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Marijuana Legalization in Canada Has Companies Chasing a Green Rush




Marijuana Legalization in Canada Has Companies Chasing a Green Rush

SMITHS FALLS, Ontario — Millions of dollars worth of marijuana plants sat under lamps brighter than the noonday sun as employees of Canada’s largest cannabis business bustled about the 47 giant growing rooms of its factory, which once made Hershey bars.

Now it’s home to Tweed, whose parent company, Canopy Growth, was the first Canadian marijuana grower to debut on the New York Stock Exchange.

Valued at more than $10 billion, Canopy is worth even more than Bombardier, the Canadian manufacturer that is one of the world’s largest makers of planes and trains, offering a stark example of this nation’s new get-rich-quick hope — the marijuana industry.

On Oct. 17, Canada is set to become only the second country in the world and the first major economy to legalize marijuana for all uses. Companies are clamoring to join in what some are calling a green rush.

“It’s like Seagram’s back when Prohibition was in place and just about to end,” said Deborah Weinstein, a lawyer in Ottawa who handled Canopy’s move onto the Toronto Stock Exchange, with the stock symbol WEED. “But it’s more than that. This has never been an industry.”

On the same day that marijuana becomes legal, the government will announce a program to make it easier for Canadians convicted of possessing small amounts of marijuana to obtain a pardon, according to an official familiar with the plan.

The official, who spoke on the condition of anonymity, said that because several details must still be worked out, the program will not become active immediately. Pardons are to be available only for people convicted of possessing 30 grams of marijuana or less, the legal limit under the new system.

The law limits the products that can contain cannabis; edibles, for example, will not be legal until next year.

The legislation also heavily restricts advertising and is laden with bureaucratic rules, including licensing and inspection requirements for producers.

But companies are already lobbying for more permissive rules.

The fervor is a little reminiscent of the dot-com boom of the 1990s. The top 12 Canadian marijuana companies are now worth nearly 55 billion Canadian dollars, or $42 billion, and investors are snapping up the stock.

Profits, though, are a dream of the future. At Tweed, for example, sales last year from the medical marijuana business were just 77 million Canadian dollars. The company lost 70 million dollars.

Some investors may be sorry. Not every marijuana producer now taking stock markets by storm will profit and survive, many experts believe.

There are 120 businesses licensed to grow medical marijuana, which has been legal in Canada since 2001. They are now poised to serve people who simply want to get high. In provinces where the private sector will handle retail sales, companies are scrambling for licenses to open stores.

Shoppers Drug Mart, the country’s largest pharmacy chain, has taken out a medical cannabis producer license.

Most big alcohol players appear to be sitting back for now, except for some investments, but analysts expect they will eventually get more involved.

A notable exception is Jakob Ripshtein, who used to head the Canadian operations of Diageo, the British-based liquor giant that makes Guinness beer and owns several of Seagram’s brands.

In May, he became the chief operating officer of Aphria, which owns an expansive and expanding marijuana greenhouse complex near Leamington, Ontario.

“Do I believe there are going to be different players coming into the industry?” Mr. Ripshtein said. “I absolutely do.”

Only dried cannabis, oils and seeds will go on sale this month. But the industry is dreaming up a future that will include products like cannabis-laced candies. At a large lab at Tweed, for example, scientists are laboring away under fume hoods on marijuana drinks.

[For future coverage of marijuana legalization in Canada and other Canadian news, subscribe to our weekly Canada Letter newsletter.]

There is also an industry around the industry, already making money.

Businesses have sprung up to create the software that allows growers to track their plants and final products, as the government requires. Marijuana growers are also voracious consumers of supplies like fertilizers, as well as energy.

And greenhouse makers now have a customer base beyond tomato and green pepper farmers.

Beyond that, abandoned factories, like the one Tweed operates in, have suddenly become hot properties.

Even Canadian news organizations have joined in. In Toronto, The Globe and Mail has hired reporters and editors to produce “Cannabis Professional,” a daily newsletter that will cost 2,000 Canadian dollars a year for a subscription.

David Campbell is one of those profiting from the boom.

Mr. Campbell, 50, has a background in management at companies that make machines dauntingly known as “supercritical fluid botanical carbon dioxide extraction systems.” Typically they decaffeinate coffee.

But they are also ideal for squeezing the active ingredients out of marijuana plants to create oil.

So in 2015, when Justin Trudeau was campaigning for recreational legalization (Uruguay legalized the drug in 2013), Mr. Campbell set up Advanced Extraction Systems in Charlottetown, Prince Edward Island, just to serve the cannabis industry.

Mr. Campbell hasn’t looked back. The company has sold 12 systems this year, including one to a medical marijuana company in Germany. Advanced has gone from one employee, Mr. Campbell, to 14, most of them engineers.

“We feel this is just the beginning,” Mr. Campbell said. “We’re targeting California hard now.”

Even seemingly minor announcements about the industry can create paper fortunes overnight.

In September, Tilray, a producer with headquarters in Nanaimo, British Columbia, said the Food and Drug Administration in the United States had given it permission to export a cannabis compound to the University of California, San Diego, for medical research.

The value of the sale is so small that the company declined to disclose it. But the news still sent Tilray’s stock price up by 78 percent, adding billions to its value. The excitement soon faded and its shares have dropped back toward their previous value.

[Where will cannabis be sold? What will happen at the Canada-U.S. border? Here’s what you need to know as Canada legalizes marijuana.]

Meanwhile, the size of the industry is anyone’s guess.

Statistics Canada, the census agency, estimated that last year Canadians handed over 5.7 billion Canadian dollars for marijuana, with 90 percent of that going to a vast black market of dealers and underground websites.

No one knows what will happen now to the illegal trade, with its greater selection and lower prices, although the government has vowed to stamp it out.

The biggest players in Canadian marijuana, including Canopy, came out of the medical marijuana system, which was greatly expanded about five years ago.

Bruce Linton, Canopy’s chief executive, acknowledged that from the first days of legal medical marijuana his mind was on the day that the much larger recreational market would open for legitimate business.

But he, like most in the cannabis business, sees the government’s tight limits on advertising and marketing as an obstacle to future profits.

The government requires that marijuana be sold in plain packages that feature large health warnings and tiny logos. Advertising is limited to what Health Canada, the federal department that regulates cannabis, calls “information-type promotion” and “brand-preference promotion” all of which must be kept away from the eyes of children.

No ads are supposed to appear until Oct. 17, but several companies have jumped the gun and run advertisements that bend — or possibly break — the upcoming rules.

Health Canada said in a statement that it has cautioned several of the companies.

At the same time, a steady stream of lobbyists to Ottawa has been pushing for looser marketing rules, among other things.

Federal lobbying records show that public servants, political staff members and cabinet ministers have received 583 visits or phone calls from marijuana industry lobbyists since Mr. Trudeau was sworn in as prime minister in November 2015. That includes 92 lobbying visits alone by Brendan Kennedy, the president and chief executive of Tilray.

In the Tweed factory in eastern Ontario, where children used to buy broken candy bars from Hershey, Tweed has a carefully appointed visitors’ center, museum, cafe and gift shop offering clothing and marijuana paraphernalia.

Visitors can learn that Louis Hébert sowed the first cannabis seeds in what would become Canada in 1606, and sniff the scents of the company’s various strains of marijuana.

The atmosphere is a more successful tech start-up than Cheech and Chong, with employees in white lab coats, disposable jumpsuits or black T-shirts, all bearing the company’s retro script logo.

One recent day in the visitors’ center, two of Tweed’s 2,000 global employees talked over social media strategies at a long table of artfully distressed wood.

Mr. Linton was there, too, preparing to meet the civic leadership of Smiths Falls to discuss a mural for an outer factory wall that would depict the history of the town and imagine its future.

He recalled when cannabis was hardly a sure bet.

For much of his career Mr. Linton was involved in several tech start-ups in Ottawa.

When he decided just over five years ago to leave tech behind to start a marijuana business, his associates and family members had a unanimous view that it was a “very, very bad idea.” They were almost proved right.

In its early days, the company twice ran out of money, Mr. Linton said, and narrowly avoided bankruptcy only because of a last-minute infusion of cash from hard-to-find investors.

Now investors have bet billions of dollars on his vision. And Mr. Linton declared that Oct. 17 will be a unique moment in Canada’s history.

“The epicenter of the public policy is here, and everybody’s coming to Canada from all the other countries to see how we do it,” he said. Actually having home field for the first time ever in anything — this is amazing.”

Follow Ian Austen on Twitter: @ianrausten

Catherine Porter and Lindsey Wiebe contributed reporting from Toronto. Kirsten Smith provided research.

A version of this article appears in print on , on Page A8 of the New York edition with the headline: As Canada Legalizes Pot, Green Rush Means Money, Too. Order Reprints | Today’s Paper | Subscribe

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Marijuana and CBD companies can’t advertise on Facebook and Google, so they’re getting creative – CNBC




David Bozin used to get cuts and scratches on his arms when it came time to bathe his golden retriever, Jax, who rebelled against the prospect of being dunked in water.

Then he learned that dogs, like humans, respond to the properties of cannabidiol, also known as CBD, a cannabis compound that helps the body relax without producing intoxicating effects. Bozin got to work on a line of CBD-infused dog products, including a dry shampoo and puppy treats, that he calls ZenPup.

But in trying to find customers for his new company, Bozin faces a unique challenge in today’s market. He doesn’t have access to Google, Facebook or Instagram (owned by Facebook), which have banned CBD and marijuana promotions. The two dominant online advertising platforms account for 57 percent of the U.S. digital ad market, according to eMarketer, and almost all emerging brands today count on Google’s search ads and Facebook’s precision targeting to efficiently get the word out.

“Facebook is not the end all, be all. Instagram is not the end all, be all,” Bozin told CNBC. “Does that mean you’re not going to see as much traffic at the get go? Sure. But at the end of the day the most important point is conversion,” or getting people to buy your products, he said.

Marijuana is legal for recreational use in 10 states and Washington, D.C., and available for medical purposes in many others parts of the country. CBD is a bit more complicated because the laws are murky.

Currently, 47 states allow some form of CBD sales. The 2018 Farm Bill, which Congress passed this week, allows states to decide if CBD products made from hemp can be sold in their jurisdiction. However, it doesn’t protect the products from the Food and Drug Administration, which can penalize companies for making inaccurate health claims.

“We avoid talking about anything too specific about what the product will do,” said Cary Smith, senior vice president at agency North 6th Agency. “If you come from an educational standpoint, you skew towards less restrictions, and have a bit of a larger organic reach.”

With so much uncertainty in the market, Google and Facebook have shied away from allowing marijuana and CBD advertising, taking a similar approach to how they handle tobacco and related paraphernalia. When it comes to alcohol, Google prohibits companies from targeting underage users or promoting unsafe behavior, while alcohol advertising on Facebook has to adhere to local laws.

In the absence of Google and Facebook, ZenPup has been forced to find alternative ways to launch its products. The co-founders, who worked in marketing and public relations, are spending time building relationships with media companies, high-end dispensaries and pet accessory retailers, along with other brands that might be open to partnering with a CBD provider. They’re finding popular social media influencers, who can support the products organically on their accounts.

ZenPup has also focused on clean, attractive packaging so that it’s appealing for “shelfies,” or staged product photos that people post on their feeds.

“Those younger consumers are looking for something different from an aesthetic standpoint, that also is top quality and at a good price point,” said Nicholas Weatherhead, ZenPup’s chief marketing officer and co-founder.

Other approaches are available to CBD companies, depending on the specific industry. Hillary Wirth, media director at the agency Noble People, said there are plenty of ways to get your brand in the right place.

To promote Viceland’s digital show “Weed Week,” in April Noble People bought local and national TV ads with DirecTV and Comcast, as well as on channels like IFC , USA and BBC America, and focused on pornography site Pornhub. There are also digital ad networks like like Traffic Roots that allow marijuana and CBD ads.

“So you can’t advertise on Facebook or Google – it’s not the end of the world,” said Wirth. “There are plenty of other media channels that will get you contextually next to relevant weed content.”

Noble People got creative in other ways. The firm organized a Washington, D.C., Viceland event to allow people to “Smoke Weed with Jeff Sessions.” But it wasn’t the former attorney general — just a man from Wisconsin with the same name.

Another approach is storytelling and finding a narrative that can generate PR.

For example, branding agency Abel told the story of Charlotte’s Web, a dietary supplement company named after Charlotte Figi, a young girl who suffered from epileptic seizures. With the help of CBD, Figi was able to to reduce her seizures and improve her health.

With “brands like Charlotte’s Web, the founders, who are very positive about the cannabis opportunities, have been able able to use PR as a marketing channel,” Abel CEO Julian Shiff said. “The word of mouth is so strong they are developing a tribe around their brand.”

Sponsoring sporting events and concerts are effective ways to find brand resonance. Smaller gatherings can work as well. Recess, which makes a CBD-infused seltzer, holds information events at places like hip-hop yoga chain Y7 Studio and samplings at Rise by WeWork. The company is based around a beverage, but it’s really trying to sell a lifestyle, said CEO and founder Ben Witte, who used to run mobile strategy for ad tech company AdRoll.

Witte said Recess has reached 50 times its projected sales this year, amounting to hundreds of thousands of dollars. The product is mostly sold online, but is also available in New York City stores.

“The most important thing is to have a clear mission and purpose,” Witte said. “The best way to communicate that mission and purpose is not through a Google or Facebook ad.”

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How Cannabis Could Become The Next Real Estate Disrupter – Forbes




Outdoor restaurant renderingDesign by M-Rad Inc.

For a while it looked like the best thing to bring to a neighborhood was a new Whole Foods grocery store. One study showed that homes in these neighborhoods would appreciate at a much faster rate than if they were near a Trader Joe’s (and both were better than a Starbucks). Another sign a neighborhood is on the cusp of revitalization is when the yoga studios start vying for space with the arthouses. Usually it is not long after that the expensive coffee shops and cupcake stores start showing up at street level. But now that so many states have passed laws favorable to the marijuana movement, the next big thing to bring a neighborhood back from the brink just might be the increasing number of organizations that work in the industry.

Downtown Los Angeles could be the first case study to see this phenomenon in action. Next month, a seven-story building in the heart of Los Angeles’ Jewelry District will open up, filled with tenants who all have cannabis somewhere in their job description. The 67,000-square-foot Green Street Building (the name is in reference to its anchor tenant, the Green St. Agency, which works solely with clients in the marijuana industry) will house everything from co-working spaces to an art gallery, dispensary, restaurant, law firm, luxury spa and lounge. Real estate investment company Bow West Capital purchased the property last year for a reported $14 million. Once open it will be the largest real estate space dedicated to cannabis in the U.S.

“The buildings in [the Jewelry District] have not received the proper upkeep, allowing for low sale prices of the buildings but also requiring full renovations,” said Matthew Rosenberg, CEO and Founder of M-Rad, Inc, the design team behind the project. “With the prosperity and funding in the cannabis industry on the rise, this is a perfect combination for this exciting new industry to make this area their home, with Green St. being the catalyst.”

While there are not many residential properties for sale within the Jewelry District itself, data from shows the few that are on the market have a median asking price of $525,000. Surrounding neighborhoods vary quite a bit with the neighborhood of Florence-Graham about five miles away to the southwest seeing median list prices of $440,000 compared to Greater Wilshire a few miles to the northeast seeing median list prices of $1.7 million.

Lounge renderingDesign by M-Rad Inc.

M-Rad took the 1913 building and completely renovated the interiors to create mixed-use spaces that cater both to the requirements of offices and restaurants as well as the unique needs of cannabis companies. They needed to create the right proportion of an open-plan design matched with a set of cloistered, secluded rooms for those who want privacy. Here are some images of the interior provided exclusively to Forbes.

For example one concept for behind the hidden door of the library bookshelf could be the Bud Bar, with a custom-designed table. (Interested? A Forbes contributor put together a Gift Guide which includes some of the most unique marijuana rolling papers, with some that are made from gold and others that look like money.)

Concept of tableDesign by M-Rad Inc.

The lounge, MOTA—which if, like me, you didn’t know is a Spanish slang term for marijuana (at least one dispensary out there has ascribed the words Medicine Of The Angels to the letters, but the term doesn’t have its origins as an acronym)—will complement the restaurant which may prepare cannabis-infused menu items and have a U-shaped bar designed specifically for potential cannabis tastings. It will also have fully transparent windows into the kitchen so guests can see the food being prepared. Sound-proof rooms are also available for private meetings and the Flower Room can be a designated smoking area. [Update: The design team followed up after this was published to clarify these features are just in concept stage and have not been confirmed or approved. No cannabis products will be sold on site based on current plans.]

MOTA Cafe renderingDesign by M-Rad, Inc.

“The companies who are part of the building are some of the biggest players in the industry,” says Rosenberg. “Which will bring in high-level clientele and investors who may feel encouraged to invest in the development of the area. The building itself will host a number of cannabis-related programs such as cultural activities and gastronomic experiences which will attract new clientele.” Some of the big names affiliated with the project are prolific investor Gary Vaynerchuck, who is a 50% stakeholder in Green Street Agency, and Vicente Sederberg LLC, dubbed The Marijuana Law Firm, is one of the tenants.

Typically neighborhood revitalization follows the pattern of stores opening up on a neglected city block one retail space at a time. But this model is different. By bringing a critical mass of companies to the neighborhood all at once, the sudden influx could accelerate the resurgence all the more quickly. Los Angeles’ Jewelry District could become a major player in a matter of months, not years.

Follow me on Twitter @amydobsonRE

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