Canada’s federal medical marijuana laws provide licensed producers with a number of benefits that would make their American counterparts jealous. Cannabis business owners have access to banking services, credit card payments and copyright protection. They can use the federal postal service to ship their products to consumers and aren’t hampered by interstate commerce laws that prevent U.S. businesses from going national.
But it’s not all free enterprise in Canada.
Licensed producers like Emblem Cannabis have to maintain stringent health and security requirements and are prohibited from traditional advertising channels. While shipping direct-to-consumers has its advantages, it comes with a caveat: Licensed producers aren’t allowed to sell their product through storefronts. Although some cities and provinces have tolerated or even regulated medical dispensaries, they exist on somewhat shaky footing and operate separately from licensed growers.
Emblem received its license in August 2015, but won’t be authorized to begin selling product until this summer. The company has been growing on a small-scale, trial basis since October 2015. From the start, the Ontario-based company outfitted the 23,000-square-foot indoor facility with some of the most advanced technology in cultivation.
“We’re definitely not the biggest facility in Canada,” CEO and co-founder Maxim Zavet says. “But I think in terms of build-out and our actual grow equipment and processing areas, we’re probably in the top five.”
Zavet and his partners spent two years and roughly $10 million renovating a former chicken processing plant into a full-scale commercial grow operation. The facility uses 1,000-watt high-pressure sodium lighting, and Zavet says the HVAC air handling units, climate controls, CO2 and irrigation systems were installed so Emblem “could have top-shelf production from the get-go.”
The construction cost could have been much lower if not for the security requirements established by Health Canada.
“We’ve got very strict security standards — cameras everywhere, perimeter security,” Zavet says, pointing out that all movement within the facility can be tracked.
The Canadian government also mandates that key personnel for cannabis operations must be granted federal security clearance to determine if they pose an unacceptable risk to the integrity of the program. The background checks are conducted by the Royal Canadian Mounted Police, who send their findings to Health Canada for review.
Federal inspectors from Health Canada tour the Emblem facility on a monthly basis to ensure it meets the national standards. Contamination is the chief concern for the inspectors.
“The standards in Canada are pretty high in terms of microbial testing,” Zavet says. “You’re judged like an herbal medication, not like a food. When people are consuming the product they can be reasonably assured that there is no mold, no pesticides or contaminants and they know exactly what they are getting in terms of THC and CBD, because the labs in Canada are also federally regulated.”
In order to grow a product capable of passing microbial tests, Emblem protects each grow room with positive air pressure. While typical hinged doors allow foreign particles to enter each time they’re opened, Emblem’s high-pressure rooms prevent contaminants from entering.
Employees working inside the grow rooms cover themselves from head to toe in cleanroom suits to prevent anything on their clothing from contaminating the sealed environment.
Zavet says the inspections are definitely a hassle, but he says the national standards have prevented pesticide scandals and promote a sense of trust for Canada’s 50,000 registered patients.
“There’s not a lot of possibility for contamination between the grow rooms and in the processing areas; they are both separate, and a high degree of sanitation is required,” he says. “But as we know, cannabis, especially dry flower, is a living organism — so there’s always a margin for error.”
Emblem has staggered production into separate phases to meet demand as awareness for the program grows. Phase one for the company’s production schedule will see 600 kilograms (roughly 1,323 pounds) of flower harvested on an annual basis. At phase two, set to begin in January 2017, the company plans to triple its annual production to 1,800 kilograms per harvest (3,968 pounds).
Emblem currently utilizes four grow rooms, each capable of housing 1,200 plants and producing 60 grams of flower per square foot. The company plans to bring another four grow rooms into operation once phase two begins.
Emblem Cannabis will begin sales with a soft launch this summer. Danny Brody, Emblem’s vice president of corporate development, says the average price per gram in Canada has remained steadily at about $8.50 per gram ($6.57 in the U.S), and the average patient in the program consumes 1.5 grams per day.
Without traditional advertising avenues, education has become the next best option to spread awareness. To better suite those needs, Emblem Cannabis built its sister company, GrowWise, to focus on education and the promotion of the country’s medical program.
“We’ve set up clinics all over Ontario,” Brody says. “We operate out of incumbent pain clinics and out of doctor’s offices — specifically doctors who prescribe medical marijuana.”
GrowWise follows a similar model to other pharmaceutical companies, setting up educational events one day a week. The classes have nearly 30 patients at each event and cover the benefits of cannabis for qualifying conditions. After the class session ends, attendees are paired with nurses who answer questions and walk them through the online ordering process.
“Under the current laws, it’s mail-order only, so the customer can order by phone or by Internet — which is good on the one hand because you don’t have the overhead costs of retail stores,” Zavet says. “But obviously a lot of people like to have that interaction and see the product and smell the product, talk to the budtender. So that is something that we’re lacking.”
The company’s online menu will include everything from dried flower to extracts, with “pharma-appropriate dosages” that Zavet believes will be more palatable for consumers.
There are plenty of dispensaries in major cities where Canadians can go to sample flower, review edibles and talk to budtenders for recommendations, but they’re typically far removed from the 30 producers licensed by the government. Dispensaries in Canada operate somewhere between tolerated and illegal; license-holders like Zavet are strictly forbidden to do business with dispensaries, making producers and retailers direct competitors.
Zavet, who practiced law for several years prior to becoming CEO of Emblem, knows that prosecuting cannabis-related offenses can be difficult. Even as the government has begun shutting down dispensaries, he believes the “quasi-legal” competition will remain until the government starts implementing regulations for recreational use.
To add to the competition, a federal court ruling in February 2016 found that limiting patients to the licensed distributors was an infringement on their national rights. The decision inadvertently opened the market up for home growers.
“It is a big issue for licensed producers because we’re essentially competing with gray-area illegal dispensary product and home growers that are flooding the market,” Zavet says.
The court gave lawmakers six months to construct a program to regulate home growers — a window which will close in August. By that time, Zavet believes the government will opt to mirror the home-growing regulations established in Colorado.
Legal gray areas aside, Canada’s entire cannabis industry sits on the precipice of full-scale cannabis legalization.
“Recreational is definitely on the horizon,” Zavet says. “We firmly believe that licensed producers will be the only supply for the recreational market, because the government’s number one concern is public safety and preventing marijuana from getting in the hands of children. Licensed producers are already prepared to sell product with all of the record-keeping mechanisms and all the quality mechanisms in place.”
If Zavet’s suspicions are correct, Emblem Cannabis is set to play a major role in bringing recreational cannabis to Canada. The country’s recent assembled task force on marijuana legalization and regulation has already stated that some of their main objectives are continuing the medical program and establishing a strict system of production, distribution and sales. The task force will report back to the government in November with plans for legislation to be introduced in 2017.
“We are already starting to consider some expansion plans,” Zavet says regarding Emblem. “We definitely have the room on the site to expand in a significant way. But we need to get into selling and revenue before we can start doing all of those great things.”