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By the ounce  

Weed was the big loser

During the federal election campaign, cannabis was on the back-burner.

Nobody was opposed to it, but nobody was in favour of it either. Most parties didn’t even give it a line in their platform. This, despite the fact that the sector has created a remarkable number of jobs and investment over the past few years.

On the one hand — as our good friend at The Cannabis 101 Podcast pointed out during our post-election chat [Episode 21 at 56:45] — if legalization isn’t being politically ripped apart at every turn, it’s not a disaster.

On the other hand, why aren’t we discussing the future of cannabis at this important juncture? The eyes of the world are on us.

Former Canopy Growth chairman and co-CEO Bruce Linton was troubled by the silence of Canadian politicians on cannabis during the election. He spoke to Bloomberg, predicting that it will cost us on a world stage if that persists.

“This is the only segment Canada has a leadership position on hands down compared to every other nation on this planet, and I’d like to have the feds step up and actually say we’re going to have our trade commissioners push it,” he said.

What now?

With a Liberal minority in the House, the expectation is that cannabis will proceed as planned.
Liberal insider Omar Khan told The Leaf News that there's simply no political pressure for any change.

"I think (the Liberal government) will tinker around the edges, particularly as it pertains to various public-health issues, but unless they're pushed, unless the industry can show them a political, on top of policy, rationale for doing something big or bold, no government is going to go out on a limb for an industry that is not willing to go out on a limb for itself," said Khan.

The Liberals will need some support to hold on to power, and that’s likely to come from the NDP. New Democrats had little to say about cannabis, only that they’d “proactively expunge criminal records for Canadians convicted of minor cannabis possession.”

We hope the Green Party’s promise to remove the sales tax on medicinal cannabis products somehow gets pushed forward through political co-operation.



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The sky hasn't fallen

In less than a week, cannabis will have been legal for one year in Canada.

The sky hasn’t fallen; emergency rooms haven’t been overwhelmed with pot overdoses; there’s been no marked increase of people driving high; and the streets aren't filled with smoke.

Here's a short history of the past year in cannabis:

Cannabis consumers

The biggest benefit is, of course, no more prohibition. Those who have been convicted in the past of possession can be pardoned fast and free.

Consumers have more choice, better information, and (some) reassurances that their product is consumer protected. Normalization is happening.
 

Retailers

A lucky few legal stores have their licences, as many retailers continue to go through the financially (and emotionally) exhausting licensing process.

Illegal stores have been facing an ongoing crackdown, but mail-order marijuana is still going strong. Stores on Indigenous land remain a grey area.

Producers

It’s clearly been a learning curve to grow cannabis on such a commercial scale. From a consumer perspective, quality and value have been hit and miss.

Certain producers have developed a cult-like following and others have developed a group of dedicated haters and whistle blowers. With limited freedom to brand, current popularity is often determined by word of mouth.

Investors

Investors have been mauled by a bear market — everything from:

  • the CannTrust debacle
  • Canopy’s CEO being turfed
  • fears over vaping; shortages in major markets
  • mould and bug controversies; etc.

On average, those investing in the top 10 largest cannabis producers have seen a negative return of 57% says the Financial Post. Few have been spared.

Home growers

Scrolling through Instagram, it seems home growers have had a lot of fun dipping their green thumbs into the experience of growing weed alongside their tomatoes and sunflowers.

(That is, when their cannabis plants aren't being chopped down by police.)

Also note, the right to grow your own is on the table in the upcoming federal election.

Meanwhile, fear of vaping is lingering like a big ol’ smoke cloud.

It seems like every day there’s a new story about serious illness or death in the U.S. related to vaping — and we’ve seen a small number of cases in Canada.

Here is some useful info from health officials.

The Centres for Disease Control and Prevention is investigating more than 800 American cases of people suffering from severe pulmonary illnesses.
The CDC has recommended that people refrain from using e-cigarette or vaping products — particularly those containing THC.

They found things in common among patients:

  • a history of e-cigarette use, vaping, or dabbing (vaping concentrated marijuana) within 90 days before symptom onset;
  • lung injury
  • absence of evidence of infection, and,
  • absence of alternative plausible diagnoses.

Health Canada is advising Canadians who use vaping products to monitor themselves for symptoms — including cough, shortness of breath and chest pain — and to seek medical attention promptly if they have concerns about their health.

Be upfront with doctors and nurses about your vaping habits, including if you use oils from illegal or unregulated sources.



Amazing weed with Color

Known in the rec market as Color Cannabis, WeedMD has earned a reputation for delivering amazing weed at a decent price for Canadian cannabis lovers.

The company’s CEO, Keith Merker, did a Q&A with Reddit’s WeedStocks community Thursday night. 

The cannabis investing community had some great questions for him, and Merker delivered on answers.

A little background on the Ontario company.

They’re expecting their first outdoor harvest at the Strathroy, Ont., farm. The company is also expanding its indoor capacity, securing Health Canada’s approval for 10 additional 10,000-square-foot cultivation rooms, which are all being populated with cannabis plants.

In preparation for Cannabis 2.0, they’ve launched CX Industries, an extraction hub in Aylmer, Ont.

Their products, including Mango Haze and Pedro’s Sweet Sativa, have been available in B.C.

Here are the best questions and answers, curated and easy to read:

Q: What’s your personal favourite WeedMD strain?

A: I have to admit, walking into one of our 10,000 sq. ft. flowering rooms in the greenhouse filled with 3,500 mature Pedro’s Wine Gums (Sweet Sativa), is an experience to remember. The intensity of the sweet and sugary terpenes just blows your mind.

Q: Any new strains on the horizon? Does WeedMD have any exciting genetics that’s not deployed? Anything on par with Pedro’s Sweet Sativa?

A: We have plenty of strains growing outdoors that we look forward to bringing to market. This includes some WeedMD classics such as Ultra Sour and Babba’s Erkle Cookies as well as some new ones. You will see them get to market starting in late 2019 and into 2020.

Q: What do you think is the most important change governments need to make to help foster a better cannabis economy?

A: I think that the most important thing is to deconstruct the illegal market, which requires a multi-faceted approach in my opinion. This includes:

  • Offering appropriate opportunities and incentives for illegal market operators to transition to a legal market
  • Ensuring that there is appropriate access for legal cannabis (online, bricks-and-mortar retail)
  • Ensuring that the legal market can compete on pricing (market structure, taxation)
  • Allowing for appropriate communications and education to be provided by the legal market (also known as branding or marketing…); allowing legal operators to tell our story and the story of our products and how they differ from a safety and quality standpoint
  • Enforcing the law on those illegal operators who refuse to transition to a legal position

Q: Is a listing to the TSX a goal in the foreseeable future?

A: It has always been our plan to move to the TSX.

Q: In your opinion, what is the reason investors currently only value WMD stock at $1.42/share?

A: I think we are the best kept secret in the cannabis industry. We have kept our heads down and have built a great company. Now that the industry is maturing, I expect that investors will start to value real operations and performance. To paraphrase Warren Buffett – when the tide goes out you see who is swimming naked. WeedMD is fully clothed!

Q: Why do you feel WeedMDs stock trades at a much lower valuation then many other similar sized cannabis companies in Canada?

A: WeedMD has always tried to stay true to its roots in execution and discipline. We have focused on building a business and have not participated in the hype and promotion that has surrounded cannabis in the public markets. So although we may trade at lower future multiples than our peers, we have actually performed much better than most over the past year on a relative basis.

Q: I am curious how your marketing team plans to leverage Color Cannabis in the rec market to carve out and own cannabis occasions? In the brand’s early-launch phase (and understanding the challenging legal landscape) what has been the biggest surprise or learning you’ve taken from Color Cannabis overall?

A: We feel that Color represents a unique approach to the rec market and branding in general in that we are not defining the experience and/or the occasion. We are instead recognizing with Color that cannabis is an incredibly individual experience and aiming to be the partner of choice for that experience. I think that we are on the right track so far with the launch and that Color does a great job standing out amongst our peer brands.

Q: Can you shed more light on the outdoor grow. Will the outdoor flower sales be branded under a different brand name? Can you advise what percent of the outdoor crop will be earmarked for flower sales versus extraction?

A: In all honesty, the specific split between flower and extract-grade product from the outdoor is still an open question, but we are conservatively estimating somewhere between 10-25%to be sold as flower. As for the brands to be used, please stay tuned – there may be some surprises in store.

Q: What plans (if you’re able to discuss), does WMD have to capitalize on legalization 2.0 later this year?

A: Through CX industries, our plan is to become a major provider of raw materials, for example in the form of crude oil and distillate to our partners. We also will be producing and distributing several SKUs of 2.0 products, concentrating primarily on the vape and concentrate category to begin with. Once again, our goal is not to overcomplicate things, but to focus on a few areas and become best-in-class.

Q: Do you consider WeedMD a prime target for a possible acquisition, or will the team continue to pursue and leverage upwardly mobile partnerships (pita pit for example) and brand strength as ways of differentiating and staying competitive?

A: We are busy building a great company in WeedMD. Building it for the long-term. Of course, if an offer was made for our great company, we would be obliged to consider it – we are a shareholder-first company and I am a shareholder.

Q: Do you think the U.S. has better legislation to address these points? Even though federally legal in Canada — Are more restrictions around access and retailing of cannabis products harsher? What international markets are you excited for?

A: In the U.S., every state has its own rules and regulations, some very restrictive, some very much a free market. Each has its own idiosyncrasies and it’s tough to compare apples to oranges or to say that one is “better” than another at this point. Generally speaking, Canada is currently the clear leader internationally in scaled, regulated and compliant cannabis production. Ultimately however, this country is at risk of losing our first-mover advantage if we do not allow for the proper development of brands and downstream products. Internationally there is a lot happening. We are excited for the EU, which has a large market that is opening for cannabis, as well as some smaller but exciting markets such as Australia.

Q: Would you be able to shed some light on why it’s almost impossible to get your product through the OCS? If you don’t grab it generally within the first five minutes or a restock it sells out.

A: We have been steadily increasing our production platform and supply chain capabilities and look forward to providing a more consistent supply going forward to our adult-use market. We are focused on ensuring our medical patients also receive consistent supply which is why you’ll see most of our strains listed on our medical channel regularly. As we scale our production, availability is becoming much more consistent with 18 hybrid cultivation rooms now online.

Q: Does WeedMD intend to secure supply agreements with the remaining provinces?

A: We absolutely intend on signing on with the remaining provinces over time. Our goal has always been to establish great relationships with our partners, including with the provinces and we are now building more of these relationships as our production base increases.

Q: How do you guys plan on tackling harvest? Do you intend on using farm equipment to harvest or will it be taken down by hand? Can we expect some sun-grown flower to be available in the Canadian market or will it all go to extracts?

A: We will take outdoor down in multiple stages, first taking the top colas, then sides, then remaining biomass. This process will occur over a period of about a month as some strains come in earlier than others. We certainly expect some outdoor product to be available for either recreational or medical patients in flower form. How much will depend on strain, quality and volume.

Q: How do I volunteer to help with the harvest?

A: Send an email to [email protected] and I will make sure our team puts you in contact with the right people.

Q: Is WeedMD going to be recruiting young researchers looking to call WeedMD home?

A: We have great relationships with universities and colleges throughout Ontario. Stay tuned to our job postings and feel free to submit a resume to weedmd.com

Q: How is WeedMD leveraging technology today and where do you see the opportunity for the future to help drive innovation? Thinking mobile apps, IoT for facility and production optimization, data analytics, cloud computing, etc.

A: One thing I have learned is that you cannot try to do everything and succeed. We have a great amount of proprietary techniques, processes and systems in place in our cultivation for instance. Our team is always trying to make improvements in these areas to support and improve our core business. Layered on top of this, we bring on new ideas and technologies to support our business when and where we think it will make a difference.

An example of this would be our partnership with TruTrace Technologies, providing a cutting edge tool to validate our supply chain.

In summary, we are not out there spending money on general research or non-core initiatives – we are trying to find partnerships and develop internal technologies that will improve our core business and ultimately make us more profitable.



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BC pot: could be worse...

If you think the painfully slow retail rollout in B.C. is bad, take a little trip over to Ontario.

Like a game of Monopoly, it’s a roll of the dice in Canada’s most populous province to see where the cannabis players land.

The province uses a lottery to determine who gets to open up a retail cannabis store. They announced the latest 42 lucky ones randomly generated from the 4,864 eligible expressions of interest.

It’s been a clumsy roll-out, with glaring gaffes.

Among the latest winners is the address of the province’s most notorious black market shop — Café. The dispensary has been subject to police raids, arrests, and cement barriers blocking entrances. In defiance, they continued to sell weed on the sidewalk outside, even putting up a mocking sign with their pop-up operating hours.

Now a numbered company with its address at the illegal store’s location at 104 Harbord Street in Toronto won a licence. It’s unclear if the people behind the company are owners of the black market chain, but the connection is being made.

The lottery resulted in other anomalies, including a dumb distribution of stores. The small town of Innisfil (population 30,000), for example, gets three stores — two side by side, even — while bigger municipalities, like Etobicoke, are underserved.

End the madness

Longtime cannabis industry insider and advocate Abi Roach has started a petition to end the lottery system.

“Ontario has now run two insane cannabis retail lotteries,” she says. “No other business gets a business license in this random fashion. Why does cannabis?”

Roach, who is the founder of Hotbox, says the lottery system “breeds corruption, regulatory loop holes, and worst of all it has no merit-based need for entry.”

David Wylie publishes the oz. — follow okanaganz on Instagram, Twitter and Facebook. Subscribe to the newsletter @ the oz.



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About the Author

David Wylie is publisher of the oz. — a cannabis newsletter that covers the growing legal weed industry from the Okanagan Valley.

He has been a journalist for nearly two decades, working in newsrooms all over Canada.  

David is active as okanaganz on Instagram, Twitter, Facebook and Reddit. Subscribe to the email newsletter at okanaganz.com.

An ounce of info goes a long way.



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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