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Dreams Of Fortune, And Fears, As Canada Embraces Marijuana
Pubdate: Mon, 09 Jul 2018
Source: New York Times (NY)
Copyright: 2018 The New York Times Company
Website: http://www.nytimes.com/
Details: http://www.mapinc.org/media/298
Author: Ian Austen
DREAMS OF FORTUNE, AND FEARS, AS CANADA EMBRACES MARIJUANA
CHESTERVILLE, Ontario - Inside garage-sized containers at one end of a
cavernous warehouse in a former Nestle factory south of Ottawa are
rows of marijuana plants stacked atop each other, basking in the
unearthly glow of grow lights.
They belong to Hamed Asi, an Ontario businessman who calls them his
"vertical farm." He has no background in growing marijuana, or in any
kind of agriculture. His other line of business is installing office
furniture; cubicles, filing cabinets and desk chairs fill the opposite
end of the warehouse.
A financial boom not seen since the dot-com mania of the late 1990s
has overtaken Canada. The legalization of recreational marijuana,
scheduled for this autumn, is not only a momentous social change and
public health challenge, but also a rare opportunity for entrepreneurs
like Mr. Asi to be in on the birth of what they hope will become a
multibillion-dollar industry.
Early signs of a boom abound: Marijuana growers have plowed millions
into investments that, without having recorded profits yet, have
stock-market values measured in billions. Down-on-their-luck towns
like Chesterville, Ontario, hope that marijuana will reverse economic
decline. Former politicians and law-enforcement officials who once
opposed legalizing recreational marijuana have now joined or formed
companies to cash in on it.
Some provincial governments forecast that tax revenue from marijuana
sales will help balance their budgets. And companies offering every
kind of service or product - from real estate to packaging - are all
out for a piece of the action.
Mr. Asi's dreams of wealth are sprouting here in a century-old former
factory that once turned out pallets of Nestle Quik bound for railway
boxcars. A partner and operations manager at a company called the
I.D.P. Group, he acknowledges the risks inherent in what has already
become a highly competitive industry.
"You can't just do this because everyone else is doing it," he said in
his office which is, not surprisingly, fitted with the latest in
office furniture. "Worry? Yeah, 100 percent. We see how good this
industry can be if you do it right, but you've got to really be diligent."
This month, Prime Minister Justin Trudeau fired the starting gun for
Canada's new gold rush by announcing that legalization of recreational
marijuana will begin on Oct. 17, months later than the original plan
of Canada Day, July 1. But, as in the earlier mania for technology
companies, there are growing concerns that this boom could produce
more disappointment than riches.
Mr. Trudeau's government portrayed the legalization of recreational
marijuana - Canada has had a medical marijuana system since 2001 - as
a way to wipe out the black market, not as a potential job creator or
moneymaker for either the government or investors. In effect, he
promised a system in which marijuana would be available, but not promoted.
As a result, the federal government will license growers in Canada,
and provinces will decide how it is sold to consumers. In some
provinces, notably Alberta, the government went with privately
operated shops. Others, like Ontario and Quebec, will essentially
adopt a variation of the system of government-owned stores that has
been used for alcohol sales since Prohibition ended.
Under regulations recently released, marijuana will generally be
treated more like cigarettes than alcohol. Advertising will be
severely restricted - as will the ability of Canada's marijuana makers
to turn themselves into household brand names. Packages must be
uniform and plain, aside from vivid, yellow health warnings and tiny
logos. Even baseball caps, T-shirts and all other logo-laden giveaways
promoting marijuana brands will not be permitted.
Many of the big companies eagerly awaiting the October light-up date
have their roots in the medical marijuana industry. But their styles
have shifted.
Chuck Rifici, a founder and former chief executive of the company now
called Canopy Growth (at more than 8 billion Canadian dollars, the
most valuable marijuana company in Canada), once sported the clean-cut
look one would expect from an accountant and former chief financial
officer of Mr. Trudeau's Liberal Party.
But as he has shifted to selling marijuana as a way to get high - not
just as pain relief - Mr. Rifici has abandoned suits and ties for
designer T-shirts. His graying and less-than-trim beard give him the
air of a rock star.
Bounced from Canopy in 2014, Mr. Rifici is now the chief executive of
a competitor, Auxly, which has invested in 12 marijuana-growing
operations. Among them is Mr. Asi's operation in Chesterville, which
has received 12 million Canadian dollars.
Shares in Mr. Rifici's company once surpassed 1 billion Canadian
dollars and are now worth about just over 500 million dollars. Its
ability to raise money, however, has yet to be matched by an ability
to make money. Auxly recorded more than 10 million Canadian dollars in
losses in the first three months of this year.
The future after October, Mr. Rifici said, offers nothing but promise,
as marijuana will start flowing out of stores and new markets beckon.
"The rest of the world is going to legalize this," he predicted. "So
the urgency for me is having the people and the capability to be a
first mover in that new jurisdiction. I think one or two of the large
multinational cannabis companies will be Canadian companies."
But before Mr. Rifici conquers the world, he and his competitors first
have to figure out how to make their home market work.
"The rules around cannabis start to look a little bit silly or a
little bit over the top," Mr. Rifici said. "Over time that will loosen
a little bit. The industry is certainly pushing for it."
That push, however, will meet forceful resistance from Canada's
medical community, which has repeatedly raised warnings about
marijuana's health risks, particularly for users under the age of 25.
"There's already a lot of misinformation out there about it being
natural and less harmful than tobacco and alcohol," said Dr. Jeff
Blackmer, a vice president of the Canadian Medical Association. "When
there's that much money to be made, funny things happen. We've learned
that lesson from big pharma."
Cam Battley, who once worked in the pharmaceutical industry and who is
now the chief corporate officer of Aurora Cannabis (market value: 5.6
billion Canadian dollars; losses in the first part of this year: 20
million dollars), acknowledged that the soaring values of marijuana
companies may not be justified in every case. But he also rejected
suggestions that the dreams surrounding the industry may, well, go up
in smoke.
"People should be cautious and do their homework on the cannabis
sector," Mr. Battley said. "We've become a mainstream industry in
Canada. On this, we're not seen as a wild and crazy country. I think
the world trusts Canada to get cannabis right."