Pubdate: Mon, 10 Mar 2014
Source: National Post (Canada)
Copyright: 2014 Canwest Publishing Inc.
Contact: http://drugsense.org/url/wEtbT4yU
Website: http://www.nationalpost.com/
Details: http://www.mapinc.org/media/286
Author: Ryan Holmes

RULES SPARK CROP OF STARTUPS

This month, a new company is set to light up the TSX Venture Exchange 
in a first-of-its-kind public offering. It's not a tech darling or a 
renewable energy startup. It's a pot grower.

Tweed Inc., based in Smiths Falls, Ont., is one of fewer than a dozen 
companies authorized by the federal government to grow medical 
marijuana under new rules taking effect April 1.

Small-time growers and neighbourhood cannabis dispensaries, known 
colloquially as compassion clubs, will be gone. From now on (barring 
a successful constitutional challenge), only large, commercial-sized 
growers will be authorized to produce and sell medical marijuana.

Tweed - cute name aside - will be anything but a mom-and-pop shop. If 
all goes well with the public offering, plans are to produce 15,000 
kilograms of marijuana a year, priced from $5 to $15 a gram, 
depending on variety. Tweed said revenue could reach $100-million 
within two years.

It's not the only company seeing high hopes in pot. A growing number 
of startups, on both sides of the border, are capitalizing on 
shifting attitudes and legalities around marijuana.

Several U.S. publicly traded companies - Medical Marijuana, Cannabis 
Science and Hemp Inc., to name a few - have seen stock prices surge 
since the start of the year, part of rising enthusiasm for the 
multibillion-dollar legal marijuana market in that country. Perhaps 
it's time for budding entrepreneurs here to ask: Could Canada's next 
entrepreneurial wave be green and leafy?

The question, of course, should be approached with a good deal of 
caution. Marijuana is hardly the most transparent of sectors. A 
black-market past continues to haunt the legal side of the industry 
and the shifting regulatory landscape makes long-term planning a challenge.

"Legal marijuana distribution and growing is way too new and full of 
scams," cautions analyst Cody Willard, writing about U.S. pot 
startups on The Wall Street Journal's MarketWatch. "Criminals ... are 
still being rooted out."

With those caveats in mind, it's worth noting that demand is high, 
the market is significant in size and attitudes are evolving rapidly. 
Medical marijuana use is permitted across Canada, as well as in 20 
U.S. states, and Health Canada predicts the legal market in the 
country will reach $1.3-billion by 2024, serving an estimated 450,000 
Canadians.

Meanwhile, this January, Colorado became the first state to allow 
recreational sales of pot. Government officials there announced that 
they anticipate collecting US$134-million in taxes on sales of more 
than US$1 billion during the coming fiscal year. Washington State is 
poised to follow suit. With these states on board, the legal 
marijuana marketplace in the U.S. is expected to exceed US$2.3-billion in 2014.

Furthermore, while recreational use remains deeply controversial in 
Canada (not to mention illegal), polls suggest Canadians may be ready 
for a change.

A 2013 Forum Research poll showed 69% of those surveyed favour either 
legalization or decriminalization. In a 2012 Health Canada study, 
nearly half of Canadians over age 15 admitted to trying marijuana.

A growing chorus of pro legalization politicians (most notably, 
Liberal leader Justin Trudeau) have questioned the rationale for 
keeping pot illegal. Cannabis was originally restricted by the 
Canadian government in 1923, on the heels of a series of articles in 
Maclean's magazine asserting that marijuana addiction led to insanity 
and death (penned by one "Janey Canuck").

In the past 40 years, more than a trillion dollars has been spent on 
the war on drugs in North America, according to University of British 
Columbia researchers. Since 1990, however, the price of marijuana (as 
well as drugs such as heroin and cocaine) has fallen by more than 
80%, suggesting supply is more plentiful than ever. "By every metric, 
the war on drugs has failed," concluded one of the report's authors, 
Dr. Evan Wood.

Yet, the war on drugs continues to be waged in Canada. The current 
administration - while conceding this approach is "not working" - has 
opted to take an even tougher line on marijuana, increasing prison 
sentences for minor offences. Since the Conservative government came 
to power in 2006, there have been more than 405,000 marijuana-related 
arrests. Officials might be better off taking a few cues from the 
entrepreneurs at Tweed Inc. - at least for economic reasons, if not 
social and political ones.

Back in Smiths Falls, the company has moved into a factory once 
occupied by Hershey's Chocolate (insert munchies jokes here). When 
Hershey's shut the plant in 2009, 600 people in the small town lost 
their jobs, leaving the "Chocolate Capital of Ontario" with a serious 
hole in its economy. If all goes well, the idle factory will soon be 
buzzing again, courtesy of a new green economy.
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MAP posted-by: Jay Bergstrom