Recreational Marijuana

issues, opportunities and the political
landscape

 

 

 

 

Today's Presentation:

History of Cannabis regulation in Canada and lessons learned from 

Global Summary of the Cannabis Landscape

The Canadian Climate for Recreational Marijuana

which will include: regulatory considerations, distribution, retail and things
that concern the LCBO

 

History of Cannabis Regulation in
Canada

1999-Marijuana Medical Access Program
(MMAP)

2001 -?Medical Marijuana Access Regulations
(MMAR)

2003, 2005, 2009, ZOlO?Revisions to the
MMAR

a? 2014-Marijuana for Medical Purposes
Regulations (MMPR)

 

 

 

 

 

MMAP-Qualified patients were granted the authority to possess cannabis for medical
purposes

to a lack of legal sources to access medical cannabis, the MMAR was
established in 2001 to allow quali?ed patients to possess medical cannabis with the
support of a medical practioner

Under the MMAR, authorized patients had three ways to obtain medical cannabis. 1)
Produce under a Personal Use Production License 2) Designate an individual to produce
under a designated person production license or buy dried cannabis from Health Canada,
which contracted Prairie Plant Systems.

MMPR- Regulation aiming to treat cannabis as medication and to create licensing scheme
for the commercial production and distribution of cannabis for medical purposes.

The MMPR outlines strict and standardized policies for growing, manufacturing, safe
keeping, security, record keeping, packaging, labeling and shipping medical cannabis. It
provides: regulations for LPs, choice of strains and suppliers, reduced concerns for personal
growers and reduced some administrative burden on HC.

 

Lessons from Licensed Producers
(LPs)?Medical

Sell direct to customers and deliver by courier

Theft occurs in the delivery system even though
boxes are unmarked

They are sophisticated business minds not typical
?pot?heads"

Financing from the big 5 banks was hard to get
They offer promotions and have clever branding

They sell in all Provinces and have thousands of
patients

Facilities are extremely controlled and inspected
frequently by Health Canada

 

 

 

 

are legally allowed to grow and/or grow and sell medical
marijuana. Currently the only legal access point in Canada.
?30,000 people across Canada with prescriptions.

29 LPs licensed by HC

Tweed uses noble sounding names for their product (Argyle,
Herringbone, Mayberry and Princetone)

Mettrum uses a colour code and more clinical sounding names
(Red number 1, Orange number 3 or blue number 5)

Street names are far more creative and include (Pineapple
express, amnesia haze, purple kush, sour diesel, girl scout
cookies)

Dispensaries
Not legal but also no enforcement
0 Proliferation of dispensaries across the country

0 Illustrates how the medical regs have failed because the dispensaries have
illegitimated the system

 

Comparative Analysis of
Jurisdictions

Uruguay

Washington State, USA
Colorado State, USA

Israel

Netherlands

Spain

 

 

 

 

 

Uruguay- Government controlled, both recreational and medical legal, government sets
price, have to be 18, only for residents [no tourism), sold through licensed pharmacies,
total ban on marketing.

Both Washington and Colorado regulate private companies to supply the recreational and
medical markets, free market price, have to be 21, residents can purchase up to
ZSg/transaction but in Colorado tourist can only purchase 7g/transaction. Washington has
25% excise tax plus 8% sales tax and colorado is 15% excise and 10% sales

lsrael is a medical onlyjurisdiction controlled by government including prices, no age
restriction/set by doctor. Sold in pharmacies and medical centres. 17% sales tax.

Netherlands- Coffee shop system, production is illegal and sourced on the black market,
free market price, must be 18 and 5g/person, coffee shops cannot sell alcohol (but some
do), coffee shops pay income and sales tax

Spain-Social clubs

 

Po??calLandscape

5 Bill Blair is leading the
Trudeau government's
marijuana legalization
project
a Three member Cabinet team.

and Federal?provincial-
territorial task force

i No timeline set for
completion

3 Likely something more to
come in the first term

International Conventions

 

 

 

 

 

The Liberals plan to remove marijuana consumption and incidental possession from the
Criminal Code, while creating new laws with heavy penalties to those who give it to minors
or operate a motor vehicle under its in?uence.

There are three main reasons for this:

1)Keeping it away from minors

2)Tal<ing money out of the pockets of organized crime
failed medical system

The Liberals have set up a task force comprising federal, provincial and municipal
governments, and will seek input from experts in public health, substance abuse and the
police, to design a new system of marijuana sales and distribution.

We don?t yet know what this will be exactly but we have a strong sense that the Ontario
government is advocating for a controlled and rigorous approach, in line with a
government monopoly with tight controls like the LCBO. We do not anticipate any
immediate changes to the medical system in the early stages but there is interest in
legitimizing medical marijuana into the mainstream health care system.

Canada will have to amend its participation in three international conventions:
The Single Convention on Narcotic Drugs of 1961, as amended by the 1972 Protocol;

The Convention on Substances of 1971;

The United Nations Convention against Illicit Traffic in Narcotic Drugs and 
Substances of 1988.

 

 

 

    

Some LCBO customers will
oppose use and will be
uncomfortable around the
product.

 

 

While it is thought that a controlled approach to sale is in the public?s interest, there will be

some customers of ours that oppose the use of Marijuana and will be uncomfortable
around the product.

However, Forum Research's last poll indicated 

 

Forum Research Poll (mama. 2015)

Selling Marijuana: 

Harem

'Do you approve or disapprove of legal marijuana or cannabis being sold
in augments; through each of the following chonnels?? he 

am

am
9? MIME (All Respondents]

II
In!" 6! 
1? Age/ Gender



5 Sample 1003 145 124 195 232 306 511 492
sup-I- nn; 15. Approve nun-muRegion Likely to Use Marijuana

as means!?

 Sample 1003 149 152 285 us 251 165 163 835
Le? Approve Disaan Don't know 6-in-10 approve of legalized marijuana or cannabis This is similar to

national rates of approval noted recently (November 4, national sample - Just more
than a third disapprove of the idea and one tenth have no opinion Approval is
common to the youngest the wealthier to in Northern Ontario

among Liberals and New Democrats and among college graduates


One-in-six use marijuana now

Just less than one ?fth of Canadian adults use marijuana or cannabis now and this is
especially true of the youngest mid income groups to - in
Northern Ontario among New Democrats and those with some college or
university 

Close to one quarter will use marijuana if it is legal

Most want to see legal marijuana sold at specialized marijuana dispensaries

When asked the most appropriate place to sell legal marijuana the majority approve of
selling it at specialized marijuana dispensaries while fewer than half approve the
plan to sell it at the LCBO Far fewer see it being sold in convenience stores 
or by private individuals Among those who plan to use it once it is legal, the same

pattern applies, except with more enthusiasm for all channels (dispensaries - 84%, LCBO -
65%, convenience stores - 40%, private individuals - 



Split Opinion on individual grower exemption

Ontarians are exactly Split on whether individuals should be permitted to grow their own
marijuana once it is legal or not One tenth have no opinion Interest in
the individual grower exemption is, once again, highest among the youngest mid
income groups to - in Southwestern Ontario among New Democrats
and those with partial college or university 

Majority see marijuana smoking allowed in private only, "vaping" in public

When asked where users should be permitted to smoke legal marijuana, the strong majority
agrees it should be in private only while 3-in-10 think it can be smoked wherever
tobacco is permitted Very few believe it should be allowed anywhere, even where
tobacco is not allowed Among potential users of legal marijuana, a smaller, but still
significant group agrees marijuana should be smoked in private only Vaping, or
smoking e-cigarettes, on the other hand, is seen to be appropriate in public where tobacco is
allowed while one third think it too should only be done in private One tenth
think vaping should be permitted everywhere, even where tobacco is not.

 

Who is interested in distribution?

SHOPPERS

DRUG MART

 

 
  
  

 
    
 

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Medical community and the government want to legitimize and integrate medical
marijuana into the existing health care system. Shoppers has been vocal in expressing their
interest in distributing medical marijuana with a play for recreational as well. Tobacco was
once sold in 

 

Regulatory Issues

Impaired Driving
0 Roadside detection
Production
Formulation
Potency
Marketing
Pricing

Tax
Consumption

 

 
 
 
 
   



 

 

 

 

The government has a lot of work to do to get the policy right. The results will impact how
?a government controlled monopoly like the does business. This is a good time for
LCBO to turn their mind to how regulations will steer this business. Here are some
examples of regulatory issues that need to be determined:

ProdUction (quality, security, tracking, commercial activity between producers and the rest
of the supply chain, production limits, BIG weed)

Formulation (availability of different formulas, promote low risk cannabis products
(Vapourizers) and consumption behaviours in the long term.

Potency Limits in ratios, {test and monitor potency of products, information
about potency [accurate, effects and risks, encouraging safer ratios, ensuring
staff are trained in strength/potency-reiated health issues so they can advise customers.)
This will impose an added BURDEN on staff. (dosage) example bottie vs shot.

Packaging (child resistant, preserve freshness and quality, does not promote consumption
or encourage use, standardization and non-branded.)

Availability to meet the demand and reduce illegal market supply while preventing over-

availability, location ?not near schools,

 

Marijuana and Alcohol Sales

Mark?up price
a Depends on the policy objectives
0 Need to strike the right balance
Avoid black/grey market sales

Cannibalization of Alcohol sales?

a Anecdotal evidence from Colorado suggests that
beer sales grew after the legalization of marijuana
due to the influx of "Cannabis Tourism".

0 Cannibalization of alcohol sales is possible.

 

 

 

 

 

The challenge with pricing will be striking the right balance between con?icting priorities.

Deterring use
Reducing the size of the illegal market
Displacing cannabis use from or to other drugs

Generating revenue from sales

Taxation will need to be integrated into pricing regulation to maximize tax revenue while
supporting and not undermining other policy aims

Sales, production, license fees

Great need to control taxation to prevent creating incentives for diversion, tax avoidance
and fuelling the illegal market.

ID

 

Social Responsibility

Strong reputation for
keeping controlled
substances out of the
hands of minors

i Check, Challenge 8:
Refusal

Employee training

 

Support from health Trudeau wants to keep

agencies like CAMH Marijuana out of the hands
of minors.

    

 

 

 

 

Consumption policy ties into our well established social responsibility mandate.

Trudeau wants to keep it out the hands of minors but the survey numbers show that it is
easier for a 16 year old to get a small amount of pot more frequently than a small amount
of alcohol. Legalization won't achieve this policy objective on its own without suppressing
the black market.



Age threshold. Evidence suggests that Cannabis is harmful to the developing brain.
Checking ID

Prevent bulk purchases that could be re-sold in the black market or to minors
Appropriate public locations where cannabis can be consumed (Tobbaco) I

The unresolved challenges to date are impaired driving, the UN Drug convention and
Tourism (cross-border trade)

11

What do the HEALTH experts say?

CAMH and CCSA both note that the harms of cannabis are significantly lower than alcohol.
They advocate for a controlled system and incentives for vaping compared to smoking. They
do not support high concentrates or advertising.

11



 

   

 

 

Considerations

Infrastructure

a Capital. Capacity, Capability

Format

Retail or wholesale?

- Counter serviceI ecommerce.
alongside alcohol or
independent?

- Medical growers AGAINST
co-location

Merchandising

Product Handling

a Theft. vaults. chain of custody
in store warehousing

 

for LCBO

 

 

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In store warehousing

Shelf life 6 months or it dries out

Vaults needed

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Other Issues for LCBO

Profitability
a Uncertain at this time
a Mark up, grey black
market, ability to grow at
home?
Lab testing
- Lab doesn?t have capacity

 

 

to do all testing required  (microbiological) -- 1? w- 
- Onus on supplier or third 

Part?r?

 

Customer perception
Need for customer insight

 

 

 

 

 

 

 

 

Lower margins on Marijuana will effect pro?tability -less room in the margin?might
change in forty years

Talking hundreds on millions not billions

13

 

 

tiariiuana, magnum: and. LGEQ Stare: - City Inform

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Cantur Conn" cam. Senior Policy Aduso:
cannuohwmmoxom
158 $9

 

Questions

 

 

 

Questions?

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