Lp,s are doomed!
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Like cannabis, Canada’s crowded craft beer industry is tapped out.
What brewers say must happen to stay afloat.
Hobbled by the COVID-19 pandemic and an oversaturated market, craft brewery insiders say consolidation is needed to save the industry.
Bonno
Economic,s
Owning a craft brewery is supposed to be about passion and fun. For Muthu Sakthivel, co-founder of Bell City Brewing Co. in Brantford, Ont., the last two years have mostly brought pain and frustration instead.
Bell City, tucked into a corner unit of a strip mall, saw its sales plunge by more than half during the pandemic, even as the brewery scrambled to meet delivery orders from customers locked down at home. Government wage subsidies helped blunt the impact of the revolving door of COVID-19 rules – open, close, open, close. So did having an understanding landlord and forgiving vendors, up to a point.
But Mr. Sakthivel, a 30-year veteran of the brewery industries in India and Canada, had mortgaged his house to launch Bell City with a partner in 2014 and the thought of losing his home weighed heavily on him.
So in December, with Bell City falling behind on its rent, on payments to suppliers and on its tax bill, – “The government is sleeping now but we accumulated a lot of beer tax and HST that’s going to attack like a lion charging,” he said – Mr. Sakthivel accepted a deal to sell control of the brewery to a tiny upstart beverage company from North Carolina.
“Things couldn’t continue the way they were,” he said.
Mr. Sakthivel’s experience is a microcosm of an industry that to insiders and outsiders alike can seem like an inexplicable black box, in which heavy debt loads and financial red ink are the norm yet few breweries show outward signs of trouble and there is no shortage of new entrants keen to join the fray. For years the craft brewery market grew at explosive rates, with new breweries pouring into the sector at a furious pace. In the five years before the pandemic hit, the number of breweries in Canada more than doubled to around 1,100, with small craft breweries accounting for all of that increase and defying repeated warnings that the craft market was long past tapped out.
Growth in the number of breweries in Canada
Annual count
0
200
400
600
800
1,000
1,200
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
300
THE GLOBE AND MAIL, SOURCE: BEER CANADA
DATASHARE×
Year Number of breweries in Canada
2008-01-01 300
2009-01-01 290
2010-01-01 310
2011-01-01 330
2012-01-01 380
2013-01-01 430
2014-01-01 520
2015-01-01 641
2016-01-01 694
2017-01-01 817
2018-01-01 994
2019-01-01 1121
2020-01-01 1195
GROWTH IN THE NUMBER OF BREWERIES IN CANADADOWNLOAD CSV×
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While the pandemic threw the industry into turmoil, many craft brewers managed to hold on by pivoting to deliveries and relying heavily on government largesse. Some entrepreneurs even saw an opportunity in the crisis, with scores of new breweries opening their doors last year.
Now some argue a reckoning is coming. Brewers must grapple not only with the immediate financial damage caused by the pandemic, but surging costs that threaten to wipe out what meagre profits exist in an industry where the majority of brewers were already losing money even before COVID-19 came along.
It all sets the stage for what industry observers believe will be, at best, an extremely difficult period ahead, and at worst, an era marked by closures and bankruptcies.
Or if Mr. Sakthivel has his way, consolidation. While his brewery has changed hands, he isn’t going anywhere.
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The company that bought Bell City, EARI Group, is a world apart from the international beer giants that have stalked large and mid-sized Canadian breweries in the past. Born out of the shell of a failed video-game developer last year, EARI trades as a penny stock on the over-the-counter (OTC) market, considered the sub-basement of the public equities realm.
Small as it is, EARI has an ambitious plan to consolidate a swath of Ontario’s congested craft beer sector, with Mr. Sakthivel joining as an adviser while he continues as brewmaster at Bell City. Now it’s Mr. Sakthivel’s job to help convince other breweries to come on board.
It’s a phenomenon that’s already under way in some parts of the craft sector. Last fall, Toronto’s Lost Craft merged with High Park Brewery. Then, in February, two of Ontario’s most established craft breweries came together when Steam Whistle Brewing bought Beau’s Brewing Co.
Mr. Sakthivel believes this is just the beginning. Peering over the rim of his glasses and clutching a pint of his brewery’s lager as he sits amidst Bell City’s brew tanks and stacks of kegs, Mr. Sakthivel offers a stark message to his fellow craft brewers: Merge or die.
“Don’t be afraid of joining hands with other brewers and growing fast and growing bigger, there’s nothing wrong with that,” he said. “Remaining small forever will kill you.”
For an industry trying to regain its balance, it’s decision time. Some brewers aren’t waiting around.
While Canada’s first microbreweries launched in 1985, with the likes of Granville Island Brewing in B.C. and Ontario’s Upper Canada Brewing Company – both since absorbed by foreign-owned beer giants – Canada’s craft beer boom really kicked into high gear in the mid-2000s as consumers embraced more flavourful, locally produced brews.
It was a trend politicians were also keen to foster, since craft breweries were proving to be big employers in local economies. Over the years, federal and provincial governments devoted untold millions in grants, loans and subsidies to young and upstart breweries.
Employment at all breweries
Number of jobs
0
5,000
10,000
15,000
20,000
1997
2001
2005
2009
2013
2017
9420
THE GLOBE AND MAIL, SOURCE: STATISTICS CANADA
DATASHARE×
Year Brewery jobs
1997-01-01 9420
1998-01-01 8420
1999-01-01 7885
2000-01-01 6880
2001-01-01 7020
2002-01-01 7360
2003-01-01 7955
2004-01-01 7420
2005-01-01 8240
2006-01-01 8175
2007-01-01 9655
2008-01-01 10385
2009-01-01 10920
2010-01-01 10045
2011-01-01 10095
2012-01-01 10955
2013-01-01 10905
2014-01-01 11190
2015-01-01 12270
2016-01-01 13595
2017-01-01 15350
2018-01-01 17360
2019-01-01 18595
2020-01-01 17440
Today the craft brewery industry is anything but micro. While no national sales figures for the sector exist, it’s estimated craft beer accounts for at least one-tenth of Canada’s $9.1-billion in beer sales. In B.C., for instance, microbreweries that produce less than 15,000 hectolitres a year (a category that encompasses 94 per cent of all breweries in the country) account for roughly 13 per cent of all beer sold through stores and restaurants, according to the BC Liquor Distribution Branch, a provincial agency.
Still, it’s a highly fractured market. Figures from the Canadian Craft Brewers Association show that among the roughly 1,200 craft breweries in Canada, 95 per cent generate less than $10-million in revenue, and of those, most post sales well below $1-million.
Which meant most craft breweries had little room to manoeuvre when the pandemic hit.
At Beau’s, for instance, the kegs had nowhere to go.
Jason, a taproom associate, fills a glass at Beau's Brewing in Vankleek Hill, Ont. The brewery was recently purchased by Steam Whistle.
The brewery in Vankleek Hill, Ont., about halfway between Ottawa and Montreal, supplied beer to around 700 bars and restaurants in its home province before the pandemic decimated the sector. Seemingly overnight, the company’s sales were chopped in half. Beau’s was forced to destroy $1-million in inventory – that is, beer – as a two-week lockdown morphed into something much worse.
“Every three, four weeks, you have to throw out your entire financial plan and build a new one,” said Beau’s co-founder Steve Beauchesne. “You know it’s only gonna last three or four weeks before the world changes again. So yeah, it’s been a non-stop roller coaster, basically.”
For Beau’s and many in the industry, most of the last two years has been about finding survival strategies to keep the lights on and the brew fermenting. That meant navigating rolling lockdowns while capitalizing on new revenue streams and selling to largely couch-bound drinkers.
While bars and restaurants were frequently closed, customers became easier to reach in other ways. Most provinces, including B.C., Saskatchewan, Ontario and New Brunswick, loosened their restrictions on alcohol sales, allowing beer and wine in takeout and delivery orders from restaurants, for example.
Breweries did a lot of their own deliveries, too.
At Collective Arts Brewing in Hamilton, a brewery known for tapping hundreds of artists to design its cans over the years, the sales team became delivery drivers, or “beer Santa Clauses” as Matt Johnston, co-founder and CEO at the brewery, puts it. “We were often the first person people had seen in weeks,” he said.
Not everyone could take advantage. In Ontario, for instance, only breweries with a retail store at their production site can deliver to customers. That was a problem for the many companies that pay others to carry out their production, otherwise known as contract brewers.
“It was a real struggle for us. As a brand, we didn’t have that ability to survive, frankly,” said Shehan De Silva, the CEO of Lost Craft, a self-described “virtual brewer.” To remedy the situation, Lost Craft merged with High Park Brewery in October and moved into its facility in Toronto’s west end. “We definitely believe in consolidation,” said Mr. De Silva.
Yet even as existing brewers struggled to stabilize their businesses during the pandemic, new entrants seized the chance to launch their own craft breweries. Since the pandemic started, Ontario and British Columbia have actually seen net increases in active breweries, with the two provinces alone growing their combined overall brewery count by more than 100 between 2019 and 2021, according to provincial government figures. It’s a sign of the industry’s resilience, or at least it’s unshakeable lure.
One new brewery to launch in early 2021 was Good Neighbour Brewing in Winnipeg. The brainchild of Morgan Wielgosz and Amber Sarraillon, it became the city’s first female-owned brewery.
Ms. Wielgosz, who has worked as a brewer in the industry for 15 years, quickly admits that “it was a bit of a risk to launch in the middle of a pandemic.” But the couple, who sold their home to finance the launch, felt Winnipeg’s market was not as saturated as some other cities and that they could carve out a niche by serving their immediate neighbourhood.
After contracting out production to another brewery during its first year of business, Good Neighbour bought space last month to install its own in-house brewery operations. “It’s been nerve-racking but I’m quite comfortable saying we’re on the path we came up with in our business plan,” she said.
The craft brew survival story might look very different without the help of the federal government, which offered no-interest loans as well as rent and wage subsidies to struggling businesses amid COVID-19.
Craft brewers and brewpubs pepper the list of Canada Emergency Wage Subsidy recipients, which was analyzed by The Globe and Mail. The amounts each company received under pandemic emergency programs is unknown.
That said, Junction Craft Brewery offers a clue. The Toronto brewery, which has a taproom and event space, filed in October for creditor protection as it restructured its business.
According to court documents, Junction had received around $236,000 via CEWS as of the end of 2020, in addition to other government assistance. That wasn’t enough to stem the bleeding, however, and the brewery reported a loss of about $858,000 that fiscal year.
The pandemic wasn’t the start of Junction’s problems, either. In court filings, the company said its financial difficulties dated to 2018, when its annual loss surpassed $1-million.
Losses are exceptionally common in craft beer. Nearly six in 10 breweries lost money in 2020, according to Industry Canada, on par with 2019 when just 42 per cent were in the black, down from 57 per cent five years earlier.
“A lot of breweries are not in great shape,” said Stuart Wheldon, who became CEO of Junction in 2019, after a previous career in the tech sector. “A lot are relying on investment from shareholders and finding ways to get creative and keep going.”
Despite its troubles, Junction was purchased for $1.1-million by some of the previous shareholders and continued to operate through the restructuring.
“We’re alive,” Mr. Wheldon said. “We’ve got a very aggressive plan to grow.”
Growth is a common refrain from existing and new entrants alike.
However, such talk flies in the face of a top-line industry reality. Overall beer consumption has been on the decline for years as consumers switch to spirits, canned cocktails and hard seltzers, not to mention new cannabis-infused beverages.
Per capita beer sales, by volume
In litres, for those of legal drinking age
60
80
100
120
140
1949
1961
1973
1985
1997
2009
82
THE GLOBE AND MAIL, SOURCE: STATSCAN / NOTE: YEARS END MARCH 31
DATASHARE×
year litres
1949-01-01 82
1950-01-01 80.4
1951-01-01 82.7
1952-01-01 96.2
1953-01-01 96.9
1954-01-01 92.4
1955-01-01 96.9
1956-01-01 98.1
1957-01-01 98.8
1958-01-01 93.5
1959-01-01 99.7
1960-01-01 98.8
1961-01-01 100
1962-01-01 102.6
1963-01-01 105.9
1964-01-01 108
1965-01-01 107.9
1966-01-01 110.9
1967-01-01 112
1968-01-01 110.5
1969-01-01 114.2
1970-01-01 118.2
1971-01-01 121.4
1972-01-01 125
1973-01-01 128.5
1974-01-01 128.1
1975-01-01 128.3
1976-01-01 124.1
1977-01-01 124.3
1978-01-01 120
1979-01-01 122.5
1980-01-01 116.6
1981-01-01 118.5
1982-01-01 114.3
1983-01-01 113.3
1984-01-01 111.2
1985-01-01 109.2
1986-01-01 108.1
1987-01-01 109.1
1988-01-01 106.9
1989-01-01 104.3
1990-01-01 101.2
1991-01-01 98.1
1992-01-01 93.5
1993-01-01 93
1994-01-01 93.2
1995-01-01 92.8
1996-01-01 90.3
1997-01-01 90.5
1998-01-01 91.3
1999-01-01 91.5
2000-01-01 89.5
2001-01-01 90.4
2002-01-01 89
2003-01-01 89.4
2004-01-01 88.3
2005-01-01 89.7
2006-01-01 89.9
2007-01-01 89.4
2008-01-01 89.1
2009-01-01 89
2010-01-01 85.4
2011-01-01 85.4
2012-01-01 82.9
2013-01-01 80.5
2014-01-01 79.1
2015-01-01 79.3
2016-01-01 77.7
2017-01-01 76
2018-01-01 74.6
2019-01-01 71.1
2020-01-01 69.6
Indeed, many breweries have diversified into other beverages, including cannabis-infused drinks, but craft beer remains their top seller.
“Retail shelf space hasn’t kept up with the number of new breweries,” says Mr. Johnston of Collective Arts. “Previously the category was growing and you weren’t fighting for share of stomach. Now the number of breweries has surpassed the growth of the category and you’re starting to see signs the saturation point has passed. This has the potential for tough times ahead. You’re already seeing it in the U.S. with craft breweries closing.”
One problem for anyone looking to open a new craft brewery is that the private nature of the industry can create a façade of success. Even before the pandemic there were instances of brewery owners who hit the wall financially and were forced out. Yet because they quietly found new owners to take over, the troubles never became public.
“It’s an information-poor environment for making business decisions,” said Ben Coli, who co-owns and operates Dageraad Brewing in Burnaby, B.C., which he launched in 2014.
“Look, if you need to open a craft brewery because it’s in your soul, then do it,” he said. “But if you’re piling in because you think it’s a great business, you’re not seeing the people out there losing their shirt and walking away having lost hundreds of thousands of dollars of their families’ money, because it’s all private.”
More exits from the industry are likely, said Ken Woods, president of Black Oak Brewing in Etobicoke, Ont., and a veteran of the beer industry. Many breweries are emerging from the pandemic with loads of new debt, he said, and their workers have been ground down by a tough two years.
“To be honest, the price point right now would have dropped quite dramatically,” Mr. Woods said. There’s plenty of talk that “people are looking to either sell or merge.”
If 2022 will be a year of craft beer consolidation, Beau’s is one example of how the trend might unfold.
Before the pandemic, Beau’s would regularly get unsolicited – and unwanted – takeover offers and investment pitches, which it handily rejected. Yet as the crisis of the last two years wore on, the brewery was left in an increasingly vulnerable position.
To cut costs, Beau’s stopped running its own delivery trucks to liquor stores. Combined with shifting lockdowns and disruptions to its supply of cans, the brewery was struggling to keep its product reliably on shelves.
Enter Steam Whistle. In November, Beau’s partnered with the Toronto brewery on sales and distribution. The benefits were immediate, Mr. Beauchesne said. Steam Whistle was still running its own fleet of delivery trucks, “and suddenly our stock levels improved,” he noted.
In late February, Steam Whistle said it was buying Beau’s for an undisclosed amount.
At the start of the pandemic, a deal ”wasn’t on our radar screen,” Mr. Beauchesne said. But the initial partnership showed “how much better it would be for the business to combine.”
That simple Economics 101 message of economies of scale is at the heart of Mr. Sakthivel’s pitch for the industry to consolidate, whether it’s sharing the cost of trucks, buying larger quantities of malt at lower prices or divvying up marketing expenditures.
Since EARI purchased Bell City, Mr. Sakthivel said four “major” craft breweries have called him to probe for details about the U.S. company’s plans.
A second takeover deal announced in February that would have seen EARI buy Railway City Brewing in St. Thomas, Ont., fell through after the two sides failed to reach an agreement. Railway’s president, John Peart, did not respond to an interview request but said in a statement at the time the brewery would continue to operate normally.
Despite the mixed start to its consolidation plans, EARI is eyeing a shopping spree over the next six to 12 months, said Allan Bradley, the company’s Toronto-based chief financial officer.
By tapping U.S. private equity and merchant banks for financing, EARI is looking to consolidate breweries in Ontario with a combined $25-million in revenue. That could work out to anywhere from eight to 18 acquisitions, depending on the size of the breweries, said Mr. Bradley.
The goal is to keep taprooms and brewing operations intact to maintain each brewery’s local identity, while combining back office operations and providing capital for upgrades.
For instance, in its deal to buy Bell City, EARI paid roughly US$1.2-million in equity, assumed $273,000 of Bell City’s debt and injected $150,000 in new capital into the business for expansion and increased marketing. As it grows, EARI hopes to graduate its shares from the OTC market to the Nasdaq exchange.
Since EARI purchased Bell City, Mr. Sakthivel said four “major” craft breweries have called him to probe for details about the U.S. company’s plans.
“The industry is riddled with breweries with poor management and too much debt,” he said. “We have a lot to choose from out there.”
Other breweries are also on the lookout for acquisitions. “There are assets for sale,” said Lost Craft’s Mr. De Silva. “We kick the tires on a lot of deals in craft beer.”
It’s worth noting that since the pandemic began, the multinationals that own Molson Brewery, Labatt Brewing and Sleeman Breweries have sat on the consolidation sidelines in Canada. (Labatt was the last to do a deal in the sector, buying Calgary’s Banded Peak Brewing in January, 2020.) With those beverage giants all chasing the consumer shift into non-beer drinks, and most Canadian craft breweries too small to make an acquisition worthwhile, it’s not certain they’ll be on the hunt for deals anytime soon.
Nor is everyone in the craft space keen on consolidation. At Collective Arts, a brewery often floated as a potential takeover target, Mr. Johnston dismisses the idea the company would ever be put up for sale.
“From the day we started we’ve heard those rumours, but we’re all about a collective, grassroots support of emerging artists and musicians and we really appreciate our independence,” he said, adding the company still sees opportunity to expand further internationally. As it stands, Collective Arts generates a quarter of its beer, spirits and cocktail sales from the U.S., parts of Europe and Asia.
Still, signs of the shakeout may be showing up, in Ontario at least. In fiscal 2022, which ended March 31, the number of breweries in the province decreased to 427 from 432. It marked the first decline since the craft beer boom began.
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POLITICSWhite House Touts Marijuana Research Amid Biden Inaction
Bonno4/20
President Joe Biden still believes people shouldn’t be incarcerated over marijuana—but there’s still no “update” on any progress to fulfill his decriminalization promise from the campaign trail, the White House said on the unofficial cannabis holiday 4/20 on Wednesday.
Press Secretary Jen Psaki was again asked about the president’s pledge to stop criminalizing people over marijuana at a briefing with reporters. While there’s no news from the administration on that proposal, the official instead touted moves by the Drug Enforcement Administration (DEA) to expand the number of authorized manufacturers to grow cannabis for research purposes.
That didn’t quite address the decriminalization question.
“The president continues to believe that no one should be in jail because of drug use,” Psaki said. “I don’t have an update here. We are continuing to work with Congress, but what I can say on marijuana is we’ve made some progress on our promises.”
DEA approving additional cannabis manufacturers for scientists is “a key step in promoting research because it broadens the amount and quality of cannabis available for research purposes,” the press secretary said.
She added that Biden is “continuing to review his clemency powers, which is something he also talked about on the campaign and certainly remains committed to taking action on.” Psaki made similar remarks on the clemency topic at a briefing in December.
Biden has received about a dozen letters from lawmakers, advocates, celebrities and people impacted by criminalization to do something about the people who remain behind federal bars over cannabis. After months of inaction, some members of Congress like Sen. Elizabeth Warren (D-MA) have even sent follow-up letters demanding a response.
As Biden continues to “review” his clemency powers, he could theoretically turn to a report published by the Congressional Research Service (CRS) last year, affirming that the president has it within his power to grant mass pardons for cannabis offenses.
The report also said that the administration can move to federally legalize cannabis without waiting for lawmakers to act.
But the prospects of unilateral action from the administration to comprehensively end prohibition remain in doubt. About a year ago, Psaki reiterated that the president’s opposition to broad reform “has not changed.”
When asked about a bill to federally legalize marijuana that passed out of the U.S. House of Representatives earlier this month, the official said the president agrees that “our current marijuana laws are not working,” but she declined to directly address whether the president supports the specific legislation.
—
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Biden campaigned on several cannabis reform promises—from rescheduling to expungements to legalization for medical use—but he’s yet to act on most of them after more than a year in office. That’s in spite of intense pressure from lawmakers and advocates throughout his tenures.
Biden himself hasn’t made a substantive public comment about cannabis policy since entering the Oval Office, beside making a quick, dismissive comment to a reporter who asked about clemency for current federal marijuana prisoners.
Vice President Kamala Harris, for her part, suggested last year that the Biden administration isn’t focused on following through on its marijuana reform pledges because it’s too overwhelmed with other issues.
Advocates are losing patience. It’s one thing that the administration hasn’t taken concrete steps on its own to change federal marijuana policy, but it’s also taken actions that subvert reform efforts.
For example, in Biden’s latest budget proposal for Fiscal Year 2023, he again proposed the continuation of a rider blocking Washington, D.C. from legalizing cannabis sales. To the relief of advocates, however, he again kept a separate rider intact to protect legal medical cannabis programs from federal intervention.
The lack of clemency action from Biden is especially disappointing to advocates who have been lobbying the White House to do something on this issue.
Early in 2021, the Biden administration came under fire after it was reported that it had terminated or otherwise punished dozens of staffers who admitted to prior marijuana use as part of their background check process.
Psaki previously attempted to minimize the fallout, without much success, and her office also stressed that nobody was fired for “marijuana usage from years ago,” nor has anyone been terminated “due to casual or infrequent use during the prior 12 months.” However, she’s consistently declined to speak to the extent to which staff have been suspended or placed in a remote work program because they were honest about their history with marijuana on the federal background check form.
For what it’s worth, a poll released in January found that more than half of Americans feel that Biden has made little to no progress on his campaign pledge to decriminalize marijuana during his first year in office—and most people also aren’t betting on him doing more to advance the reform in 2022.
Beside the House passed legalization bill, Senate leadership is also working to finalize its own legislation to end prohibition and promote social equity. However, Senate Majority Leader Chuck Schumer (D-NY) recently pushed back the timeline for that bill’s introduction after saying it would likely be filed this month.
Several Republican members of Congress introduced a bill last November to federally legalize and tax marijuana as an alternative to far-reaching Democratic-led reform proposals and scaled-down GOP cannabis descheduling legislation. The sponsor of that bill, Rep. Nancy Mace (R-SC), said she expects a committee hearing on her proposal.
Last week, a bipartisan group of congressional lawmakers filed a bill that would simply direct the attorney general to create a commission charged with making recommendations on a regulatory system for marijuana that models what’s currently in place for alcohol.
Meanwhile, DEA said in a new report that as more marijuana is being produced domestically in the U.S., it’s undermining illicit cannabis trafficking from Mexico.
Separately, Florida’s agriculture commissioner on Wednesday filed a lawsuit against the Biden administration, arguing that the federal government is unconstitutionally depriving medical cannabis patients of their Second Amendment right to purchase and possess firearms.
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Got a plane to catch.
Canadian cannabis producer Flowr selling Portugal facilities to Akanda
Bonno
April 20, 2022
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Canadian cannabis producer The Flowr Corp. is selling its subsidiary Holigen Holdings, which owns two cannabis cultivation facilities in Portugal, to U.K.-based medical marijuana company Akanda Corp. in a deal worth roughly 35 million Canadian dollars ($28 million).
The purchase price includes CA$3.75 million in cash, 1.9 million Akanda shares, Akanda’s assumption of debt worth CA$5.1 million and interim funding to Holigen, according to a Wednesday news release.
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Akanda will also buy CA$1 million of Flowr shares in a private placement.
Holigen owns RPK Biopharma Unipessoal, which possesses cannabis facilities in Sintra and Aljustrel, Portugal.
In a statement, Flowr interim CEO Tom Flow said the deal will give the company “a significant amount of cash on closing to solidify its balance sheet and also preserve the upside related to our European operations.”
Flowr pulled out of a number of international cannabis markets in 2021.
Akanda described Holigen’s two Portugal facilities as “a high-quality 20,000 square foot indoor EU GMP certified grow facility… dedicated to the cultivation of high-THC premium cannabis” and a large outdoor grow facility.
“Portugal is one of the EU’s leading jurisdictions to conduct cannabis business with a forward-looking government, in addition to a responsive regulator,” Akanda CEO Tej Virk said in a statement.
“The government has been actively discussing the advancement of legalization of adult-use cannabis and Akanda is dedicated to our presence in the country as the landscape continues to evolve.”
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DEA goes to battle in federal court over THC in hemp extractions
Bonno
April 20, 2022 -
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Image of U.S. Court of Appeals, D.C Circuit, in Washington DC
U.S. drug regulators are doubling down on arguments that cannabis extracts with elevated THC levels are illegal even if they come from hemp.
The U.S. Drug Enforcement Administration told a federal appeals court Tuesday that hemp can’t legally be processed into an intoxicant.
“We’re talking about things that are too high in THC to qualify as hemp,” DEA lawyer Sarah Carroll said.
The DEA made the case Tuesday when it faced off with the Hemp Industries Association (HIA) and South Carolina CBD maker RE Botanicals, which are challenging a 2020 DEA rule that criminalizes common hemp extraction practices and intoxicating hemp products.
Carroll told a three-judge appeals court in Washington DC that hemp operators are making “beverages, food, all kinds of things that contain substances taken from the cannabis plant.”
The DEA lawyer also told the judges that the agency has no intention of giving up control over extracts with elevated THC levels.
“If a substance like that is created from a cannabis plant, but the substance itself is high in THC, the substance does not qualify as hemp and is subject to regulation,” Carroll said.
The DEA argument comes as hemp manufacturers are increasingly making intoxicating products that include delta-9 THC or its isomers.
The Hemp Industries Association and RE Botanicals are asking the court to stop the DEA from saying that hemp extracts become illegal drugs if they exceed 0.3% THC, even if the extracts come from legal hemp.
At issue is whether the DEA can criminalize the hemp-extraction process. Hemp operators point out that even low-THC hemp often goes “hot,” or above the legal threshold of 0.3% THC, during the extraction process.
CBD manufacturers “inevitably and necessarily” handle extracts that exceed 0.3% THC, argued HIA lawyer Shane Pennington. CBD makers can then adjust the extracts during processing to meet the legal standard.
He said that Congress did not mean to make CBD production illegal when it authorized nationwide hemp production in 2018 and that the DEA is wrongly trying to put itself in charge of the CBD industry.
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Pennington argued that the DEA’s 2020 rule is somewhat like saying that cake is legal but that the flour and eggs a baker needs to make a cake are illegal substances subject to DEA control.
A decision in the case is expected in three to six months.
The DEA has yet to enforce its extraction rule, but hemp operators say the industry has already suffered because of it.
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Health Canada referred almost 500 cannabis-related cases to federal police over 2-year period
Bonno, International Editor
April 18, 2022 - Updated April 18, 2022
Health Canada referred nearly 500 cannabis business-related cases to the Royal Canadian Mounted Police (RCMP) for possible enforcement action during the two years ending in March 2021, a major increase over fiscal year 2018-19.
The federal government’s top cannabis regulator disclosed the police referrals after MJBizDaily inquired about the referrals’ absence from the agency’s latest compliance and enforcement report.
Health Canada said the referrals “typically consist of illegal cannabis retailers or sales, including physical locations and online sales, illegal cultivation operations and/or illegal delivery or distribution services.”
The person, company or organization targeted in the referrals aren’t identified.
In the 2019-20 fiscal year, 287 cases were sent to the national police force – a ninefold increase over the 2018-2019 financial year, when Health Canada referred 32 cases to the RCMP.
In 2020-21, Health Canada referred another 197 cases to police, the agency told MJBizDaily.
This is the first time the 484 referrals in 2019-20 and 2020-21 have been disclosed.
Combine those 484 referrals with the previously disclosed 32 referrals for fiscal 2018-19, and Health Canada has referred 516 cases to police since the spring of 2019 – about five months after Canada legalized cannabis.
Health Canada explained that, upon receiving a complaint, it advises the individual making the complaint to contact local law enforcement if they suspect illegal activity has taken place, such as the unauthorized production, selling or distributing of cannabis.
Health Canada also said it assesses whether any complaints relate to regulated cultivators, producers or sellers.
“In cases where a complaint relates to illicit activities, the information is referred directly to the RCMP as it is within law enforcement’s mandate to take action against illegal cannabis activity and those who operate outside the legal framework,” a spokesperson said via email.
No licensed producers?
Health Canada told MJBizDaily that none of the cases referred to the federal police service in fiscal 2019-20 directly involved federal license holders or personal/designated medical growers.
However, the spokesperson added that one case “related to a federal license holder” in the 2019-20 year was referred to the RCMP.
“This case was not captured in the data previously provided due to an administrative oversight,” the spokesperson noted.
It’s not known which licensed producer Health Canada is referring to.
The health department said it is unable to comment on any specific case referred to the RCMP because of privacy reasons.
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Health Canada regulates recreational and medical cannabis production.
It also grants individuals permission to cultivate a specified amount of medical marijuana, or people designated to grow it for someone else, known as personal/designated growers.
Author was told a specific breakdown of the hundreds of cases referred to police was unavailable.
“While a breakdown is not available, referrals to the RCMP typically consist of illegal cannabis retailers or sales, including physical locations and online sales, illegal cultivation operations, and illegal deliver or distribution services,” the spokesperson wrote.
“In cases where a complaint relates to unauthorized, illicit activities, the information is referred directly to the RCMP.”
6,259 cannabis-related charges
The RCMP would not answer most of author‘s questions regarding the referrals made by Health Canada.
A spokesperson for the federal police force said in a statement that the agency “cannot confirm the number of files referred by Health Canada, nor the number of files looked into by the RCMP pertaining to cannabis.”
However, the RCMP acknowledged it filed 3,139 charges related to cannabis during in the 2019-20 fiscal year.
In the following year, 2020-21, RCMP acknowledged another 3,120 charges related to cannabis.
Police couldn’t say how many of the 6,259 charges – if any – were related to regulated businesses.
The spokesperson said it “would be a very significant effort” to figure that out and the RCMP “will not be in a position to provide you the information requested.”
In the statement, police said: “RCMP federal policing is working on organizational priorities and concentrating efforts towards serious and organized crime and more dangerous drugs, such as Fentanyl and synthetic opioids.
“Federal policing targets the most serious criminal threats to Canadians, including national security, transnational and serious organized crime, and cybercrime.
New York’s illicit marijuana market thrives ahead of adult-use launch
author profile picture.
Bonno Legal & Regulatory Reporter
April 19, 2022 -
Image of illicit marijuana products for sale in lower Manhattan
Illicit marijuana products are openly on sale at Washington Square Park in lower Manhattan's Greenwich Village neighborhood.
Scores of illicit shops are flourishing across New York, posing a competitive threat to the state’s upcoming multibillion-dollar adult-use marijuana industry.
In fact, some unlicensed sellers are peddling marijuana products such as flower, pre-rolls and edibles from small stands out in the open – including in public venues such as Greenwich Village’s Washington Square Park, long known as a popular meeting spot and cultural hub.
The regulated recreational marijuana market in New York is projected to launch late this year or in early 2023.
The 2022 MJBizFactbook projects that annual sales will hit $1 billion-$1.2 billion in 2023 and $2.2 billion-$2.7 billion by 2026.
Underground operators, however, could draw customers away from the licensed businesses because they don’t pay taxes and licensing fees and, so, can offer lower prices.
At the same time, the state hopes to convert these illicit businesses into licensed companies and persuade customers to buy regulated products that have passed high safety and health standards.
As of last week, the state Office of Cannabis Management said it had issued 52 cease-and-desist letters since February in attempts to rein in the illicit activity across the state, much of it in the New York City area.
The cease-and-desist letters ordered the underground businesses to stop the illegal activity or risk being rejected for a license in the legal market.
The illegal operators also were warned of the possibility of steep fines and criminal penalties.
Andrew Ghitelman, the office’s deputy director of communications, wrote in an email to MJDaily that the regulator “will work with our partners to enforce the law,” but he declined to elaborate on the “ongoing investigations.”
Crackdown could hinder diversity
There might be a good reason for that, experts said: Cracking down on illicit sellers is tricky because many are the same people the state wants to convert into licensed equity businesses in an effort to develop a diverse adult-use cannabis industry.
In March, the state announced it would issue the first round of retail recreational licenses to individuals with marijuana-related convictions and associated entrepreneurs.
The state has a goal of issuing 50% of all adult-use licenses to equity applicants and wants to create a $200 million public-private fund to help support those individuals.
“What’s critical is the intention of those (illegal) operators,” said Rob DiPisa, co-chair of the cannabis law practice at New Jersey-based Cole Schotz.
“Is their intention to convert (to the regulated market)? If their intention is to continue to operate in the legacy market, then it just compounds the problem New York already has with its legacy market.”
It’s difficult to get a handle on the amount of illicit marijuana sales in New York.
New Frontier Data estimates that illicit sales nationwide totaled $66 billion in 2020. The firm noted in a blog post that an estimated “24% of U.S. cannabis sales were believed legal” that year.
The essential resource for cannabis business leaders across all sectors provides the latest data and in-depth analysis you need to develop informed business strategies and avoid costly missteps.
Illinois-based multistate operator PharmaCann, which has one of the New York’s 10 lucrative vertical medical marijuana licenses, said New York must curb illegal activity – even if that means cracking down on some individuals whom the state hopes to persuade to join the regulated industry.
“Illicit market activity is rampant in New York and actively undermines the goal of the General Assembly to create a diverse, revenue-generating regulated market to displace the illicit market,” Jeremy Unruh, PharmaCann’s senior vice president of public and regulatory affairs, told MJBizDaily via email.
“Stakeholders must come to terms with the fact that allocating resources to quash the illicit market does not run afoul of decriminalization objectives.”
State regulators have a similar message.
“New York State is building a legal, regulated cannabis market that will ensure products are tested and safe for consumers while providing opportunities for those from communities most impacted by the over criminalization of cannabis prohibition – illegal operations undermine our ability to do that,” Ghitelman of the Office of Cannabis Management wrote in his email.
Running afoul by “gifting”
New York’s illicit operations include small storefronts, street stalls and consumption lounges.
As has happened in other emerging adult-use markets such as Vermont, many businesses believe they are taking advantage of a legal loophole by “gifting” cannabis if customers pay for merchandise such as T-shirts, club memberships or marijuana delivery fees.
But those transactions are considered illegal sales under New York’s Marijuana Regulation and Taxation Act (MRTA), according to state regulators.
Based on anecdotal evidence, scores of illicit operations are selling marijuana products, with the number growing in recent weeks and months.
“More and more new ones are opening up,” DiPisa said. “Obviously, they see an opportunity.
“They are seeing other legacy operators not being prosecuted, and then that gives other potential operators the comfort to do it themselves.”
An executive with one of the state’s existing MMJ operators recently observed people selling marijuana products out in the open from small tables set up in Washington Square Park.
The executive – who did not want to be identified because of the sensitive nature of the topic – saw prices of $30-$40 for an eighth of an ounce of marijuana, $15 for pre-rolls and $30 for a 100-milligram bag of gummies.
“A couple of guys even gave me business cards to contact them if I want delivery,” the executive noted.
“This was in Washington Square Park which is known for weed culture historically – so perhaps a bit more prevalent here – but similar stands/setups are all over the city,” the executive added.
Upstate in Buffalo, Scott Mazzo, founder of Vitality CBD, estimated in a recent interview that about 10 such storefronts had emerged in the area, some with signs.
“Storefronts are popping up,” Mazzo said, “gifting” cannabis by selling T-shirts and other merchandise.
“It’s definitely concerning that the gray market in Buffalo is thriving,” he said.
New York cannabis regulators “said it’s not allowed, but it’s not being enforced. Our attorneys, they’re laughing because they say there’s no one here to enforce it,” Mazzo said.
In addition to operating a CBD business, Mazzo is a partner in a prospective equity retail business in the state’s recreational marijuana industry.
One has to be “hyperaware” of the illicit market, he said, because it makes succeeding in the competitive legal market that much more difficult.
In part because of the illicit market, he and his partners are thinking of focusing on more suburban, high-income locations.
Unless a legal establishment can establish itself as more trustworthy, “there’s no reason for people to transition (to the legal market) with higher prices and poor quality products,” he said.
Educational Posters for the 4/20 2022 Rally
By David Malmo-Levine on April 17, 2022
To Bonno
CANNABIS CULTURE – One of the ways in which the “legalization for all” movement is attacked in the corporate press is by insisting that full legalization has been achieved, and there’s nothing left to protest.
For example, here’s a letter from the April 23rd 2015 Vancouver Sun:
“Re: Pot protest evolves into cannabis craft fair, April 21. Now that the 4/20 ‘celebration’ has evolved from a protest into a trade show, it is time Vancouver police and city council treat it like any other event of that nature. Enforce city bylaws and require the organizers to obtain necessary permits and foot the bills for policing and all other associated costs. While they’re at it, they should also insist it take place at a time that is much less disruptive to traffic. I can’t think of any other trade show that would be allowed to be so intrusive. As the number of smokers at the event indicate, marijuana is easy and cheap to obtain, and the legalization (or certainly decriminalization) of it is inevitable, as evidenced by the lack of law enforcement. The need to protest is long past, so treat this trade show as any other and stop using Vancouver tax dollars to support it.”
“Make pot pedlars pay,” Robert Austin, Vancouver, Vancouver Sun, April 23rd, 2015, p. 21
And here’s an opinion article from the Daily Hive from 2019:
“As 4/20 looms, it’s clear a tipping point has been reached in the City of Vancouver. After years of staging the annual protest, we’re now in a new era of legalization. They made it. But organizers insist they’re going ahead with the event at Sunset Beach regardless and they’re not interested in covering the costs that other events are subject to. . . . Pride started as a protest. They grew and evolved. It’s time for 4/20 to as well.”
In response to this nonsense, I’ve written articles for Cannabis Culture about how the Cannabis Act is a fraud, how the continued over-regulation of industrial hemp threatens to guarantee humans suffer from extinction-level climate destabilization, and how people continue to be arrested – and sometimes killed – under “legalization/cartelization.”
But preaching to the converted is not enough. Rally season is an opportunity for outreach to the non-pot-using community – to reach them with our message in the media coverage of the rally, and with posters that advertise the rally.
So every year I come up with an assortment of posters to let the public know that our movement still has valid concerns worth protesting about.
This year I have come up with a series of ten such educational posters. Cannabis Culture has kindly made them available for you to download and print so you too can participate in the public education campaign. There’s no copyright on any of this material, so if you feel like cutting off the bottom part and replacing it with information about the time and place of your own 4/20 rally in your own city or town, feel free to do so.
Cannabis firm seeks creditor protection amid 'critical cash shortage'
Publishing date:Apr 18, 2022 •
Bonno
Eve and Co. chief executive Melinda Rombouts inside the company's greenhouse in Strathroy. (Free Press files)
Eve and Co. chief executive Melinda Rombouts inside the company's greenhouse in Strathroy. (Free Press files)
A Southwestern Ontario pot producer that bills itself as Canada’s first female-focused cannabis company filed for creditor protection as it faces a “critical cash shortage.”
An Ontario court has approved a request by Eve and Co., a licensed cannabis grower that operates a massive greenhouse in Strathroy, to sell assets and seek investment after it was granted protection under the Companies’ Creditors Arrangement Act (CCAA).
“The creditor protection is kind of a temporary holding status,” said Michael Armstrong, a professor at Brock University’s Goodman school of business who studies the cannabis industry.
“All of the current debts are kind of frozen. Now, any new loans under creditor protection, they are protected under the court. It allows the company to bring in more money, enough to keep it running.”
Eve and Co., a publicly traded company listed on the TSX venture exchange, didn’t respond to a request for comment Monday.
The company and its subsidiary, Natural Medco, was founded by Melinda Rombouts, who became the first woman to helm a cannabis producer after converting her Strathroy flower-growing greenhouse into a medical marijuana grow-op.
After Canada became the second country to legalize recreational pot in 2018, cannabis companies across the country raced to build out their operations to meet the expected demand.
Eve and Co. secured a $18.7 million loan from Royal Bank of Canada in 2019 to expand its Naperton Drive greenhouse to 93,000 square metres, making it one of Canada’s 10 largest marijuana-growing operations at the time.
It also marked one the first times one of the so-called Big Five banks was lending to a cannabis company. At the time, Canadian banks had been hesitant to do business with cannabis firms because of their meagre cash flows, limited assets and fear of running afoul of authorities in the U.S., where the drug remains illegal at the federal level.
“It’s a huge recognition,” Rombouts said at the time of the RBC loan.
But after the initial buzz of legalization wore off, cannabis companies across the country have shuttered operations, scaled back expansion plans, laid off staff and even declared bankruptcy.
A report by BDO Canada, a licensed insolvency trustee, details how Eve and Co. came to face a “critical cash shortage” as a result of lower than expected demand for its products, an oversupply of cannabis and downward price pressure in the domestic market.
A $2.9 million deal to ship medical marijuana to Germany fell apart and a deal to lease out a portion of the Strathroy greenhouse unraveled after the tenant stopped paying the $125,000 monthly lease, the report said.
“The proposed CCAA proceedings will allow (Eve and Co.) to maintain its business operations, preserve supplier relationships, preserve jobs for its employees, provide stability for the benefit of all the applicants’ stakeholders and allow the time to conduct a court-supervised sales and investment solicitation process,” the 15-page report said.
With an oversupply of cannabis in the Canadian market, Armstrong said things such as brand recognition, intellectual property and an established base of medical marijuana customers make companies attractive for acquisition.
“So, would any other cannabis company want to take it over? Maybe, but there would probably have to be something special about this company to make it worth their interest because there’s not very many producers that want more greenhouse space at this point,” he said of Eve and Co.
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DRUG WAR AND DRUG POLICY BIG PHARMA FEATURE JULY 21-28, 2014 ISSUE
The Real Reason Pot Is Still Illegal
Opponents of marijuana-law reform insist that legalization is dangerous—but the biggest threat is to their own bottom line.
By Bonno JULY 2, 2014
The-Real-Reason-Pot-Is-Still-Illegal
Patrick Kennedy, son of the late Senator Ted Kennedy, did several stints in rehab after crashing his car into a barricade on Capitol Hill in 2006, a headline-making event that revealed the then–US congressman for Rhode Island had been abusing prescription drugs, including the painkiller OxyContin. Kennedy went on to make mental health—including substance abuse—a cornerstone of his political agenda, and he is reportedly at work on a memoir about his struggles with addiction and mental illness. In 2013, he also helped found an advocacy group, Project SAM (Smart Approaches to Marijuana), which has barnstormed the country opposing the growing state and federal efforts to legalize pot.
Taking the stage to rousing applause last February, Kennedy joined more than 2,000 opponents of marijuana legalization a few miles south of Washington, DC, at the annual convention of the Community Anti-Drug Coalition of America (CADCA), one of the largest such organizations in the country.
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“Let me tell you, there is nothing more inconsistent with trying to improve mental health and reduce substance-abuse disorders in this country than to legalize a third drug,” Kennedy boomed. The former congressman also praised his fellow speakers for standing up to the “extremist responses” from legalization advocates.
Given that CADCA is dedicated to protecting society from dangerous drugs, the event that day had a curious sponsor: Purdue Pharma, the manufacturer of Oxy-Contin, the highly addictive painkiller that nearly ruined Kennedy’s congressional career and has been linked to thousands of overdose deaths nationwide.
Prescription opioids, a line of pain-relieving medications derived from the opium poppy or produced synthetically, are the most dangerous drugs abused in America, with more than 16,000 deaths annually linked to opioid addiction and overdose. The Centers for Disease Control and Prevention report that more Americans now die from painkillers than from heroin and cocaine combined. The recent uptick in heroin use around the country has been closely linked to the availability of prescription opioids, which give their users a similar high and can trigger a heroin craving in recovering addicts. (Notably, there are no known deaths related to marijuana, although there have been instances of impaired driving.)
People in the United States, a country in which painkillers are routinely overprescribed, now consume more than 84 percent of the entire worldwide supply of oxycodone and almost 100 percent of hydrocodone opioids. In Kentucky, to take just one example, about one in fourteen people is misusing prescription painkillers, and nearly 1,000 Kentucky residents are dying every year.
So it’s more than a little odd that CADCA and the other groups leading the fight against relaxing marijuana laws, including the Partnership for Drug-Free Kids (formerly the Partnership for a Drug-Free America), derive a significant portion of their budget from opioid manufacturers and other pharmaceutical companies. According to critics, this funding has shaped the organization’s policy goals: CADCA takes a softer approach toward prescription-drug abuse, limiting its advocacy to a call for more educational programs, and has failed to join the efforts to change prescription guidelines in order to curb abuse. In contrast, CADCA and the Partnership for Drug-Free Kids have adopted a hard-line approach to marijuana, opposing even limited legalization and supporting increased police powers.
A close look at the broader political coalition lobbying against marijuana-law reform reveals many such conflicts of interest. In fact, the CADCA event was attended by representatives of a familiar confederation of anti-pot interests, many of whom have a financial stake in the status quo, including law enforcement agencies, pharmaceutical firms, and nonprofits funded by federal drug-prevention grants.
The anti-pot lobby’s efforts run counter to a nationwide tide of liberalization when it comes to marijuana law. In 2012, voters legalized pot in Colorado and Washington State; this year, voters in Alaska appear poised to do likewise. Since 1996, twenty-two states and the District of Columbia have legalized medical marijuana or effectively decriminalized it, and a contentious ballot initiative in Florida may result in the South’s first medical marijuana law. Meanwhile, legislatures across the country are debating a variety of bills that would continue to ease marijuana restrictions or penalties. On the federal level, a bipartisan coalition of lawmakers has challenged the Drug Enforcement Administration in testy hearings, and many have called for removing marijuana as a Schedule I drug under the Controlled Substances Act, which puts it in the same class as heroin and LSD.
The opponents of marijuana-law reform argue that such measures pose significant dangers, from increased crime and juvenile delinquency to addiction and death. But legalization’s biggest threat is to the bottom line of these same special interests, which reap significant monetary advantages from pot prohibition that are rarely acknowledged in the public debate.
* * *
The CADCA convention featured a roster of federal officials and members of Congress as well as a guest appearance by R&B singer Mario. The speakers talked with energy about the coming showdown over marijuana-law reform.
“We need to apply what Hank Aaron said about baseball to our movement today,” asserted Sue Thau, a CADCA consultant. “We need to always keep swinging!”
Buses were scheduled to ferry the participants to Congress for meetings, and Thau coached the assembled activists to emphasize the potential risks for young people, something that “everybody on Capitol Hill can agree on.” In addition to lobbying against marijuana-law reform, she encouraged everyone to preserve key federal funding streams, to “make sure all the programs that fund our field, every one of them,” are protected in the appropriations process for the coming fiscal year.
Ironically, both CADCA and the Partnership for Drug-Free Kids are heavily reliant on a combination of federal drug-prevention education grants and funding from pharmaceutical companies. Founded in 1992, CADCA has lobbied aggressively for a range of federal grants for groups dedicated to the “war on drugs.” The Drug-Free Communities Act of 1997, a program directed by the White House Office of National Drug Control Policy, was created through CADCA’s advocacy. That law now allocates over $90 million a year to community organizations dedicated to reducing drug abuse. Records show that CADCA has received more than $2.5 million in annual federal funding in recent years. The former Partnership for a Drug-Free America, founded in 1985 and best known for its dramatic “This is your brain on drugs” public service announcements, has received similarly hefty taxpayer support while advocating for increased anti-drug grant programs.
The Nation obtained a confidential financial disclosure from the Partnership for Drug-Free Kids showing that the group’s largest donors include Purdue Pharma, the manufacturer of OxyContin, and Abbott Laboratories, maker of the opioid Vicodin. CADCA also counts Purdue Pharma as a major supporter, as well as Alkermes, the maker of a powerful and extremely controversial new painkiller called Zohydrol. The drug, which was released to the public in March, has sparked a nationwide protest, since Zohydrol is reportedly ten times stronger than OxyContin. Janssen Pharmaceutical, a Johnson & Johnson subsidiary that produces the painkiller Nucynta, and Pfizer, which manufactures several opioid products, are also CADCA sponsors. For corporate donors, CADCA offers a raft of partnership opportunities, including authorized use of the “CADCA logo for your company’s marketing, website, and advertising materials, etc.”
The groups’ approach to marijuana contrasts sharply with their attitude toward prescription-drug abuse. In March of this year, the heads of CADCA and the Partnership for Drug-Free Kids sent a letter to Attorney General Eric Holder and other government officials urging them to keep marijuana listed as Schedule I, a designation indicating that it has no recognized medical use and is among society’s most dangerous drugs. “We are aware of a small chorus in the United States Congress (copied on this letter) who are calling for the rescheduling of marijuana,” wrote Arthur Dean, a retired general and the president of CADCA, and Stephen Pasierb, head of the Partnership. “[O]ur groups agree with the most recent Health and Human Services (HHS) determination that marijuana should remain a Schedule I drug.”
* * *
CADCA’s website makes it clear that the organization—dedicated to a “world of safe, healthy and drug-free communities”—has adopted marijuana as its primary concern. The group’s stated policy priorities are to preserve and expand two federal drug-prevention grant programs and to oppose marijuana-law reform. CADCA has hosted training seminars to instruct community organizations in the best tactics for opposing efforts to legalize even medical marijuana. The group also offers template letters to the editor, sample opinion columns, talking points and other tips for pushing back against reform efforts.
Prescription drugs are another story. In this realm, both CADCA and the Partnership favor educational campaigns and limited pill-monitoring programs—measures that experts on painkiller addiction say are insufficient to deal with the burgeoning problem. CADCA’s site mentions prescription-drug abuse primarily in the context of expanding outreach programs funded through the Drug-Free Communities Act.
In February, the same month that CADCA held its convention, forty-two leading drug-prevention groups sent a letter to the Food and Drug Administration to protest the recent approval of Zohydro. Notably absent from the signatories: CADCA and the Partnership for Drug-Free Kids. A policy paper posted by CADCA regarding prescription drugs doesn’t call for a shift in how the FDA regulates painkillers, arguing instead that federal drug-prevention grant programs should be expanded.
Asked about CADCA’s efforts to combat prescription-drug abuse, Thau replied that the group supports educational programs and drug-monitoring efforts, and also recently signed on to a bill—sponsored by Senator Ed Markey—that offers a civil-liability exemption to those who provide preventative medications to individuals experiencing an overdose. CADCA has also promoted voluntary drug “take-back” events that encourage people to bring their unused pharmaceuticals to a central location for disposal.
It’s important to keep in mind, however, that industry groups haven’t opposed any of these measures. But they do oppose those restrictions that could eat into the industry’s profits. In 2012, for example, a group of doctors and drug-prevention advocates petitioned the Food and Drug Administration to change the prescription labeling of opioids so that they could be prescribed only for “severe pain,” rather than the “moderate to severe pain” stipulated under the current guidelines. Purdue Pharma opposed the plan, calling on the FDA to “maintain that the current indications for long-acting opioids are appropriate.” According to advocates who spoke to The Nation on condition of anonymity, the Partnership refused to join the push for new prescription guidelines. CADCA didn’t sign on either.
CADCA and the Partnership have also failed to call for action on current bills in Congress to crack down aggressively on painkillers, including the Stop Oxy Abuse Act, which would—in keeping with the suggestion of the doctors’ advocates who petitioned the FDA—allow OxyContin to be prescribed only for severe pain. The two anti-drug groups have not signed on to support the Safe Prescribing Act, which would move hydrocodone products like Vicodin and Lortab from Schedule III to Schedule II, making the product more difficult to prescribe. Nor, for that matter, have they endorsed any of the bills introduced by Representative Hal Rogers or Senator Joe Manchin to block the approval of new, stronger pain-killer drugs such as Zohydro.
“I think it’s hypocritical to remain silent with regard to the scheduling of hydrocodone products, while investing energy in maintaining marijuana as a Schedule I drug,” says Dr. Andrew Kolodny, a New York psychiatrist who heads Physicians for Responsible Opioid Prescribing. Kolodny notes that there are legitimate concerns regarding marijuana legalization, particularly how the drug may be marketed and its effect on adolescents, so “I don’t think it’s inappropriate for them to be advocating on marijuana.
“But,” he adds, “when we have a severe epidemic in America—one the CDC says is the worst drug epidemic in US history—it makes you wonder whether or not they’ve been influenced by their funding.”
In some cases, both CADCA and the Partnership have directly promoted certain opioids. In 2010, Marcia Lee Taylor, the Partnership’s chief lobbyist, signed on to a letter with Will Rowe of the American Pain Foundation asking the Office of National Drug Control Policy to continue Medicaid reimbursements for so-called “tamper-proof” opioids, which cannot be crushed or snorted but can still be abused to deadly effect. (The American Pain Foundation has since shut down, following an investigation by ProPublica showing that the group relied heavily on money from opioid manufacturers and played “down the risks associated with…painkillers while exaggerating the benefits.”) In 2012, CADCA joined with Purdue Pharma and other opioid makers in signing a similar letter to the Centers for Medicare and Medicaid Services.
Prescription-drug manufacturers like Purdue Pharma, which made more than $27 billion in revenues from OxyContin alone since 1996, have faced ethical problems in the past. In 2007, Purdue Pharma and its top executives paid $634.5 million in fines for deceptive marketing that played down the addictive properties of OxyContin. Also that same year, the company agreed to pay $19.5 million to twenty-six states and the District of Columbia to settle claims that it illegally encouraged doctors to overprescribe the drug. But the company’s influence over anti-drug advocacy is less known.
Erik Altieri, a spokesman for the National Organization for the Reform of Marijuana Laws, argues that marijuana can provide a “great alternative for treating chronic pain and other types of ailments.” Pharmaceutical companies “don’t want to see another vendor on the market.”
In a written response to queries, retired general Arthur Dean, CADCA’s chair and CEO, said: “The funding CADCA receives in no way impacts CADCA’s policy efforts or strategic direction. Prescription drugs are legal medicines that serve a legitimate and often life-saving purpose in our society. CADCA has utilized some discretionary grants from industry sources, such as Purdue Pharma and several other companies, to develop programs and tools to help community coalitions prevent and reduce youth prescription drug abuse and the abuse of over-the-counter cough medicine.” Asked about current proposals in Congress to rein in the way painkillers are prescribed, Dean replied: “CADCA has not taken a position on the proposed legislations.”
The Partnership for Drug-Free Kids did not respond to a request for comment. Neither did Purdue Pharma and other opioid makers, including Abbott Laboratories, Pfizer and Alkermes. A spokesperson with Janssen told The Nation that the company funds CADCA to support “educational programs about the safe and responsible use of pain medicines.”
In May, CADCA sent out an action alert to its members, asking them to contact Congress and oppose an amendment in the House of Representatives that would block the DEA from targeting medical marijuana operations that are legal under state law. The measure passed later that month with bipartisan support.
* * *
Patrick Kennedy’s Project Sam is arguably the most visible group opposing marijuana-law reform, with the former congressman making the rounds on HBO’s Real Time With Bill Maher and Comedy Central’s The Colbert Report, among other cable and news programs. And yet this group, too, is rife with potential conflicts of interest.
Some legalization advocates have criticized Kennedy’s crusade against pot. Though the former congressman received many second chances in his struggle with alcohol and prescription drugs, he has opposed any move toward marijuana decriminalization that would afford similar leniency to others. After Project SAM began organizing opposition to Alaska’s legalization initiative this year, demonstrators in Anchorage paraded a giant check with the figure $9,015—the amount in campaign money that Kennedy received from the liquor and beer lobby while in office. Critics have also pointed out that Project SAM’s board and partners represent many of the interest groups that stand to profit from marijuana’s continued prohibition.
“Some of the folks active with Project SAM appear to have a financial interest in keeping marijuana illegal and promoting mandatory treatment for adult consumers,” says Mason Tvert, spokesman for the Marijuana Policy Project in Colorado. For example, Ben Cort, Project SAM’s spokesman, leads a drug-treatment program in Aurora, Colorado.
Tvert points out that marijuana convictions often result in court-ordered rehab, which can provide an obvious incentive for treatment centers to oppose reform. In filings with the Securities and Exchange Commission, the Geo Group—a company that manages several for-profit treatment and detention centers—states that “any changes with respect to the decriminalization of drugs and controlled substances could affect the number of persons arrested, convicted, sentenced and incarcerated, thereby potentially reducing demand for correctional facilities to house them.” In short, marijuana-law reform can cut into revenues.
Dr. Stuart Gitlow, president of the American Society of Addiction Medicine, sits on Project SAM’s board of directors and frequently speaks out against medical marijuana. In comments to USA Today in January, Gitlow disputed President Obama’s comment that marijuana is no more dangerous than alcohol. “There’s no benefit to marijuana,” he said. “It’s simply that people want the freedom to be stoned. That’s all it is. And there’s a great deal of risk.”
What the USA Today piece didn’t mention—and what Gitlow hasn’t disclosed during his appearances on HLN TV, Southern California Public Radio and other local media—is that he serves as the medical director for Orexo, a pharmaceutical company that recently produced a new drug called Zubsolv. The product is an opioid substitute along the lines of Suboxone that, while designed to treat opioid addiction, is often abused for recreational purposes. As The New York Times reported, Suboxone has been linked to more than 400 deaths in the United States since 2003.
Last December, Dr. Mark Willenbring, former director of treatment and recovery research at the National Institute on Alcohol Abuse and Alcoholism, raised concerns about Gitlow’s leadership of the American Society of Addiction Medicine, given his relationship with Orexo. “My concern is with the increasing public perception, especially in psychiatry and addiction treatment, that financial interests taint and discredit professional opinions,” Willenbring told the Alcoholism & Drug Abuse Weekly.
Peter Bensinger, a former DEA administrator, and Robert DuPont, a former White House drug czar, now manage a consulting firm that specializes in workplace drug testing. The two work closely with Project SAM and have spoken at events with its leaders. Last year, for example, Bensinger and DuPont signed on to a Project SAM letter pressing the Justice Department to reconsider its decision to defer the enforcement of federal drug laws in states that have legalized marijuana. For that stance, they’ve come under fire from marijuana-law reformers like Howard Wooldridge of Citizens Opposing Prohibition for promoting “policies that line their pocketbook.”
* * *
Marijuana-law reform has created deep divisions within police agencies. A recent poll of officers found that nearly two-thirds believed marijuana laws should be reformed—with 36 percent agreeing that marijuana should be legalized, regulated and taxed; 14 percent supporting relaxed penalties; 11 percent supporting legalized medical marijuana; and 4 percent supporting decriminalization.
Yet strong institutional forces have kept nearly every law enforcement professional association opposed to reform. Starting with the Reagan administration, police departments were encouraged to seize and sell property associated with drug busts, which significantly augmented their revenue. Between 2002 and 2012, law enforcement agencies collected about $1 billion from marijuana arrests, according to Justice Department data.
It was also during the 1980s that federal grant programs requiring police to engage in drug enforcement were expanded, including the Edward Byrne Memorial Justice Assistance Program, which funds multijurisdictional drug task forces. The Byrne grants, which cover a range of drug enforcement actions including marijuana, provided over $2.4 billion for law enforcement agencies this fiscal year.
“It’s money,” says retired Los Angeles Police Department Deputy Chief Stephen Downing, when asked why so many police organizations are lobbying against marijuana-law reform. “In many states, the city government expects police to make seizures, and they expect these seizures to supplement their budgets.” According to The Wall Street Journal, drug task forces in Washington State have predicted that asset-forfeiture revenues will decrease as a result of marijuana legalization.
Others dispute the notion. Bob Cooke, a former president of the California Narcotic Officers’ Association, asserts that “losing money from asset forfeiture is not why we believe [pot] should be regulated.” Instead, he argues, law enforcement agencies oppose legalizing marijuana because its use is inherently dangerous: “One try and it can ruin your life.”
But the fiscal impact on law enforcement has become part of the debate. Earlier this year, when Minnesota State Representative Carly Melin proposed a medical marijuana bill, she faced a backlash from police lobbyists. “There was a concern about losing federal grants tied to drug enforcement laws,” Melin says. “Asset forfeiture was briefly discussed as well.” She adds that law enforcement agencies approached her bill with “absolute opposition” but changed their position after widespread public pressure. Melin’s bill passed in May once patients and the parents of sick children began contacting lawmakers.
“It’s not hard to figure out that there’s a lot of money attached to enforcing marijuana laws,” Melin says. “Marijuana arrests still account for over 60 percent of drug arrests in Minnesota, so it’s still big business for law enforcement.” Minnesota’s numbers reflect the data compiled by the American Civil Liberties Union, which show that marijuana arrests account for more than half of all drug arrests nationwide.
Similar dynamics have played out elsewhere. When Californians debated a legalization initiative in 2010—which was ultimately unsuccessful—the lead organizer of the opposition was John Lovell, a longtime police lobbyist in Sacramento. Lovell has made a career of channeling federal “drug war” grants to law enforcement agencies in the state—including millions of dollars for the California Marijuana Suppression Program, grants for overtime pay for police, and money for additional officers dedicated to marijuana eradication.
In Florida, the state sheriffs’ association, led by Polk County Sheriff Grady Judd, has become the public face of opposition to a medical marijuana referendum on the ballot this fall. Judd has deployed a number of arguments against the referendum, from the dangers of driving while high to increased workers’ compensation claims, to teenage addiction and increased respiratory illnesses.
But the annual strategic plan submitted to the Polk County Board of Commissioners by Judd’s office suggests another major concern. In it, Judd says that his force is “doing more with fewer resources” and that he’s had to cut seventeen deputy sheriff positions due to a lack of funds. Judd describes seizures from marijuana grow houses as a key revenue source for his department: seizing such property helps to “meet eligible equipment or other non-recurring needs that could not be met by local funding, thereby putting forfeited and unclaimed funds to work in crime prevention, for the taxpayer,” according to the document. Plus a Florida law enforcement newsletter describes the state’s marijuana eradication program—which brought in nearly $900,000 last year in forfeitures, and more than $1 million in previous years—as “an excellent return on investment.”
Downing, the retired LAPD deputy chief, notes: “The only difference now compared to the times of alcohol prohibition is that, in the times of alcohol prohibition, law enforcement—the police and judges—got their money in brown paper bags. Today, they get their money through legitimate, systematic programs run by the federal government. That’s why they’re using their lobbying organizations to fight every reform.”
Indeed, alcohol prohibition was ended partly through ethics reform. During Prohibition, the Eighteenth Amendment was enforced through a law called the Volstead Act, which exempted federal liquor enforcement agents from Progressive-era civil service exams. Without these exams, the Prohibition Unit became a vehicle for awarding patronage jobs to political allies. Almost immediately, these 18,000 federal jobs were marked by scandal and corruption. According to one Treasury agent, the “most extraordinary collection of political hacks, hangers-on, and passing highwaymen got appointed as prohibition agents.” They set up illegal roadblocks, killed innocent civilians, and extorted money from bootleggers rather than arresting them. The wet lobby successfully pushed to re-establish civil service exams for the Prohibition Unit in the late 1920s—a shift that embarrassed dry-lobby supporters, because nearly two-thirds of all agents couldn’t pass the entrance exam. Further weakening support for Prohibition, the Supreme Court declared it illegal in 1927 for local judges to pay themselves with a share of the fines collected from Volstead Act cases.
While not a perfect analogy, some marijuana advocates see the fight against Prohibition as a guide, since so many interest groups working to maintain the status quo today are tied to cash flows—whether federal grants or forfeiture revenues—that depend on keeping the drug illegal.
Prohibition provides “an incentive for these interest groups to keep seeking federal money to continue the ‘war on drugs’ [and] their own salaries,” says Representative Steve Cohen, one of the most outspoken proponents of legalization in Congress. Cohen adds that some of the most vociferous opponents of reform appear to be influenced by the money flowing from pot prohibition. “It’s a vicious cycle.”
Ex-big pharma executive behind OxyContin sells medical marijuana
By Bonno
BBC News, Toronto
Published25 November 2016
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Employees at the Emblem production facility in Paris, Ontario
IMAGE SOURCE,COURTESY EMBLEM
Image caption,
Employees inspect plants at the Emblem production facility in Paris, Ontario
John Stewart used to run the pharmaceutical company behind the narcotic painkiller OxyContin. Now he is banking on medical marijuana.
Mr Stewart does not know which is more controversial these days, OxyContin or pot.
He guesses the average person would give "a bigger negative" to the powerful and controversial painkiller that has been linked to the opioid overdose and addiction epidemic in the US and Canada.
"There is a lot of anti-opioid sentiment," he says, delicately. "And certainly based on the social disruption that we've seen it's understandable."
In the US, an estimated 1.9 million Americans were addicted to prescription opioid painkillers in 2014. Accidental overdoses from prescription painkillers quadrupled between 1999 and 2012. In 2014, drug overdoses were the leading accidental cause of death south of the border, driven by prescription opioids.
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North of the border, some 15% of Canadians have an opioid painkiller prescription and 2% of those report abusing the drug.
But Mr Stewart has turned his attention elsewhere. He left Purdue Pharma in 2013 and is now a co-founder of Emblem, a medical marijuana company based in Paris, Ontario.
He credits his time at Purdue Pharma, which did some early research into therapeutic cannabis but never brought a drug to market, for sparking his current interest - finding better ways to deliver the medical benefits of marijuana to patients.
Marketplace newcomer
Now, his new job might just end up eating away at the bottom line of opioid manufacturers like the one he once worked for.
Doctors prescribe less pain medication in medical marijuana states. Recent research out of the University of British Columbia suggests cannabis has potential in helping to ease alcoholics and people addicted to opioids off their habit.
But Mr Stewart maintains there is still a place for powerful opioids that can help relieve severe and chronic pain.
"I saw a lot of patients who really, really, really had their pain improved by these drugs, of which OxyContin was only one," he says.
He also argues some people also abuse pot.
Emblem Pharmaceutical's John Stewart
IMAGE SOURCE,COURTESY EMBLEM
Image caption,
Mr Stewart says he was met with scepticism when he joined Emblem
Emblem is one of the newest entries into Canada's burgeoning marijuana marketplace. It received its license to grow and sell medical marijuana from Ottawa last year, joining 35 other competitors in an increasingly crowded marketplace.
Investors, which include Mr Stewart, believe it can eventually generate CA$100m ($74m; £60m) in revenue a year.
Ottawa brought in a new regime for medical cannabis - legalised in Canada in 2001 - in 2014, forcing patients to buy their medication through large-scale licensed growers that would ship them dried marijuana. Those new rules helped launch a commercial industry that's flourishing in the country.
Cultivators like Aphria, Mettrum Health, and Canopy Growth, currently Canada's largest medical marijuana producer, have become stock market darlings.
In October, Shoppers Drug Mart, one of Canada's major pharmacy chains, applied to distribute medical marijuana to the current cannabis patients, a number that is growing.
Right now, licensed producers can only ship the product to patients, which Mr Stewart calls "cumbersome". Patients can also grow limited amounts.
The federal Liberals also plan to introduce a bill this spring to legalise recreational marijuana across the country, which has further fuelled investment in the cannabis sector.
Big pharma fears
Emblem is also positioning itself to be part of the future recreational marketplace, which some estimates place at CA$22.6b . Its website, peppered with photos of millennials out with friends, urges visitors to join the "craft cannabis movement".
Mr Stewart's focus is the pharmaceutical arm of Emblem Cannabis, which will invest in research into things like dosing and plant strains as well as into the development of alternate forms of consuming medical marijuana like gel caps, sprays, patches, and pills.
Medicinal cannabis sold in Los Angeles before a 2012 ban
IMAGE SOURCE,GETTY IMAGES
Image caption,
Canada was an early adopter of medical marijuana
Not everyone welcomes former pharmaceutical executives to the pot business.
Mr Stewart admits corporate newcomers like him are met with a healthy dose of scepticism within the tight-knit marijuana business community.
"Nobody says to me to my face: 'We are terrified big pharma's going to come take over this industry.' However, they are," he says. "These days nobody wants big pharma, particularly in the United States, to do anything."
But he also says he meets people who see an opportunity to bring in capital to bolster research, improve quality control and consistency, and develop new products, something he says Emblem and other big cannabis investors will do.
"It's really only because of the work of a lot of pioneers in this who put themselves at great risk, legal risk , that we are where we are today," he says.
Inside big pharma's fight to block recreational marijuana
Pharma and alcohol companies have been quietly bankrolling the opposition to legal marijuana, raising questions about threats to market share
Alcohol and pharma groups have been quietly backing anti-marijuana efforts across the US as calls for legalization ramp up.
Alcohol and pharma groups have been quietly backing anti-marijuana efforts across the US as calls for legalization ramp up. Photograph: Ed Oudenaarden/EPA
Bonno
Sat 22 Oct 2016 13.00 BST
Marijuana legalization will unleash misery on Arizona, according to a wave of television ads that started rolling out across the state last month. Replete with ominous music, the advertisements feature lawmakers and teachers who paint a bleak future for Arizona’s children if voters approve Proposition 205, a measure that would allow people aged 21 and over to possess an ounce of pot and grow up to six plants for recreational use.
“Colorado schools were promised millions in new revenues” when the state approved recreational pot use, says the voiceover in one ad. Instead, schoolchildren were plagued by “marijuana edibles that look like candy”.
Marijuana<br>FOR USE SUNDAY, DEC. 29 AND THEREAFTER - In this Dec. 5, 2013, photo marijuana matures in ideal conditions at the Medicine Man dispensary and grow operation in northeast Denver. As Colorado prepares to be the first in the nation to allow recreational pot sales, opening Jan. 1, hopeful retailers are investing their fortunes into the legal recreational pot world _ all for a chance to build even bigger ones in a fledgling industry that faces an uncertain future. (AP Photo/Ed Andrieski)
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As Election Day approaches, the ads will continue, but the surprise lies in who is backing them. In August, the pharmaceutical company Insys Therapeutics also cited concerns for child safety when, with a $500,000 contribution, it became the largest donor to Arizona’s anti-legalization drive. But their stated concerns have raised a few eyebrows across the state. Insys manufactures Subsys, a prescription painkiller derived from fentanyl, the synthetic opioid that is up to 100 times more powerful than morphine.
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And although child safety is a legitimate concern as states legalize cannabis – in Colorado, child emergency room visits for marijuana intoxication have increased to 2.3 per 100,000 kids aged 10 and under since legalization in 2014, up from from 1.2 per 100,000 kids before that – accidental ingestion of pharmaceuticals sends about 318 per 100,000 kids aged five years and under to the emergency room, according to government figures. The frequency of hospital visits from kids accidentally taking narcotic painkillers have increased 225% between 2004 and 2011, the US Department of Health and Human Services said.
Instead, critics say, the Insys contribution in Arizona is a ploy to protect market share. And it mirrors other large donations to anti-marijuana campaigns by pharmaceutical and alcohol companies that fear the growing clout of legal marijuana. In November, five states – Arizona, Massachusetts, Maine, Nevada and California – could join four others that have already legalized recreational cannabis. Currently, 25 states permit the plant’s medicinal use. They represent a national marijuana market that will top $6.7bn in sales this year, according to the research firm ArcView Group, and $20bn annually by 2020.
“We’ve definitely seen a more active opposition from the pharma industry,” said Amanda Reiman, manager of marijuana law and policy at the Drug Policy Alliance, an advocacy group that promotes drug reform. “Research conducted by myself and others shows that medical cannabis patients are substituting cannabis for pharmaceuticals at a very high rate, and for alcohol at a pretty high rate as well.”
Indeed, alcohol and pharma groups have been quietly backing anti-marijuana efforts across the country. Besides Insys, the Arizona Wine and Spirits Wholesale Association gave one of the largest donations to the state’s anti-legalization campaign when it paid $10,000 to Arizonans for Responsible Drug Policy. And the Beer Distributors PAC recently donated $25,000 to the Campaign for a Safe and Healthy Massachusetts, making it the state’s third-largest backer of the opposition to recreational cannabis.
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Purdue Pharma and Abbott Laboratories, makers of the painkiller OxyContin and Vicodin, respectively, are among the largest contributors to the Anti-Drug Coalition of America, according to a report in the Nation. And the Pharmaceutical Research and Manufacturers of America, considered one of marijuana’s biggest opponents, spent nearly $19m on lobbying in 2015.
The plant’s threat to the alcohol industry is difficult to chart. Some researchers claim consumers substitute alcohol with marijuana when the plant is legalized. But in Colorado, which legalized recreational marijuana in 2014, that scenario has not played out. Alcohol sales there have increased since cannabis legalization, according to state tax data. And despite the alcohol industry’s opposition to cannabis in Massachusetts and Arizona, in neighboring Nevada the alcohol industry is among the biggest donors to the pro-legalization drive. It has given nearly $88,000 to the pro-legalization campaign, according to the Center for Public Integrity. That’s because approval of Nevada’s initiative would hand alcohol distributors the sole right to sell cannabis for the first 18 months.
For big pharma, however, an expanding amount of data explains their fears. Opiate overdoses dropped by roughly 25% in states that have legalized medical marijuana compared to states that have prohibited sales of the plant, according to a 2014 study from the Journal of the American Medical Association. The study implies that people could be using medical marijuana to treat their pain rather than opioid painkillers, or they’re taking lower doses. And research published this year by the University of Georgia shows that Medicare prescriptions for drugs used to treat chronic pain and anxiety dropped in states that have legalized medical marijuana. Medicare saved roughly $165m in 2013, according to the study, which estimated that expenditures for Medicare Part D, the portion of the government-funded health insurance program that subsidizes prescription drug costs, would drop by $470m annually if medical marijuana were legalized nationally.
Combine this data with the growing cost of prescription drugs – brand-name drug prices have increased 127% since 2008, according to the pharmacy benefit management company Express Scripts – and an opioid epidemic that is the leading cause of accidental deaths in the US, and it’s easy to understand why pharmaceutical companies are closely monitoring cannabis legalization.
But they might be fighting a losing battle. In Colorado alone, marijuana sales reached $996m in 2015 and raked in $135m in tax revenue. Towns have earmarked the money for road improvements, recreation centers and scholarships for low-income students. With that much money in play, investors and special interest groups have begun to flex their muscles. Pro-pot lobbyists in Denver now battle on equal footing with their counterparts in the pharmaceutical and alcohol industries.
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“Their [marijuana] lobby has grown quite a bit, and they have become increasingly sophisticated,” said Colorado state senator Pat Steadman, who was heavily involved in the implementation of Amendment 64, the measure that legalized recreational marijuana in 2014. “They’re investing more money in government relations, elections, marketing and public relations.”
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And pro-pot political action committees such as the National Organization for the Reform of Marijuana Laws (NORML) PAC and the Marijuana Policy Project (MPP) PAC are putting these resources into action by supporting state and federal candidates who are committed to legalizing medical marijuana and regulating recreational cannabis like they do alcohol. That includes California, where the lobbying arm of the Drug Policy Alliance, a group that works to change drug laws, has backed November’s recreational legalization measure with $4.47m, according to government records.
Legalization proponents in California have raised nearly $18m, compared to the opposition’s $250,000 in fundraising. In a sign of broad approval – and likely passage, according to polls – Lieutenant Governor Gavin Newsom, the California Democratic Party and the American Civil Liberties Union (ACLU) of California all back the measure. If approved, Proposition 64 would result in $1.4bn in annual revenues within the first year alone, according to legislative analysts, which is expected to balloon to $6.5bn by 2020. In other words, legalization in the Golden State – with its 39 million residents and the world’s sixth largest economy – would triple the size of the country’s legal cannabis market.
“Given California’s size, given its history as the source of legal and illegal marijuana for California and much of the nation, the fact that it’s coming online changes the equation significantly,” said Sam Kamin, a professor of marijuana law and policy at the University of Denver.
“It makes it harder for federal prohibition to continue, and I think it accelerates a push for legislative change at the federal level.”
Leading Anti-Marijuana Academics Are Paid by Painkiller Drug Companies
Researchers who have advocated against legalizing pot have also been on the payroll of top pharmaceutical firms with products that could be easily replaced by using marijuana. Could this be a major conflict of interest in the pot debate?
By Bonno
27.8.14
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Dr. Herbert Kleber, an anti-marijuana doctor who has served as a paid consultant to Purdue Pharma, the maker of OxyContin. Image via YouTube
As Americans continue to embrace pot-as medicine and for recreational use-opponents are turning to a set of academic researchers to claim that policymakers should avoid relaxing restrictions around marijuana. It's too dangerous, risky, and untested, they say. Just as drug company-funded research has become incredibly controversial in recent years, forcing major medical schools and journals to institute strict disclosure requirements, could there be a conflict of interest issue in the pot debate?
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VICE has found that many of the researchers who have advocated against legalizing pot have also been on the payroll of leading pharmaceutical firms with products that could be easily replaced by using marijuana. When these individuals have been quoted in the media, their drug-industry ties have not been revealed.
Take, for example, Dr. Herbert Kleber of Columbia University. Kleber has impeccable academic credentials, and has been quoted in the press and in academic publications warning against the use of marijuana, which he stresses may cause wide-ranging addiction and public health issues. But when he's writing anti-pot opinion pieces for CBS News, or being quoted by NPR and CNBC, what's left unsaid is that Kleber has served as a paid consultant to leading prescription drug companies, including Purdue Pharma (the maker of OxyContin), Reckitt Benckiser (the producer of a painkiller called Nurofen), and Alkermes (the producer of a powerful new opioid called Zohydro).
Kleber, who did not respond to a request for comment, maintains important influence over the pot debate. For instance, his writing has been cited by the New York State Association of Chiefs of Police in its opposition to marijuana legalization, and has been published by the American Psychiatric Association in the organization's statement warning against marijuana for medicinal uses.
Could Kleber's long-term financial relationship with drug firms be viewed as a conflict of interest? Studies have found that pot can be used for pain relief as a substitute for major prescription painkillers. The opioid painkiller industry is a multibillion business that has faced rising criticism from experts because painkillers now cause about 16,000 deaths a year, more than heroin and cocaine combined. Researchers view marijuana as a a safe alternative to opioid products like OxyContin, and there are no known overdose deaths from pot.
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Other leading academic opponents of pot have ties to the painkiller industry. Dr. A. Eden Evins, an associate professor of psychiatry at Harvard Medical School, is a frequent critic of efforts to legalize marijuana. She is on the board of an anti-marijuana advocacy group, Project SAM, and has been quoted by leading media outlets criticizing the wave of new pot-related reforms. "When people can go to a 'clinic' or 'cafe' and buy pot, that creates the perception that it's safe," she told the Times last year.
Notably, when Evins participated in a commentary on marijuana legalization for the Journal of Clinical Psychiatry, the publication found that her financial relationships required a disclosure statement, which noted that as of November 2012, she was a "consultant for Pfizer and DLA Piper and has received grant/research support from Envivo, GlaxoSmithKline, and Pfizer." Pfizer has moved aggressively into the $7.3 billion painkiller market. In 2011, the company acquired King Pharmaceuticals (the makers of several opioid products) and is currently working to introduce Remoxy, an OxyContin competitor.
Dr. Mark L. Kraus, who runs a private practice and is a board member to the American Society of Addiction Medicine, submitted testimony in 2012 in opposition to a medical marijuana law in Connecticut. According to financial disclosures, Kraus served on the scientific advisory panel for painkiller companies such as Pfizer and Reckitt Benckiser in the year prior to his activism against the medical pot bill. Neither Kraus or Evins responded to a request for comment.
These academic revelations add fodder to the argument that drug firms maintain quiet ties to the marijuana prohibition lobby. In July, I reported for the Nation that many of the largest anti-pot advocacy groups, including the Community Anti-Drug Coalitions for America, which has organized opposition to reform through its network of activists and through handing out advocacy material (sample op-eds against medical pot along with Reefer Madness-style videos, for example), has relied on significant funding from painkiller companies, including Purdue Pharma and Alkermes. Pharmaceutical-funded anti-drug groups like the Partnership for Drug-Free Kids and CADCA use their budget to obsess over weed while paying lip-service to the much bigger drug problem in America of over-prescribed opioids.
As ProPublica reported, painkiller-funded researchers helped fuel America's deadly addiction to opioids such as OxyContin and Vicodin. These academics, with quiet funding from major pain pill firms, encouraged doctors to over-prescribe these drugs for a range of pain relief issues, leading to where we stand today as the world's biggest consumer of painkillers and the overdose capital of the planet. What does it say about medical academia today that many of that painkiller-funded researchers are now standing in the way of a safer alternative: smoking a joint.
To Bonno please forward
Sending supportive thoughts and best wishes to Alan Brochstein
@Invest420
, who had a "severe accident while he was riding his bicycle” this weekend.
That is the way of stock market weed...
Pledge of better future .
If Simon would tell the truth, nobody would accumulate Tilray,s share.
Seasoned weed users claim that the cannabis market in Massachusetts sells subpar weed at premium prices.
Legal marijuana has led to a lot of perks. Aside from the fact that cannabis is more accepted and is less of a taboo topic, there’s a wide variety of products. Cannabis comes in all shapes and sizes and, if you know where to look, is of reliably solid quality. Except in Massachusetts, where users call their legal cannabis “garbage.”
The Boston Globe reports that dozens of marijuana connoisseurs have been complaining about the quality of their state’s weed. Most agree that while cannabis has improved with its legalization, the state produces mediocre weed and sells it at premium prices.
RELATED: Airport Cannabis Amnesty Boxes Aren’t Being Used — Here’s Why
New York Tax Could Make Weed Cost 70$ An Eighth
Photo by Add Weed via Unsplash
“It’s garbage,” said Warren Lynch. “The market here is dominated by nasty corporate schwag.”
“People from other states don’t want our weed when they visit,” said Chandra Batra. “They think it’s a bad joke.” They share that those who know better prefer to purchase cannabis illegally or to go out of state for their medical marijuana.
Some of the problems that consumers recall include purchasing prepackaged flower from dispensaries, preventing them from interacting with the product and noticing its qualities, one of the main ways in which cannabis connoisseurs can tell whether or not they are handling a good batch of weed. These problems were augmented by COVID-19, which prevented people from handling a variety of products or spending extended periods of time in dispensaries.
While people’s taste in cannabis is subjective, qualities like sticky buds, bright colors, milky trichomes, and strong smells are all associated with a better experience. This isn’t at the forefront of the majority of cannabis consumers, but it’s still an issue for long-term consumers.
Cannabis growers and cultivators from Massachusetts claim that many of their problems stem from a young industry, ones that aren’t exclusively limited to Massachusetts. “What you saw a lot of in Massachusetts, especially early on, was people sacrificing quality to pass testing through a quick-drying process,” said Brandon Pollock, chief executive of the cannabis firm Theory Wellness.
Experts claim that good cannabis comes when batches are made with care, usually in smaller amounts.
Hippy Jack to Bonno
April 15,2022
News
BC Chamber says legal cannabis industry underperforming
April 15, 2022 by Bonno
A new report from the BC Chamber of Commerce says the cannabis industry is not living up to its potential.
The 33-page document put together by the Chamber’s BC Cannabis Working Group puts forward a number of recommendations it says will put the province back in its rightful place at the head of the industry.
“Although the cannabis industry has deep roots in British Columbia, the legal cannabis industry has performed below or at par with national and provincial averages in terms of total non-medical retail store sales and sales per capita,” says the report’s executive summary.
“These figures do not reflect the overall potential of the province’s cannabis market.”
• RELATED: See the full report
Among the 13 policy recommendations:
Allow private retailers to deliver directly using common carriers and app-based delivery services, such as Skip the Dishes
Accelerate farm-gate to early this year and open it to all LPs and nursery licence holders
Add an economic mandate for cannabis at the ministerial level
Remove the 20% vape tax
Rework the excise tax paid on cannabis
Either remove or increase the limit for stores under the same chain
Allow retailers to move inventory between its own stores
The Chamber says following its recommendations will “unleash billions of dollars in private sector investments.” That would mean more jobs, more tax revenue, and help re-establish BC as a leader in the industry.
Cannabis bigger than forestry
Titled, ‘Unlocking BC’s Cannabis Industry,’ the report was created by a working group co-chaired by BC licensed producer Pure Sunfarms and cannabis retailer Kiaro.
“Last year, the legal cannabis industry contributed more to Canada’s economy than some of BC’s most well-established sectors, such as forestry, mining and meat manufacturing – and it continues to grow despite challenges faced across the board,” says Pure Sunfarms President and CEO Mandesh Dosanjh.
“British Columbia can take a leadership position now to make tangible and responsible choices to propel this sector forward and make the most out of the opportunities cannabis has to offer to improve the province’s competitiveness and diversify our economy.”
There’s still lots of room to grow.
In 2019, BC reported the lowest sales per capita in Canada at $18.87, less than one-fifth of the $101.30 per capita reported in PEI.
“Other Western Canadian provinces had significantly higher numbers. In Alberta, sales were $58.19 per capita, and in Saskatchewan, that figure was $62.53 over the same period. While Ontario was only slightly above BC at $19.53 per capita, this was partially due to an initial slow rollout of retail licences in Ontario,” says the report.
Illicit market thriving
So far legal sales in BC only capture a fraction of the available cannabis market, says the report.
“The province still has some of the highest cannabis usage in the country, with almost 25% of adults reporting having used recreational cannabis in the past three months,” it says. “High reported usage, low sales per capita, and relatively flat prices suggest a thriving illicit market being inadvertently supported by barriers in the regulated industry.”
The report says regulatory obstacles are preventing the industry from living up to expectations.
The working group says its recommendations are consistent with the provincial and federal government’s objectives of eliminating the illicit market, keeping cannabis out of the hands of youth, and protecting public health and public safety.
It’s Easier to Sell a Dream Than Reality’: Inside Canada’s Cannabis Crash
Marijuana was set to be Canada’s next multi-billion-dollar industry. Four years post-legalization, stocks are down, production has stalled and the illegal market is thriving. How did we get weed so wrong?
Bonno
Apr 15, 2022
(photography: Andrew B. Myers)
Jennifer Danyluk moved from small town New Brunswick to Edmonton in 2007, joining nearly 19,000 Maritimers who’d been beckoned by the booming oil economy. Back then, there was demand for literally everyone—pipe fitters, homebuilders, store clerks. For a young and ambitious accountant like Danyluk, Alberta was the land of opportunity.
The only home Danyluk, her then husband and their two young children could find to rent was shared with another family who had also moved over from across the country. “We knew it was going to be worth it,” she says.
Danyluk landed a job at an accounting firm. Soon, her parents relocated to Edmonton too, and she started progressing in her career, moving to companies in the energy sector. She divorced and remarried, and in 2016, she took on a new, well-paying role as a controller for an energy company. That same year, Alberta’s economy crashed under the weight of an oil-supply glut. Suddenly, Danyluk found herself struggling with a 30 per cent wage cut.
The timing couldn’t have been worse. Danyluk’s blended family had just moved into a new acreage property and added a Mercedes to their three-car garage. When her husband, a procurement manager in oil and gas, lost his job, it fell on Danyluk to make the payments and uphold the standard of living they were accustomed to.
She took up a second job in public accounting while her husband waited by the phone for job opportunities that never came. Their contrasting circumstances bred resentment in the marriage. Danyluk fought exhaustion to get through days that often started at 5 a.m. and ended after 10 p.m. “I felt like I was living in the dark,” she says.
She decided to look at other options, and she didn’t have to wait long. A headhunter called her in the summer of 2017 with an invitation to interview for one of thousands of new jobs in the nascent cannabis industry.
At this point, Danyluk had zero user experience—like, she’d never even inhaled it at a high school house party. She joined Radient Technologies, a plant-extraction company that was converting its entire operations to processing cannabis into THC oil. The company had a market cap of $93.4 million at the time, before it even had a licence to produce cannabis, let alone a provable product. Danyluk became its controller.
Founded in 2001, Edmonton-based Radient showed early promise in pharmaceutical cancer treatment, but its successes were cut short by a failed medical trial that was halted after adverse outcomes for patients. It ended up as a boutique producer of natural health and cosmetic oils with two major assets: proprietary microwave extraction technology and an underused 1,850-square-metre processing plant.
Like dozens of would-be recreational producers, Radient underwent its transformation on the heels of Bill C-45, the Cannabis Act. Companies that rushed into the space—some with billion-dollar valuations—went on a hiring spree even before there were clear parameters around manufacturing, retailing, exporting and taxation of cannabis products. More than 2,600 Canadians were hired into a variety of jobs in the industry to ramp up for Legalization Day in 2018. Farmers switched from harvesting hothouse peppers to jolly green herbs. Pharmacologists pivoted from natural oils to high-concentrate vape juices. Tech bros beat their chests about that ol’ sticky icky.
Entrepreneurial in spirit and full of farmland, Alberta became an important hub for the industry. Among the province’s would-be growers stood Aurora Cannabis, a modest medical company that stole the investor spotlight with its vision for a 75,000-square-metre greenhouse. If completed, Aurora Sky would become the world’s biggest marijuana facility. By the time C-45 went from the Lower House to the Senate, Aurora had a nearly $2-billion market cap. Flush with capital, it wasted no time breaking ground on Aurora Sky and making plans for other greenhouse operations: Aurora Air, Aurora Polaris, Aurora Sun and a Danish expansion, Aurora Nordic.
Led by co-founder Terry Booth, an Edmonton electrician-turned-entrepreneur, Aurora wanted to be more than just the planet’s top pot producer—it aspired to become the PepsiCo of cannabis. Aurora would go on an aggressive buying spree, acquiring businesses from every corner of the industry, including greenhouse builders, at-home grow-box manufacturers and even a liquor-store chain it planned to convert into a dispensary franchise. Along the way, the company began talking about a deal with Radient Technologies—Jennifer Danyluk’s new employer—in the hope that Radient could apply its technology to cannabis.
“It was exhilarating to watch everything grow”
When Danyluk came on board at Radient in the summer of 2017, there were fewer than a dozen people on salary, she recalls, including Denis Taschuk, who’d been the president and CEO since 2010. “I walked into a blank slate,” she says. “Nobody for accounts payable, accounts receivable, nobody for payroll, nobody for procurement, there was nobody for inventory. There was nothing.”
That fall, Aurora made a $14-million investment in the company, financed through convertible debentures, private placements and warrant exercises—a five-year agreement for Radient to process biomass into cannabinoid extract at a premium fee. Aurora also took a major stake in Radient and put Terry Booth on its board. Within a month of announcing the deal, Radient’s market cap more than doubled to $228 million, even though it had yet to obtain its licence to process cannabis from Health Canada. (Booth declined my request for an interview and multiple emails to Radient’s communications department went unanswered.)
Danyluk set about forming the financial and HR team, hiring as many as 40 people in one month. Soon, the company needed a second office space. After one year, Danyluk was promoted to vice-president of finance. “It was exhilarating to watch everything grow,” she says. “I realized I could jump into any industry and do my job. All I have to do is learn the business.”
For that, she’d have to wait until October 17, 2018—Legalization Day. Danyluk walked into a cannabis store for the very first time with a sense of pride for being part of a leading-edge industry as well as some residual unease from a lifetime of abstinence. She wanted to try the product for herself—first a drop of THC oil, then gradually dabbling in flower, vapes and edibles. Before long, she was making her own “cannabutter” from three house plants she was growing legally on her parents’ property. She had convinced her mother that cannabis would treat her insomnia.
At work, she was surrounded by ex-energy-sector professionals. The office joke was that they’d moved from bitumen oil to another kind of oil. The joke was all too true but it would become less funny with time as another oversupply problem became impossible to ignore.
Within three years, the cannabis bubble would burst, blowing up shares in pot companies and billions of dollars in revenue projections. Canadian cannabis companies would face securities-fraud accusations, with the Radient-Aurora partnership central to a class-action lawsuit that went public last fall. All told, a third of the industry’s 20,000 jobs would vanish between 2019 and the end of 2021. And though Danyluk would leave the industry on her own terms, it was only after finding herself in a much darker place than where she’d started.
Recreational cannabis should have been an economic slam dunk. Canada was already one of the world’s top producers, not just in output but in quality too; the infrastructure and knowledge capital already existed. The federal government just needed to bring it out of the shadows of a $5-billion illicit market.
But curbing the illegal market quickly proved difficult as Health Canada rolled out its regulatory frameworks. In order to apply to become a licensed producer, or LP, companies had to practically complete construction of their facilities and then wait up to a year for approval. The average illegal grower wasn’t about to take on the start-up and labour costs, let alone fill out a tax return or a licence application that could run 1,000 pages.
Off the bat, legal weed was exclusively accessible to entrepreneurs with deep connections in the financial sector: venture capitalists and stock promoters. “They weren’t selling cannabis—they were always just selling equity,” says a former senior Aurora employee, one of several former staff and contractors who spoke to me on the condition of anonymity.
The industry bifurcated into competing markets: The illegal one continued to fly under the radar, paying no taxes and little in the way of overhead; the legal one ballooned beyond a rational size on the back of Bay Street. Canada was only the second country to federally legalize weed, after Uruguay—but the untested nature of a new industry didn’t matter to wealthy investors. Nor did it matter that the federal government prohibited recreational-cannabis exports.
Everyone wanted in on Canadian weed, and the bigger the production capacity, the bigger the investment. Constellation Brands, makers of Corona beer, bet US$4 billion on Canopy Growth, an LP based in Smith Falls, Ont. Altria, the parent company of cigarette maker Philip Morris, paid US$1.8 billion for a 45 per cent stake in Toronto’s Cronos Group, a vertically integrated cannabinoid research, production and distribution company. Big Pharma funds took the West Coast start-up Tilray from Nanaimo to the NASDAQ, where its initial share price of $17 skyrocketed past $200 within four months, drawing comparisons both to monster successes (Amazon) and bloated flops (Pets.com). “The money was just flying in the door,” says Danyluk.
In hindsight, it’s difficult to understand how these valuations were formed. Deloitte projected a retail market value for legal recreational Canadian cannabis of $5 billion. But that couldn’t possibly bear out when comparable, mature markets in the United States were yet to reach that bar themselves. “In the capital markets, it’s easier to sell a dream than it is to sell reality,” says independent analyst Scott Willis. “You get a higher valuation for your company if you just promise things that haven’t happened yet—because nobody can fact-check you.”
An illustration of a smiling face frowning depicting the cannabis crash
Willis was one of the rare cautious and pragmatic, if not pessimistic, voices during the lead-up to legalization. He left TD Asset Management in January 2018 to start Grizzle, a financial-news and research company focused on new money—emerging industries like tech, cannabis and now meme stocks. His first major report, “Up in Smoke: The Overvalued Haze of Marijuana Stocks,” was virtually ignored despite raising red flags. It compared Canada’s marijuana sector to the rare-earth-commodities bubble of 2010. “Share prices were assuming that cannabis was going to stay very expensive and very lucrative, and we knew that wasn’t the case,” says Willis. Looking at precedents for price deflation in older recreational markets like Colorado, his report predicted that oversupply would cut retail and wholesale prices in half by the end of year one.
The report also addressed the biggest buzzkill that few stakeholders—from executives to farmers to public servants—seemed keen to discuss seriously: the illegal market. Realistically, it was always going to take decades to turn illicit operators into tax-paying legal entities. But it was impossible for this to make it through the capital-markets echo chamber that rewarded companies that made ambitious promises while hoping the fundamentals would eventually catch up.
Aurora was a classic example of selling the dream, which it perhaps did most to employees (who put some of their paycheques into stock-purchase plans) and members of the extended family, like Radient (whose future success could be rewarded with an acquisition). The company even hosted an “Aurora World Tour” in 2018, flying every staffer from around the world to Edmonton for what one former employee called “the mother of all staff meetings and pep rallies.” But behind the celebratory mood, there were reasons to panic.
“The money was just flying in the door”
Terry Booth co-founded Aurora in 2006 with investments as well as $2.5 million of his own money—made from a successful electrician consultancy. Despite his wealth, the former tradesman remained a man of the people, attending meetings in blue jeans and sleeves rolled up to his elbows. Tenacious, good-humoured and occasionally salty-tongued, Booth was well liked among Aurora’s young and enthusiastic team. “But as far as him being the CEO of a multi-billion-dollar company, you really got the feeling that was thrust upon him,” says the former employee.
The board of directors’ strategy was to surround Booth with polished businessmen, starting with COO Allan Cleiren, who was brought over from Universal Rail Systems, and executive vice-president (later chief corporate officer) Cam Battley, who left a health company he’d founded in the late 1990s. Cleiren and Battley stood out as oldschool suits amid the crowd of “mavericks” and new recruits, but Battley seemed especially positioned to clean up after Booth. “Terry—God love him—he’s an Alberta guy. He’s rough,” says the source. “I got the impression that a lot of their relationship was: Terry would say something and then Cam would be running behind and going. ‘No, what Terry actually meant was this….’”
A more difficult problem to clean up was Aurora over-promising and under-delivering on Aurora Sky, the facility whose announcement turned the company into a hot stock in 2016. A source told me that six months before legalization, it was still largely “a pile of mud with some girders sticking out of the ground,” save for one completed growroom out of a planned 15. And that one was far from functional. “The big value proposition was that you could go from the seedling to the finished plant without a human hand ever touching it, because everything was moved by overhead cranes—all of your spinning was done by treadmill belts,” says the source. “But none of it worked.”
Aurora continued to update investors with cost and schedule overruns. A veteran grower who was recruited from the illegal market to work at Aurora struggled to produce quality yields in the space he had. It’s one thing to have 200 plants in a basement grow-op; managing 50,000 or 100,000 plants simultaneously with state-of-the-art technology is an entirely different skill set. Scaling up is a common problem in cannabis.
“To be truly good quality, cannabis has to have caring attention on many different variables all the way through its life cycle,” says long-time cannabis researcher and plant cultivator Ryan Lee. “You can no longer manage the quality if you’re just turning over crops.”
Health Canada regulations also require LPs to produce pharmaceutical-grade weed, which is infamously dry and joyless—“schwag” in common parlance. The result for retailers and consumers is lower-quality and lower-potency products than what you’d see on the illegal market sold at a higher price to make up for the cost of tamper-proof packaging and government taxes. What’s more, Health Canada regulates cannabis advertising as strictly as tobacco-product marketing, essentially limiting ads to age-gated venues, including bar bathrooms and websites with adult content.
Chris Bolivar, a former Edmonton adman who now leads branding for the chain dispensary Fire & Flower, admits it has been difficult competing with the illicit market—especially at the start, when Aurora and Canopy Growth controlled the lion’s share of shelf space. “It was very expensive at the outset,” he says. “What customers were getting on the illegal market was probably better product.” One LP, Winnipeg’s Bonify, was shut down after Health Canada learned it had been buying illegal products to sell as its own.
To Aurora’s credit, the company managed to consistently make products with more than 20 per cent THC, a legally allowable potency comparable to that of illicit products. In an industry that’s prohibited from using creative advertising, having higher THC percentages than competitors helped Aurora gain nearly a fifth of the market share in the first quarter of 2020, the most of any LP. But Aurora lost its edge as competitors improved their yields. By the start of this year, Aurora had only three percent of the share of the market. “They stayed where they were,” says a former senior employee. “The rest of the competition grew around them and past them.”
The same source says there’s no doubt that the Canadian legal market has the best-quality cannabis in the world. “It’s remarkable, especially when you compare it to any other nation’s. But there’s just so much of it.”
What puzzles experts is why growers attempted to flood the market in the first place. Cannabis production had already exceeded demand before legalization, evidenced in routine and robust seizures of Canadian weed crossing the southern border. But after legalization, the forecast combined output by Canada’s top nine cannabis producers amounted to more than triple Health Canada’s projected market demand of 926,000 kilograms per year. Aurora alone claimed it would grow a third of the yields. Despite obvious signs of a supply glut, the company kept announcing more greenhouses—bigger greenhouses—amid a globe-trotting buying binge led by Terry Booth.
Analysts and even staff could not get their heads around many of the acquisitions, which often felt random or redundant. For instance, Aurora bought a major stake in Hempco, an Alberta hemp producer still in the research and development phase, then acquired Agropro, Europe’s largest organic hemp producer. Another source with intimate knowledge of Aurora’s portfolio sees a logic in these decisions—just not the speed at which they were made. Sources told me that company investors urged Booth to buy everything he could to become a true multinational corporation. In the earliest days, so much about the industry was uncertain: What would future regulations look like? Aurora tried to stay ahead of the game by investing in prospects (Hempco), outright buying companies that had brought a product to market (Agropro) and taking new technologies such as robotics (the greenhouse builder Alps) out of the competition’s hands. Regardless of the value propositions, says the source, Aurora became stretched too thin across these multiple ventures to lead them all successfully.
The Radient-Aurora partnership made sense on paper, largely due to the projected size and scale of Radient’s operations. Cannabis oils, extracts and edibles were relatively novel products, but altogether, they’d already gained a third to half of the market share in jurisdictions in the U.S. where cannabis was legal. For Aurora, teaming up with a company like Radient, which had proprietary microwave technology to bulk-process five metric tonnes of biomass daily, was a no-brainer.
Radient was poised to produce the cheapest and largest quantities of THC and CBD distillates in the country. But as Legalization Day approached, it still couldn’t get bulk THC extractions to work as planned. Worse yet, the company only had an R&D licence; it was still trying to get permission to process. “There were many hoops to jump through,” says Jennifer Danyluk. “The government had massive, strict rules on how to store cannabis and where to store it, right down to the security system that had to be in place.”
What’s more, Radient had divested itself of supplements and vitamin oils—its only profitable revenue stream—due to regulations in place to prevent cross-contamination. Rather than build a separate facility for cannabis, Radient converted its entire production line to mass-producing cannabinoid extracts. As a result of time sunk into construction and without products to sell, Radient had two quarters without revenue, from September 2018 through to February 2019.
“In the capital markets, it’s easier to sell a dream than it is to sell reality”
In the meantime, Aurora began doing its own in-house extractions using two CO2 extraction rigs at various plants, which the product-development team preferred over the discoloured and pungent samples from Radient. Worse still, Radient’s oil was weak. Its first shipment had only three per cent THC potency. You couldn’t really get high off of that. Early sales figures showed that consumers weren’t interested.
Whether the decision to mass-produce unsellable THC oil was Radient’s or Aurora’s—or whether it was a decision at all—depends on whom you ask. A high-ranking source says that both companies came to this conclusion based on their own market analyses. But others can’t see how Aurora could possibly have done so, knowing the consumer market as well as it did. They think it’s more likely that Radient’s scientist-led team, who had no prior cannabis experience, could not figure out how to produce a high-potency extract with their own technology.
Aurora not only struggled to find a meaningful use for Radient’s oil but also had little need for it. A Radient staffer tells me they would call Aurora, saying , “It’s ready for you to come pick up,” and then there’d be no response. A former Aurora employee adds that their company overestimated the market for extracts as badly as it did the market for dried flower.
An illustration of a smiling face frowning in a dark sky
Of course, the company wasn’t alone. And while the abysmal sales revealed in its first post-legalization earnings call were largely forgiven by investors, the second earnings report in spring 2019 sent them running, taking Canadian pot stocks down with them. The country’s largest growers, Canopy Growth and Aurora, posted EBITDA losses of $75.1 million and $36.6 million, respectively, and would see their stock values drop by one-third by the summer of 2019. The crash was felt more by smaller public companies like Radient, which lost 70 cents of their share price of $1.88 in six months.
“The company wasn’t performing and generating cash flows and revenues, like it announced or promised,” says Danyluk. But insiders held strong that the company would rebound. Danyluk was a participant in the company share-buying plan. She continued investing 10 per cent of her paycheques into the company; Radient matched her contributions. “Becoming an owner puts more skin in the game, so you work even harder,” she says.
Last September, Aurora Cannabis Inc. and several former and current executives were served with a class-action securities-fraud lawsuit filed in U.S. District Court in New Jersey. According to the allegations brought forward in the suit, it was around the middle of 2019 that Radient made an unusual purchase of US$21.7 million of dried cannabis from Aurora. This was not something Radient had carried in stock before, nor would Radient need to fulfill its master service agreement with Aurora to process shipments of biomass for a contractor’s fee.
Stranger still, according to the former investors who are plaintiffs in the lawsuit, Radient—a company that was never in the business of selling cannabis—sold approximately US$18.1 million of biomass back to Aurora over the next nine months. The suit alleges this is a “round-trip” transaction, when one company sells assets to another to falsely inflate revenues and later buys back the assets.
According to an investigation by industry research group TheCannalysts, the transaction was likely a last-ditch effort orchestrated by the bigger company, Aurora, to fluff up its financials with bulk sales to a company it had significant influence over. For all intents and purposes, the investigation suggests, Radient existed to process the inventory of a single vendor, which also happened to own 14 per cent of the company. That single vendor, Aurora, had an executive on Radient’s board in Terry Booth. Aurora’s reports for the same quarter included US$20.1 million in sales of wholesale bulk cannabis as one of its few bright spots. Panicked and desperate to recover lost stock value, Aurora executives allegedly used Radient to get its stock price back up, according to TheCannalysts report.
Danyluk doesn’t deny that Aurora executives had a lot of sway over Radient. “They were our only customer at one point,” she says. “So how much influence does that give? Quite a bit.” But her understanding of the transaction is different. The master service agreement, she says, had proven nonviable for Radient. “Aurora was getting a smoking deal.” The companies began to do business outside of the agreement, which saw Radient purchase bulk cannabis from Aurora, process it and then sell it as finished product to Aurora and other clients it hoped to gain for survivability.
The class-action lawsuit against Aurora alleges that the company used a fraudulent scheme to inflate its fourth-quarter results in 2019, including the sale of the US$21.7 million of dried cannabis to Radient. Confidential witnesses in the class-action suit say the purchase made little sense. Radient was still in the testing phase of its extraction technology; it wasn’t even capable of processing cannabis at that quantity.
“Becoming an owner puts more skin in the game, so you work even harder”
What’s more, the steadily decreasing price of biomass suggested that, at best, Radient had recklessly overpaid for the inventory when it couldn’t even pay its overhead bills, such as forklift-rental charges. At worst, it was a sham sale, a theory supported by confidential witnesses in the class-action lawsuit who claim that the biomass never even left Radient’s vault. According to the filing in the suit, “the material was simply warehoused until it was subsequently returned to Aurora.”
A U.S. federal judge has yet to certify the class action, but the core question is whether the transaction had any “commercial substance.” The plaintiffs point to the fact that Radient, which had generated a mere $61,000 in its best quarter as a cannabis producer, still struggled to pay its bills after bringing in US$18.1 million in cannabis sales as proof that money never changed hands—that the transaction was only put on the books to mislead investors.
In an email from his public-relations agency, Terry Booth refuted the claims of the class-action suit and pointed to a motion to dismiss the lawsuit, which has been filed on several grounds. Aurora’s legal team says that the lawsuit is generally deficient, its allegations are based solely on hindsight and it should be struck out. The motion contends, among other things, that the claims related to Radient are purely speculative, the plaintiffs fail to allege facts that support any evidence of a round-trip transaction and there is nothing unusual about a sell-and-hold transaction—in this case, where the product sold to Radient (biomass) was different from the product purchased from Radient (extract).
Radient, which is not a defendant in the suit, did not respond to my requests for comment. According to corporate documents from 2020, “Aurora ceased to have significant influence over the Company [Radient] as a result of no longer having a director on the Company board and their ownership dropping below 10 per cent of the Company and therefore were no longer considered a related party to the Company.”
Jennifer Danyluk remembers the day in October 2019 when her colleagues went into a panic. She’d run through a few cost projections again and again and concluded that Radient would be cashless, probably within a year. The whole thing echoed the Alberta energy crash she’d only recently pulled through. In fact, it was worse: She watched Radient’s share price plummet from a high of about $2 a share down to a penny stock. At the very peak, she had approximately $100,000 in holdings of shares in Radient, Aurora and other cannabis companies. In the end, she’d lose all her gains and about 75 per cent of her original investment.
While it stung to lose her stock-market earnings, she barely had time to think about it with all the other stresses she faced when the pandemic hit. After delaying downsizing for longer than necessary, Radient temporarily laid off a chunk of its workforce. With the company’s staff down to a few dozen people, Danyluk worked the equivalent of seven jobs—in bookkeeping, procurement and even IT. “When you put so much of yourself into something, you don’t want it to fail,” she says. She went three months without pay and found herself living in the dark again—turning on her laptop at 4 a.m. to start days that were longer than any she’d experienced before. “I didn’t really spend much time with my family, I didn’t see my friends anymore,” says Danyluk. “I was never home. And then I landed in the hospital.”
Danyluk was hospitalized for 10 days in October 2020 due to a bacterial infection that her exhausted immune system couldn’t fend off. All her life, she had been a clean eater and a fitness enthusiast. But work stress had cost Danyluk everything, even her health. She was done. Before she recovered, she interviewed for a new job in the trucking sector. She hid the IV bag under her sleeve.
The pandemic led to a 25 per cent spike in legal cannabis sales—even bigger than the jump in alcohol sales—but meaningful growth in the industry as a whole has been negligible, revealing just how badly the industry overestimated Canadians’ appetite for weed, even at bargain prices.
Just as Grizzle had prophesied in its bleak 2018 report, product oversupply led to price drops of more than 50 per cent. An “eighth” (3.5-gram) jar of mid-market weed now sells for around $25, compared to $55 on Legalization Day.
To compete, illicit growers have also slashed their prices by about 30 per cent. But they can afford price compression, unlike the 836 licensed producers across the country today, who put about 30 per cent of their top lines toward federal and provincial taxes. “I have a few illicit-market providers in my network,” says Dan Sutton, founder and CEO of Tantalus Labs, a licensed producer of small-batch cannabis based out of B.C. “They’re laughing at us. They’re licking their chops.”
Of particular concern is the excise tax, which takes $1 per gram of the wholesale price of flower, regardless of the cost of production or the product’s retail price. In 2018, the wholesale price of cannabis was about $8 per gram; that price has now compressed to about $4.65 per gram. In other words, a 10 per cent tax has become a 20 per cent tax.
That may still be viable for companies like Aurora, but not for smaller growers like Tantalus, which rarely produces cannabis for less than $1.50 per gram. “The large companies know that there’s a medium-term vision to starve [craft producers] out,” says Sutton. “And all they need to do is continue to sell product at a gross margin loss and wait for their competitors to die. And that is happening.”
Even while small growers are picking up more market share than ever before, they simply don’t have the volume to improve their margins. Sutton, who founded the tax-reform-advocacy group Stand for Craft last fall, says the only thing keeping craft companies alive is unofficial tax vacations. Sutton calls it “flexibility” granted by the Canada Revenue Agency. “I believe that there’s a substantial majority of small to medium enterprise cannabis businesses that have either taken excise tax vacations to be able to create survivability for at least the short term or have just stopped paying their excise tax entirely,” he says.
Companies big and small are selling off farms, warehouses and unused infrastructure for cents on the dollar on industry exchange sites. Even whole companies themselves are up for sale as turnkey operations. As of this writing, 34 licensed businesses—cultivators, processors, retailers and lab testers—are listed on the website for Toronto’s Hyde Advisory & Investments, which began as a security and compliance consultancy but has evolved to include a cannabis-business brokerage.
Since Legalization Day, the Canadian Cannabis LP Index managed by New Cannabis Ventures has lost 88 per cent of its value. Roughly one third of the cannabis workforce has been wiped out since April 2020. And few companies are profitable. How did prognosticators get it all so wrong?
Many cannabis professionals, even those embittered by widespread financial malfeasance, blame the government for the industry’s inability to rebound. They routinely cite over-regulation of the legal market—high taxes and production, packaging and advertising restrictions—and under-regulation of the illicit market, which stills supplies 35 per cent of the pot consumed in Canada.
“The industry has done a great job of trying to provide health and safety and prevent youth access,” says Jeannette VanderMarel, who led several Canadian LPs over the past decade, including Green Organic Dutchman, one of the more popular brands. “But we certainly need more support from regulators to limit the illicit market.”
“The promises made upfront were too large and unrealistic”
The counter argument is that you can’t pin the travails of the cannabis market just on over-regulation or a failure to curb the illegal market. To put it simply, the main problem hanging over the industry is that the biggest and most influential LPs were overly aggressive in predicting market size and their share. “It was too much capital applied too fast in a premature race to become the biggest and meanest,” says Nawan Butt, a portfolio manager at Purpose Investments. “The promises made upfront were too large and unrealistic.”
He adds that the industry is only now finally stabilizing and “trudging toward an equilibrium” far lower than promised in 2018 by industry leaders, most of whom have left their founding companies. A report by digital-media company The Deep Dive estimates that there’s been an 80 per cent CEO turnover since Legalization Day. “They got bought out or they left in disgrace,” says marijuana-markets analyst Scott Willis. “None of these guys lost any money. They made a ton of money. They’re good to go.” And they’ve escaped accountability for damaging behaviour.
Terry Booth resigned from Aurora in early 2020, after the company announced significant layoffs, closures of several facilities and a $1 billion write-down. He’s now CEO of Australis, a Massachusetts-based cannabis investment firm. There’s been a trend of former Canadian LP executives looking for the future of cannabis in the faster-growing and more profitable industry in the United States.
Meanwhile, there’s a rosier, albeit humbler, future for companies that specialize in a smaller stable of cannabis products and have fewer steps in the distribution process. When cash was readily available, many start-ups tried to be vertically integrated on day one—managing their own propagating, cultivating, post-harvest processing, packaging and sales distribution. The problem is that all of these areas have unique requirements. The outcome was an industry consisting of jacks of all trades and masters of none.
One producer that has realized it went too fast, too soon is Radient. Though it’s not yet profitable, Radient seems to be turning a corner since freeing itself of Aurora and shedding its long-time president and CEO, Denis Taschuk, and its flawed technology. It has transformed into a maker of white-label vapes, resins, “terp sauce” and the like, earning $2.4 million in sales by its last year-end.
“It is a very different company,” says Danyluk. “They’re still alive, just at a much smaller scale. They ’re working very hard to get this going and dig themselves out.”
Now the CFO of Alberta trucking giant Edmonton Kenworth, Danyluk still consults with Radient on a freelance basis. She has no desire or plans to return to cannabis but doesn’t rule it out. “Am I bitter about the way things went?” she asks. “Absolutely. But I love the industry.”
For now, she’s enjoying her life. It’s drastically different: Her kids are grown, and even though she’s an empty nester, she ensures she makes time for them. She also makes time for her health, her three pot plants and her hobbies, including a recent experimentation with sous-vide cannabis extraction. “It works amazingly,” she’s happy to report.
Cirona Labs' Cam MacNeil on Why Product Quality Is Key in Cannabis
Plus, his work with Guardian Athletic and innovation in the beverage space
In 2018, Cam joined the cannabis industry, leading the development of Canada's first THC-infused cannabis drink at Canopy Growth Corporation. He became director of global product development for Canopy's Beverages & Edibles division, overseeing 30-plus product launches from brands such as Houseplant, Quatreau and Martha Stewart CBD. He currently serves as chief commercial officer of Cirona Labs, a U.S.-based biotech company that uses scientific research to create more effective cannabinoid ingredients.
Cam brings a balance of consumer passion, CPG business acumen, and entrepreneurial spirit to the cannabis industry. He lives in Toronto with his wife and daughter, and is an avid music, travel and sports fan.
We spoke with Cam for our Higher Calling series, where we chat with leaders in the cannabis space.
Cam, tell us...
Where you grew up, and where you live now.
I was born and raised in Toronto and still live here now. I'm working for a company based in the U.S., but I continue to live north of the border. Remote work has unlocked some amazing new opportunities while allowing me to still be close to family.
Your current role in the cannabis industry, and where you're based.
I am the chief commercial officer at Cirona Labs, a U.S.-based biotechnology company. We create water-soluble cannabinoid ingredients backed by solid science. I got my start in the industry in 2018 when I joined Canopy Growth, where I led their beverage team and launched the first THC-infused drink in Canada. At Cirona Labs, we have learned a ton about infusing cannabinoids into different product types and we saw the need for improved quality—and better products start with better ingredients. I love working on the forefront of innovation in this space, and in my first six months in role, I've been fascinated at the advances that technology can offer this rapidly evolving industry.
A story about the positive impact cannabis has had on your life.
My mother-in-law suffers from insomnia and has tried several pharmaceutical treatments over the years. More recently, she's explored medical cannabis and found some balanced CBD:THC capsules that offer a better experience than prescription sleeping pills. It might not be a miracle cure, but the pandemic has allowed us all to explore new routines that may not have fit into our former lifestyles—and I think cannabis is going to benefit hugely from this experimentation. It's exciting working in the industry, then watching family and friends discover the benefits of cannabis through their own path and at their own pace.
A favorite flower, edible, product or brand.
I really admire the Kolab brand for several different reasons. First, the creative design is awesome. I especially love the photography of concentrates and vapes—it's visually stunning. They're also pushing the boundaries of product design with live terp sticks, concentrate pens, diamonds and resin gummies. These are unique iterations or twists to familiar formats, which is real innovation from my perspective. A lot of cannabis marketing is incredibly cringe-worthy, but in my opinion, Kolab is sleek, purposeful and worth checking out.
The biggest challenge cannabis marketers face today.
The lack of scientific evidence to support product claims is still a big challenge. Marketers are keen to find claims that demonstrate efficacy—like "fast-acting" or "promotes better sleep," but in many cases, brands either don't have the proof or don't care to find it. For some, anecdotal evidence or a panel of their peers is good enough. For others, they purposely loosen the claims, tiptoeing around the connection, like "designed for fast onset" or "part of a bedtime routine." We're now finally starting to see media coverage to call out the lack of science, which is a step in the right direction. Marketers that promote these claims without scientific evidence are creating a confusing—if not misleading—world for cannabis consumers.
One thing you're excited about right now in cannabis branding, partnerships or marketing.
The most successful marketing hook has now become consistent delivery of quality. No level of celebrity branding or deep price discounts can offset the feeling that comes from opening a sticky gummy or a dusty bag of popcorn buds. It's a massive letdown and with the number of other options available, cannabis brands simply can't afford to let mediocre experiences happen. I'm happy to see this renewed focus on the basics of product quality, it's the first promise that the brand has to keep.
A cannabis trade/social justice organization that you support.
I'm inspired by the work that Cannabis Amnesty is doing to reverse criminal convictions in Canada. I was exposed to the DOJA x Pardon collaboration originally back in 2019, and it opened my eyes to the enduring personal consequences of prohibition. Still, it's obvious that Canada's Cannabis Act has made social justice an afterthought of legalization. It's important to see many American jurisdictions build and mandate social impact programs into infrastructure and policy—it's essential that it's addressed at the onset of legislation. At Cirona Labs, we're starting a social impact program this summer that's focused on empowering minority-owned businesses with access to science and research & development.
A recent project you're proud of.
We recently worked with a CBD sports performance brand called Guardian Athletic, formulating a high-quality emulsion ingredient for their beverages. The formulation is complex, with real fruit juices, a blend of vitamins, and 25mg CBD. It's also one of the best-tasting CBD beverages we've ever tried, so we knew how important it was to control any unpleasant taste notes from the CBD. We did a number of iterations, collaborating with an amazing team at Guardian and their network of production partners. We're all very excited by the final result and look forward to watching Guardian grow!
Someone else's project you admired recently.
The Cookies retail store opening in Toronto was really cool to watch. Cookies opened a store in an area of downtown that's already packed and oversaturated with cannabis retail shops. The store opened with at least a dozen other competitive locations within a few blocks' radius, in the middle of Toronto winter, and still had a lineup around the block outside in freezing temperatures. The team at Cookies is building an amazing community and it's fun to watch that play out close to home.
Someone you admire in cannabis who's doing great things.
Beverage entrepreneurs are a different breed of crazy—and I say that as a compliment. They're operating in a small segment of the market against big players and usually still finding ways to outpace, outsmart and outperform. Building a drinks business is a huge challenge, even with money and resources—I can say that from experience. Watching what entrepreneurs can endure and overcome with these additional headwinds is truly inspiring.
What you'd be doing if you weren't in the cannabis industry.
Making other products that put smiles on faces. I've sold beer, tequila, breakfast cereal and weed—the smiles are the common thread. :)
recession might hit...
add a tsp of price increases...
pinch of wars
corpses dropping on the streets
heavy migrations
but we,ve come a long, long way
CANNABIS ACT UNCONSTITUTIONAL?
CALEB MCMILLANAPRIL 14, 2022
BUSINESSCANNABIS CANADACANNABIS LEGALIZATIONCANNABIS NEWSCULTUREFEATUREDLATEST LEGALIZATION NEWSLAWMARIJUANA LEGALIZATIONMARIJUANA NEWSPOLITICSPOLITICSTHC NEWS14 VIEWS
Is the Cannabis Act unconstitutional? The Canadian government made the Cannabis Act law in 2018. Since then, Canadians, regardless of medical status, have been able to enjoy legal cannabis. Canada’s old medical regulations were disbanded in light of the new recreational rules. Lumping everyone under the same regulatory framework.
But did scrapping the old medical regs violate the Charter of Rights and Freedoms?
The Cannabis Act unconstitutional?
Shaun Howell’s Charges
On March 24, 2017, Shaun Howell was charged with possessing over 3kg of cannabis. The police said it was for the purpose of trafficking. Howell was also charged with the illegal production of cannabis. He argued that his charges should be dropped. The Controlled Drugs and Substances Act, as well as the old medical cannabis regulations, were in violation of his section 7 rights in the Charter.
The judge, Justice Robert A. Graesser, ruled that Howell’s trafficking charges were not in violation of the Charter. But interestingly, Justice Graesser did rule that the THC limits were a violation. According to the Cannabis Act, THC oil cannot exceed 30mg per millilitre, and capsules cannot exceed 10 mg.
Which may be all well and fine for a casual recreational user. But for a medical patient, this is inadequate and in a big way. And Justice Graesser’s ruling seems to indicate that the Cannabis Act is unconstitutional.
Cannabis Act Unconstitutional For Medical Patients?
If the Cannabis Act is unconstitutional for medical patients, it wouldn’t be the first time something like this has happened. From its very beginnings, medical cannabis in Canada has had a rocky history. It began as a court order for reasonable access to medical cannabis. Which the government responded by allowing medical patients to grow their own or find a designated grower. There was one legal producer.
In the early 2010s, the Stephen Harper government attempted to end all personal growing. His government drafted new medical cannabis regulations. They included many more licensed producers but no option to grow yourself.
Patients sued and the result was the Allard ruling. Since Canadians have a Charter right to reasonable access to medical cannabis, the Allard ruling includes personal growing as part of this reasonable access clause. Patients can also designate someone to grow for them.
In response to the Allard ruling, the newly-minted Trudeau Government responded with the Access to Cannabis for Medical Purposes Act (ACMPR). These new regulations kept the licensed producers set up under the Harper era, but included the home-grows demanded by the courts.
On October 17, 2018, the Cannabis Act came into force. The Cannabis Act replaces the ACMPR since the government argues patients can still grow their own, have someone do it for them, or buy directly from a federally-licensed producer.
But this Alberta court ruling says THC limits violate Section 7 of the Charter. It makes the Cannabis Act unconstitutional.
Battle Lines Drawn for Next Battle?
Justice Graesser notes that since the ACMPR is no longer in effect, his judgment grants “declaratory relief.” Which means the court determines who is right and wrong. But the court won’t award damages or punishments.
This ruling does not change the current THC limits enforced by the Cannabis Act. Although it does leave the door open for a future Charter challenge. However, these kind of challenges are never cheap, especially when the defendant can use taxpayer money. As well, medical cannabis patients have been battling with the government for at least twenty years now. Many of them don’t have the energy to keep fighting.
Even if it means the Cannabis Act is unconstitutional.
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Footnote[/
Good call!
Dropping 200 x Ethos - Cookies R2 clones into our retail shops on Monday????
under our @CrookedDory brand!
Only $17 per clone.
Atlantic Cannabis.
Only 17$ per clone?
Who is going to spend that kind of money?
Legacy? Stock Market Investers??
Dorothy is tuned on Martha.
Happy might bargin one as a souvenir.
Young, naive & fluffy bought 4 loaded with thripps.
Matt to Bonno.
It's interesting that some Canadian cannabis producers consistently report sequential net revenue growth.
Others report lower net sales quarter after quarter. They buy a competitor, see an initial bump, then net sales continue falling.
Rinse & repeat...
Atlantic Cannabis to sell clones for 17$ a pop.
Legacy,s pumping clones at 4$ but…
Guess why stock market weed is so expensive?
Canopy is great for Klein but...
A CANNABIS CARTEL IN CANADA INEVITABLE?
BONNOAPRIL 11, 2022
BUSINESSCANNABIS CANADACANNABIS LEGALIZATIONCANNABIS NEWSCULTUREFEATUREDLATEST LEGALIZATION NEWSLAWMARIJUANA LEGALIZATIONMARIJUANA NEWSPOLITICSPOLITICSPRODUCTSTHC NEWS0 VIEWS
Is a cannabis cartel in Canada inevitable? No one knows when the United States will legalize cannabis, but it feels imminent. Once this occurs, will Canada’s large licensed producers‘ lobby for domestic protection? Like Canada’s telecommunications industry? Canadians are “protected” from American competition. So we end up with a cartel: Bell, Rogers and Telus. And the highest internet/phone prices in the developed world.
Is this the future of Canadian cannabis?
The US House of Representatives passed the MORE Act the other week. The legislation aims to legalize recreational cannabis across the United States. If approved in the Senate, then it’s game over for Canada’s comparative advantage. In the multi-billion dollar global cannabis industry, what role is there for Canada, if any? Our growing season is short. And we can’t compete with grow-lights humming 10 months of the year.
The Conditions are Ripe for a Cannabis Cartel in Canada
So far, a Canadian cannabis cartel hasn’t emerged. Too many consumers demand craft, premium products. Instead, Canada has positioned itself as the largest exporter of legal cannabis in the world.
But underneath the surface, things aren’t what they seem. A United Nations agreement from 1961 considers cannabis a dangerous narcotic. International imports and exports are limited to scientific and medicinal purposes.
As well, our domestic laws are cankerous. Excise taxes (or “sin” taxes) on recreational cannabis are unnecessary. On medical cannabis, they are downright immoral. Other government markups hurt the industry and the consumer. For example, provinces like Quebec completely outlaw private retailers.
Will Legal Weed in the US Mean a Cannabis Cartel in Canada?
What if the US Legalizes It?
More States south of the border are legalizing cannabis. But so long as it remains illegal federally, there is no cross-border trade. But suppose the MORE Act makes it into law and this time next year Americans are enjoying federally-legal cannabis. Does that mean Canadians can finally import high-potency edibles from their southern neighbours?
Or will a ban prevent Canadians from peaceful acts of trade? In the same way we’re barred from purchasing cheaper internet? And phone plans with actual unlimited data? Will a cannabis cartel damn Canadians to 10mg edibles forever? Meanwhile, our American friends enjoy edibles with ten times that amount.
An Inevitable Cannabis Cartel? Read Between the Lines
Rick Savone is senior vice president of Aurora Cannabis and chair of the board of the Canadian Cannabis Council. He told the Financial Post, “It’s time for the federal… and provincial governments in Canada to stand behind our sector to get ready for this economic and competitive opportunity that’s just around the corner.”
What exactly that means is anyone’s guess. Innocent statements or calls for a cannabis cartel? Sounds like he could be calling on governments to secure the Canadian cannabis market from foreign competition.
Does he want Canadian cannabis to look more like our banking sector? Again, Canadians are at the mercy of a cartel: RBC, BMO, CIBC, TD Bank and Scotiabank. These companies can (and do) invest heavily in the American banking sector.
But are American banks allowed to operate in Canada? Of course not.
Can Canadians start a bank like one can open a hardware store? Absolutely not.
International imports and exports are limited to scientific and medicinal purposes.
International imports and exports are limited to scientific and medicinal purposes.
Future of the Canadian Cannabis Industry
Is the same sort of cartel shaping up here? Will Canada’s large producers absorb the smaller ones? Will the larger producers finally get their cartel? Cartels that seem to be a right of passage for every major Canadian industry? Despite, officially, being illegal?
Only time, and American legalization, will tell. Until then, history is not on the side of free-market competition, unfortunately. Canada’s small cannabis industry will likely be seen as a David against a Goliath.
The Goliath, of course, the massive US cannabis market. It’s a situation ripe for the kind of anti-American propaganda many Canadians eat up like Timbits.
It’s an excuse for a Canadian cannabis cartel.
Doomed!!!
What happened?
Hexo's market share fell for 9 straight months before a very small positive bump in February 2022.
Only Canopy Growth has surrendered market share in more consecutive months than Hexo: 11
Doomed!!!
What happened?
Hexo's market share fell for 9 straight months before a very small positive bump in February 2022.
Only Canopy Growth has surrendered market share in more consecutive months than Hexo: 11
DOOMED!!!
Matt Lamers ????
@matt_lamers
·
22m
New: Expected Hexo sales keep falling
Six months ago: In Sept 2021, Jefferies estimated Hexo's 2022 sales would be almost $300 million
Now: Jefferies again lowered Hexo's sales estimates for the year. Expects $211 million in sales in 2022.
That's minus-29% in just 6 months.??
Investing
·
See more
Alan Brochstein, CFA
@Invest420
·
6h
#CANNABIS BUSINESS NEWS NOT NOISE
To Bonno
While Tilray wants investors to believe things are going well, we suggest ignoring its boasts of profitability, as falling stock prices and deals failing to meet expectations aren't the foundations of success.
mailchi.mp
Tilray's Illusory Profit Obscures Fundamental Weakness
Friends,
We were surprised to see Tilray surge initially after its report this week. The company missed analyst estimates on both revenue and profitability, but rallied nonetheless. We thought that perhaps the positive reaction was due to relief that the numbers weren't actually even worse, but we believe that the market was perhaps keyed to something beyond revenue and adjusted EBITDA. Instead, traders likely took note of the reported net income and earnings per share (EPS), which were well ahead of expectations.
The Tilray press release trumpeted its profits but did very little to explain them. The first of five bullet points detailed its $52.5 million net income, but this was never discussed in the body of the press release:
The income statement included in the release, of course, made it easy to see what was going on, at least to those who looked at it. Historically, the company had always released its filings before the earnings call and before the market opened, but that wasn't the case. After issuing a press release ahead of the market open, the 10-Q wasn't filed until after the close. With that information, it became much easier to understand how Tilray generated its so-called profit. Quite simply, most is due to the plunge in the price of its stock during the quarter.
A big part of the accounting profit was due to $72.7 million of non-operating income. In other words, were it not for this item, which was detailed in the filing, then the company would have reported a loss. The 10-Q broke down the non-operating income into mainly $56.1 million of change in the value of its convertible debentures and $21.1 million of change in the value of warrant liabilities. The decline in the stock price made these liabilities worth less, which resulted in $77.2 million of income. This was aided by a $1.4 million non-specified gain and somewhat offset by small losses on foreign exchange and long-term investments.
Another item that helped boost profits was a -$29.1 million operating expense, a change in the fair value of the contingent consideration for the recently acquired Sweetwater. This means that the cash earnout due beginning in December 2023 is now less likely. In other words, because its acquisition isn't living up to prior expectations, Tilray isn't likely to make the payout it had projected previously.
Tilray reported $50.6 million pre-tax income. Had it not had the non-operating and operating adjustments detailed above, it would have reported a pre-tax loss of $51.2 million.
While Tilray wants investors to believe things are going well, we suggest ignoring its boasts of profitability, as falling stock prices and deals failing to meet expectations aren't the foundations of success. The company also bragged about revenue growth, but it compared not only the combined company's results but also those of recently acquired Breckinridge Distillery in this quarter to those of just Aphria a year ago. The cannabis segment on an apples-to-apples basis declined, but the company pointed to its growth of 32%. Similarly, the 64% growth reported for beverage alcohol was mainly due to the acquisition.
One thing that grew strongly was share-count. While the company spent a lot of verbiage talking about growth in revenue and other metrics, the weighted average share-count growth was even higher at 84%, the highest growth number we saw in that press release. To make matters worse, Tilray did exactly what we expected and had discussed in this letter recently, hitting its At-The-Money (ATM) shelf hard. Subsequent to the end of the quarter, the company sold 16.9 million shares between March 3rd and April 6th, raising $90 million (at an average of about $5.31) and leaving it with $310 million availability. As a result of these stock sales, the company incurred an additional $6.45 million potential cost as it was forced to lower the exercise price on its warrants from $5.95 to $4.91.
Tilray's press release made it sound like things are going well, but a careful review of the financials paints a different picture. The company suffered from negative growth on an organic basis, and its share-count has exploded. The cash flow from operations was -$46.3 million, and the net debt continues to expand. It's no wonder the company is so aggressively selling its shares, especially as a big portion of its debt is about to become current. The company talks about aggressive M&A plans, but it lacks the financial ability to do anything but share-based transactions from our perspective. We continue to believe that investors should brace for more stock sales by Tilray in the months ahead.
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New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
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Cannabis REIT NewLake Funds $34 Million C3 Missouri Project
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Harborside Closes Loudpack Acquisition Ahead of Transition to StateHouse
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Exclusive: Illinois Cannabis Sales Increase 14.6% Sequentially in March
Jushi Completes $45 Million Nevada Acquisition
Exclusive: This Fintech Company Banking the Cannabis Industry Is Coming to the NASDAQ
Tilray Q3 Cannabis Revenue Declines 6% Sequentially to $55 Million
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Sincerely,
Alan & Joel
info@newcannabisventures.com