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Are Canada's Cannabis Licencing Rules Opening up to Smaller Producers?

Dave Jackson Dave Jackson, Stockhouse
0 Comments| August 20, 2019


It’s the classic or cliched (depending on your point of view) David and Goliath struggle – big cannabis versus small micro cultivators.

Conventional wisdom tells us that in a market this vast and valuable – a potential US$340 billion “global total addressable cannabis market” – there are plenty of slices in the pie to go around. But, then again, there are the means to monopolization and fundamental human greed also at play.
 
Enter a new licensing process for legal cannabis producers in Canada. But, according to the smaller producers or ‘micro-cultivators’, there’s an inherent structural problem in the process. They say it limits their ability to attract investment, which could leave the fledgling industry dominated by the big cannabis companies with deep pockets or those who got a foot in the door prior to regulation changes in May.
 
The changes came about after Health Canada – the federal agency in charge of the licensing process – was swamped by applications for licensed producers (LPs). This, in turn, put a massive strain on its resources and causing months of applicant delays.
 
Since 2013, Health Canada has received over 800 applications for cannabis licences. Of those, 457 passed the initial paper-based review, but 70 percent of the applicants have yet to show evidence they’ve built a facility.

 
“The Little Guys”

Since the new ruling, to apply to some day sell cannabis products, a company must have a growing facility built without any guarantee it will receive the licence that would make the facility legal and potentially profitable.
 
The new rules aren’t deterring everyone though, one BC-based company sees significant profit potential in going small. Pasha Brands Ltd. (C.CRFT, Forum) is Canada’s only prohibition-era cannabis brand house and North America's largest craft cannabis brand house. This vertically-integrated, CSE-listed company boasts a strong, established cultivation network, brand, and retail footprint across British Columbia and beyond.


 
(Click image to enlarge)

 
Canada has tens of thousands of craft producers operating in the illicit cannabis market – an estimated 20,000 in BC alone. And it’s no secret the Canadian market, for all its potential, is plodding through ongoing supply challenges. The current crop of licensed cannabis producers are only able to supply an estimated 15 percent of what Canadians are consuming. In an August 2019 news release on the North 40 partnership, Pasha’s leadership stated that it is optimistic these new supply agreements will help correct the cannabis supply imbalance and bring exciting new products to market.
 
Their business model is as a facilitator, quality control keeper, and marketer for the thousands of micro-cultivators across the province. In essence they’re the guys promoting and helping out best-in-class BC bud. In a recent Stockhouse article, the Company detailed its plan to take on big cannabis…one small craft cannabis cultivator at a time.
 
Not unlike the battle between the big macro beer producers and their smaller, niche craft beer counterparts, the craft cannabis industry is taking the fight directly to the consumer. A lower quality, mass-produced product designed for the masses versus high-quality, organically-grown bud catering to the ‘cannabis connoisseur’.
 
But what does the term "craft cannabis" actually mean? In a space that's still striving to define itself post-legalization, there's no single agreed-upon interpretation.
 
The term "wasn't really widely used" before 2016, says Teresa Taylor, a director with the Craft Cannabis Association of British Columbia. The organization represents mostly unlicensed, small-scale cultivators and product producers in B.C.'s thriving black-market cannabis economy.
 
"I think the essence of craft cannabis is that it's a careful consideration of the cultivators to the needs of the plant and in the crop to bring out the full potential," says Taylor. "So, a focus on genetics, small batch, high-quality, unique products.
 
The Craft Cannabis Association of BC is a non-profit organization based in Nelson, BC. It’s mandate is to assist small, independent growers navigate regulations and distribution deals.
 

FULL DISCLOSURE: Pasha Brands Ltd. is a client of Stockhouse Publishing.



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