TORONTO’S CONCRETE BLOCKS MORE EXPENSIVE THAN THEY LOOKED

Toronto’s attempts to prevent unlicensed dispensaries from operating by blocking their doors and windows with stacks of 4,000-pound concrete blocks cost more than $360,000.
CBC Toronto, Now Toronto, The Star,

  • The $361,459.49 total, paid for out of provincial funds, consisted of the cost of the blocks and equipment with which to move them, as well as the labour of structural engineers, city workers, and on-site security.
  • In some cases the blocks needed to be installed multiple times as dispensary supporters procured heavy equipment to remove them.
    Daily Hive
  • The blocks—which eventually got their own Twitter account—didn’t stop dispensaries from operating, as some simply sold REC on the sidewalk outside. Even today, many of the dispensaries decorated with cement blocks last summer are still in operation.
    CTV News

ROBBERIES: NOT JUST FOR UNLICENSED DISPENSARIES ANYMORE

Unlicensed dispensaries have proven a magnet for robbery dating back to before legalization, with some past robberies turning violent, and others absurd. Now robbers are shifting their sights to legal REC stores.

Quick Hits

  1. Though the judge lectured them for knowingly breaking the 2018 Cannabis Act, more than two dozen people arrested in London, ON dispensary raids in 2018 were given discharges that did not leave them with criminal records.
    London Free Press
  2. An Ontario man once convicted of mischief and other minor offences didn’t start getting hassled by US Customs and Border Protection guards until he got pardons for his offences. Before, border guards could see what his offences were, but now they can only see that he was convicted of something and pardoned.
    Global News

ROACH OUT AT HOTBOX

Abi Roach, founder of popular Toronto vapour lounge the HotBox, announced this week she is leaving that business, having sold it to neighbouring head shop the Friendly Stranger.

  • I interviewed Roach for Leafly as she prepared for two weeks of vacation before beginning her new position.
    Leafly
  • Roach, a frequent critic of the provincial legalization rollout, will put her money where her mouth is as a senior category manager at the Ontario Cannabis Store.
    GrowthOp
  • Though it’s moved twice, the HotBox has remained on the same block in Toronto’s Kensington Market since it opened in 2000. If you’ve been in Toronto for an industry trade show, there’s a good chance you attended an afterparty there.

The Friendly Stranger morphed from a Queen Street West head shop into Friendly Stranger Holdings, which last summer received $5M in investments Green Acre Capital, VIVO Cannabis, and 48 North, and has announced deals to open REC franchises with six Ontario REC retail lottery winners.
NewsWire

Quick Hits

  1. McMaster University microbiologists showed cannabinoid CBG may fight antibiotic-resistant bacteria.
    The Guardian
  2. Veterans Affairs is considering expanding its coverage of MED products to include 2.0 products legalized last fall. In particular, it may expand its medical-device reimbursements for vaporizers (originally for dry flower) to include vape pens that contain oil.
    CBC PEI, Globe and Mail

THE SHARP END: RETAIL AND DELIVERY

LPs may be struggling, but for REC retailers the year ahead could be a lucrative one. Fire & Flower aims to nearly triple its 2019 sales in 2020 (from $58M to $160M) and expand its 46 stores to 135 in 2021. Meta Growth aims to open its 90th Canadian store (up from 34 at present) by the end of the year.
Financial Post

  • Yet Cannalyst Andrew “MollyTime” Udell stressed few REC retailers have the cash on hand to open more than a few stores at a time. Though with 50.1% ownership by convenience store giant Couche Tard, Fire & Flower is the best prepared to open more stores.
  • To that end, Meta announced an agreement with Echelon Wealth Partners to sell that company $10M worth of stock. Proceeds will be used to expand the company’s Ontario retail offerings.
    NewsWire
  • Meta also announced it would no longer sell its MED clinics to Evergreen Pacific Insurance Corporation, as originally planned.
    Cannabis Retailer
  • In New Brunswick, MED advocates are circulating a petition calling on the government to “save medical dispensaries” by licensing stores in a free-market system, rather than selling crown REC retail monopoly Cannabis NB to a single private operator.
    Country 94

The next front for REC retail is delivery, particularly with food-delivery services booming. But that expansion is hampered by limitations on third-party REC delivery services—only Alberta, Saskatchewan, and Manitoba even allow it.
BNN Bloomberg

BANKS COOL TO CANNABIS

Whether you’re a late-stage license applicant or a REC retailer, it’s getting even harder to find a bank willing to support cannabis companies—particularly smaller companies.
Financial Post

Quick Hits

  1. Under creditor protection, LP AgMedica Bioscience announced a Sale and Investment Solicitation Process (SISP) to solicit interest in restructuring or refinancing the business, sales of assets, or sales of the business.
    NewsWire

LP ROUNDUP: SNOW TIRES AND SLANDER

US liquor company Constellation Brands, which is Canopy Growth’s largest investor, named two more key figures to Canopy’s board. Judy Schmerling, who sits on Constellation’s board of directors, will take the chair, while Constellation executive VP and Chief Marketing Officer Jim Sabia joined the board as a member in principle.
NewsWire

Former Canopy co-CEO and co-founder Bruce Linton feuded with former Bacardi president Rob McPherson, whom Linton said he refused to hire as CEO because “you wanted snow tires as part of the package.” (Depending on your vehicle, a set of high-end snow tires retails for between $600 and $1,000.)
Twitter—Betting Bruiser

Aphria received a $100M private placement investment from an institutional investor who requested anonymity.
MJ Biz Daily, BNN Bloomberg

  • The deal, which diluted the company’s outstanding shares, wasn’t popular with shareholders.
  • Aphria also finally received its EU-GMP certification, allowing it to export MED flower and oil to the EU. The company originally intended to obtain such certification early last year. The delay means its rivals are already shipping to Germany.
    MJ Biz Daily

Alberta LP Sundial Growers announced it laid off “less than 10%” of its employees, blaming regulatory barriers, too few REC stores, and the illicit market.
Global News

MarketWatch identified what it said was an error in the way Hexo has calculated its employee stock options dating back to 2017.
MarketWatch

INDUSTRY SNAKES AND LADDERS

Ominous talk about bankruptcies across the industry continues. Most expect some LPs will fold in the coming year, but no one knows how many. Meanwhile, capital markets are shrinking away.
CBC Ottawa

  • Some companies are trying to sell off assets in order to bank cash, but they’re not the kinds of assets other LPs want to buy.
  • Analysts continue to warn some LPs are at risk of running short of cash in coming months.

The Toronto Stock Exchange debuted a cannabis index called “S&P/TSX Cannabis Index,” including 15 firms from the TSX and TSX Venture Exchanges.
MJ Biz Daily, Twitter—David George-Cosh

  • Companies that wish to be added to the index must have a market cap of $120M and trade a median $400,000 per day.
  •  

Quick Hits

  1. MED companies will be eligible for financial aid and international support from the federal Trade Commissioner Service if they wish to develop overseas deals. MJ Biz Daily

NEW 2.0 PRODUCTS REACH ALBERTA, SELL OUT

The cannabis 2.0 rollout continued as edibles and some extracts (though not vape pens) began appearing on REC store shelves in Alberta. As in other provinces, inventory disappeared fast.
Cannabis Retailer, CBC Calgary

  • A Mackie Research Capital analyst warned the majority of licensed parties weren’t ready for the launch of new 2.0 products, which are limited in variety and far more expensive than illicit edibles. For that reasons, LPs’ early 2.0 products “are not yet competitive with the black market.”
    MJ Biz Daily

The Deep Dive tweeted a photo of two Tilray “Chowie Wowie” brand 5mg chocolates as they received them: melted in their sealed package into a single featureless “blob of gross chocolate.”
Twitter—The Deep Dive

  • Another commentator noted the BC Liquor Distribution Branch warehouse in which REC products will be kept reaches summer temperatures in the mid-30s. “No refrigeration. Regs state [edibles] must be 6 [months] shelf stable. Summer will be a good time.”
    Twitter—Aaron W. Anderson, MJ Biz Daily

The threat of melted chocolates isn’t stemming the rush of interest in Calgary chocolatier Choklat, Canada’s only stand-alone food-producer holding a Health Canada REC processing license. Choklat owner Brad Churchill says, “The floodgates have opened. I’m looking at the [order] numbers and I’m just floored.”

  • Across the country, gummies (also called “soft chews”) are selling fastest. Ryan Roch of Alberta REC store Lake City Cannabis reported, “Gummies are King and a lot of people don’t like chocolate.”
    Twitter—Ryan Roch
  • Cannalyst Craig “GoBlueCDN” Wiggins surmised “the [dollar] cost to get high (versus the taste experience) is going be more of a driver (or headwind) of edibles competing against flower in the legal market.”
    Twitter—GoBlueCDN

Though Ontario’s edibles sold out online within hours, one critic noted that only meant “2,000 transactions before selling out….In a province of 15M people.”
Twitter—Scott Willis

PRICE GAP YAWNS WIDER

Prices for legal REC are inching upward as unlicensed REC prices are declining—leaving consumers facing a $4.57 gap in price per gram between licensed and illicit product. That’s the largest margin between legal and illegal market prices to date.
BNN Bloomberg, Bloomberg

  • The average gram of legal REC sold for $10.30 between October and December, according to Statistics Canada. A year ago, that average was $9.69. A gram of illicit cannabis sold for an average of $5.73 in the same period, down from $6.44 a year before.
    CBC News
  • Between October and December, Canadians spent $1.5 Billion on cannabis, and 38.2% of that trade was on the legal market. The average price of REC (legal and illegal) rose slightly from $7.46 to $7.50 per gram.

Dried flower dominated with more than 60% of sales, while vaping products held 19.5%, and edibles captured 7%.

Monthly legal REC retail sales totals continued climbing, reaching $135.7M in November, up from $128.9M in October and $122.9M in September.

WHY IS SO MUCH LEGAL REC SO BAD?

Much of the discussion around tables and smoking circles at Lift last week focused on the question of why so much legal REC is so bad: tiny dry, crunchy buds, sometimes full of seeds. Some of the bad REC has come from huge LPs, some from smaller shops. There are a lot of reasons why: here’s an overview.
Health Europa

  • Speaking with growers last week, I learned bad flower in a sealed LP container doesn’t mean it was bad in the grow room.
  • A grower told me he had visited the grow rooms of a number of LPs and in several cases had said, “Underground growers are in trouble: these flowers are for real.” However, he said, he hadn’t factored in the processes of drying, processing, packaging, and shipping the product first to wholesalers, then to retailers.
  • “You can have perfect buds,” he told me, “but that doesn’t guarantee they’ll survive that process. And not that many companies have perfect buds.”

The other problem: scale, and not just for production (though nearly everyone I’ve talked to has named excessive production size as the single greatest flaw in REC flower). Growers also told horror stories of improperly scaled drying operations.

Quick Hits

  1. It’s pretty obvious you can’t complain to the Better Business Bureau when an illicit cannabis website takes your $524 but doesn’t send you any weed, isn’t it? Someone in BC tried that anyway.
    Business in Vancouver
  2. A new movie, The Marijuana Conspiracy, dramatizes the still-classified 1972 Ontario-government funded research study Project Venus. During that study, 20 women were split into two groups and isolated indoors for 98 days, while half the group smoked cannabis nightly with THC increasing over the course of the study. They were not allowed to go outside.
    Toronto Star, GrowthOp