the opioid crisis across the country,” said Nunavut’s Chief Medical Officer of Health. “Really, that is unexplainable. We are going to have to keep a close eye to see if other illicit substances replace the use of cannabis.”

Workplace Safety Concerns

On a more micro level, small business owners may be concerned with workplace safety issues with recreational cannabis use legal. According to Health Canada’s 2017 Canadian Cannabis Survey, 10% of respondents reported using cannabis before or at work less than once a month, and 8% used cannabis before or at work weekly or daily. Use on the job is easily prohibited but when it comes to consumption when off the clock, there’s no consensus about safe timing of cannabis use as THC can stay in a person system’s for varying durations.

To that end, the Canadian Public Health Association released guidelines that recommend cannabis users wait six hours or even longer before driving or operating machinery, for instance. Meanwhile the Occupational and Environmental Medicine Association of Canada stated that it was not advisable to operate motor vehicles or equipment, or engage in other safety-sensitive tasks, for 24 hours following cannabis consumption. Companies such as Calm Air has banned all staff in safety-sensitive positions from consuming cannabis within 45 days of flying and warns if staff doesn’t comply, they could be grounded.

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Of all the industries, Accommodation and Food Services have the highest prevalence of employee marijuana use, according to a recent study. While those staff may not be landing airplanes, businesses such as restaurants must also consider what an acceptable window of cannabis consumption should be for those who are, for example, using meat cleavers and deep fat fryers.

There’s also tricky legal footwork required if you or your restaurant manager suspect that an employee is high on cannabis now that’s its use is legal. “I would caution my employers not to walk up to that employee who is sitting there stinking of weed and say, ‘You’re fired’,” says one employment lawyer. “Instead, the employer may be obligated to start a conversation and offer assistance or time off. If the cannabis habit remains a lingering issue, an employer can dismiss an employee citing undue hardship.”

Business Liability Questions

Canadian restaurant and bar owners are also concerned with how legal recreational cannabis further complicates liability issues and introduces the need for more employee training. One frustrated owner says that while she can stop serving a patron who’s had too much to drink, “What’s to stop them from maybe not having as much to drink as they normally do, but they’re going to smoke a joint before they leave or on their way home?,” she said. “I don’t think that the government did their due diligence for us as business owners.”

Most provinces already require that anyone serving alcohol complete a responsible service training program to ensure that they understand their legal responsibilities and learn techniques to prevent over-service. With cannabis legalized, only some provinces (British Columbia, Saskatchewan and Prince Edward Island) have revised their mandatory courses on the responsible service of alcohol to include a section on identifying patrons impaired by alcohol and cannabis.

Growth of a Different Kind

Just as legalized cannabis introduces new challenges for small business, particularly those in the food and hospitality sector, it presents new areas for growth as well. Ontario’s Second Cup Coffee Co., a coffee retailer with more than 300 cafes across Canada, has been losing market share recently but is strategizing to take advantage of the “green rush” the Cannabis Act has triggered. They’ve signed a partnership with marijuana clinic operator National Access Cannabis to convert some of its coffee shops into cannabis dispensaries and even pot lounges, if made legal in years to come.

While the current state of cannabis legalization in Canada is very restrictive – limited forms of cannabis can only be sold and consumed at very specific locations as regulated by each province – those in the food and drink business have started eyeing new ways to grow their business if those terms of legal cannabis expand.

For instance, in Colorado, there’s microdose-infused cannabis blueberry pancakes served at breakfast, cannabis hollandaise sauce, and places where guests can roll a sushi roll and a cannabis joint at the same time. Even before the Cannabis Act, there were secret supper clubs in parts of Canada where chefs serve cannabis-infused meals at intimate gatherings in private locations to test the appetite for fine, high dining. Beyond its recreational use, some think cannabis could be the next superfood craze as it contains protein, carbohydrates, insoluble fiber, potassium, magnesium, sulfur, calcium, iron, zinc, and vitamins E and C.

And yet, restaurants serving cannabis-infused meals could still be a long way off. It’s true that edible cannabis will be legalized in 2019 but because of the risk of overdosing, all edible cannabis products must be packaged in child-resistant containers with labels that display a health warning. That could mean that guests purchase a bottle of cannabis-infused salad dressing, for example, to dose their own meal.

If guests start dosing their meal with recreational cannabis in any form -- consuming or smoking cannabis instead having beer or wine with dinner – the alcohol industry could take a hit. Yet there’s serious concern about the intoxication effects of mixing alcohol and cannabis, prompting U.S. states where recreational cannabis is legal to mandate that cannabis and alcohol cannot be sold or consumed at the same location. It’s more likely that designated cannabis lounges will emerge as legal places of consumption as Canada’s current cannabis legislation restricts use at point of sale and some provinces restrict use further by limiting it to private homes.

While establishments may not be turning their spare room into a cannabis lounge just yet, restaurants and bars are getting into the celebratory spirit the end of a prohibition that has been in place for 96 years. On the day the Cannabis Act took effect, many food businesses took to social media touting their establishment as a designated “chill space” to celebrate the new law and promote an alternative customer experience. Others posted crave-able food images with prompts like “Anyone else got the munchies today?”

Pros and Cons of Cannabis Legalization Debate

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Pros of legalizing marijuana for your buisness

  1. $7 billion revenue opportunity in projected marijuana sales in 2019 alone
  2. Added opportunity in cannabis edibles and infusions promised in 2019
  3. Opportunity for savvy businesses to market cannabis as next big 'superfood'
  4. Reduced black-market marijuana activity and associated socio-economic problems
  5. First-mover advantage for Canadian business owners on the international stage
  6. Opens new cafe and lounge growth possibilities and pot dispensary partnerships

Cons of legalizing weed for your buisness

  1. Navigating the diverse patchwork of cannabis laws, prices, and regulations
  2. Communities concern over harmful illicit substances replacing pot trafficking
  3. Potential workplace safety issues due to THC's prolonged affect after use
  4. Tricky legal footwork required when suspecting employee’s are high on cannabis
  5. Potential liability issues for business owners and need for more employee training
  6. Serious concern about the intoxication effects of mixing alcohol and cannabis