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Provinces to keep control of online cannabis sales

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Provinces to keep control of online cannabis sales

A small, nondescript parcel arrives at the doorstep of Candice Beyer’s Edmonton home every couple of months. She signs for the delivery, then quickly and quietly squirrels the shrink-wrapped, odourless package away in a secret drawer.

The mother of three says the cannabis helps her unwind on the odd Saturday night when her kids are out of her hair, a comfort she likens to the glass of wine other parents might enjoy.

She’s not a medical-cannabis patient, so she has no way to get the drug legally. She’s not keen on buying from a street dealer, and with no illegal cannabis dispensaries in Alberta, Ms. Beyer sought out one of the dozens of underground Canadian companies selling the drug online and started getting the special deliveries about a year ago.

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“I’ve never liked the idea of buying it off of random people [on the street] that I don’t really know or trust,” she said.

Ms. Beyer is exactly the type of customer that governments hope to bring out of the black market once recreational cannabis is legalized next year.

As provinces reveal their plans for how they will allow cannabis to be sold, much of the focus has been on bricks-and-mortar retail stores and whether they should be private or public. However, online sales might be as lucrative – or more so – as people already accustomed to shopping online look for a way to get the drug easily and, for the most part, anonymously.

And in almost every province that has announced its plans for legal cannabis, provincial governments are keeping exclusive control of the online market – and the profits.

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Canada’s cannabis black market is estimated at about 400,000 kilograms a year, though it’s not clear how much of that is from online sales from dispensaries, which ship their products undetected through Canada Post. That’s on top of the legal medical cannabis system, which shipped 33,000 kilograms of product to 168,000 patients across the country last year.

Licensed medical cannabis growers across the country have been telling provincial governments they have the capacity and expertise to run online sales directly to consumers. So far, all provinces except Manitoba have opted for a public system of online sales meant to capture consumers such as Ms. Beyer. British Columbia, long home to the country’s largest illicit cannabis industry, has yet to unveil its plans, but has signalled it favours a mix of public and private retailers similar to the model Alberta has proposed.

On Thursday, Alberta introduced a hybrid system in which the province runs online sales and allows private businesses – including licensed cannabis producers – to operate special stores where the drug is sold separately from tobacco, pharmaceuticals or alcohol. The provincial government said this strikes a balance between bolstering its entrepreneurial image – in a place where consumers are long accustomed private alcohol sales – and providing the oversight needed to ensure legal cannabis stays out of the hands of minors, which is one of Ottawa’s key priorities behind this historic policy shift. To do that, government workers may end up delivering the cannabis.

Alberta has not decided whether it will mark up online product to match its competitors in private storefronts, but Justice Minister Kathleen Ganley told reporters Thursday that, especially in the first few years, as the legal market is established, the costs to the provincial government – in terms of areas such as policing, education and health care – will exceed any revenues.

Ms. Ganley said the province does not yet have a forecast for revenues from online sales and her spokesperson said no business case was available for this nascent public enterprise.

Potential profits from online sales would be over and above tax revenue. Ottawa has proposed an excise tax of roughly 10 per cent, split evenly with the provinces. Provincial governments say that share would be insufficient, since they have to deal with all of the issues related to legalization, including law enforcement, public health and establishing a regulatory framework and system of sales.

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Alberta Justice Minister Kathleen Ganley makes her way to the podium to provide details of the proposed cannabis legislation in Edmonton Alta, on Thursday Nov. 16, 2017.

Alberta Justice Minister Kathleen Ganley makes her way to the podium to provide details of the proposed cannabis legislation in Edmonton Alta, on Thursday Nov. 16, 2017.

JASON FRANSON/THE CANADIAN PRESS

A consortium of 12 licensed medical cannabis producers had pitched Alberta and B.C. on allowing them to run a co-operative network of stores with an e-commerce platform to sell the drug at no extra cost to the provincial government, even floating the idea of a profit-sharing dividend. Pierre Killeen, vice-president of corporate communications at Quebec-based Hydropothecary and spokesman for the Canadian Cannabis Co-op, said it is natural for governments to want to retain tight control of all facets of the market at the dawn of legalization.

A spokesperson for Liquor Stores N.A. Ltd., Alberta’s largest chain of alcohol retailers, declined to comment on his company’s plans for this new sector.

Jeremy Jacob, president of the country’s largest dispensary trade group, the Canadian Association of Medical Cannabis Dispensaries, said a government-controlled online sales system runs contrary to the spirit of free enterprise and will push black-market retailers to continue operating outside the regulatory environment.

“What other industry would you be given the right to retail, but not online?” he said. “Unless [governments] can show that private businesses will not be able to do age verification, then it seems to me that there would be no clear reason for the provinces to reserve retail for themselves other than to gain the revenue.”

Alberta’s hybrid approach seems much more sensible than that of Ontario, New Brunswick and Quebec, where in-person and online sales will be run solely by the government, according to Anindya Sen, an economist at the University of Waterloo who studies public intervention in markets.

“If Amazon is any indication, [online] is definitely where retail is going,” he said.

Medical marijuana user Skye Bergen pictured wants to the government legalize mail-order marijuana.

Medical marijuana user Skye Bergen pictured wants to the government legalize mail-order marijuana.

JASON FRANSON/The Globe and Mail

Whereas the Eastern provinces will want to keep online and in-person pricing level, so one arm of their public sales system doesn’t vastly outperform the other, Alberta can dictate the market price it wants private retailers to meet through what it charges on its government website, Prof. Sen said.

“It’s a smart move because they won’t have any overhead and, if they set prices a bit lower, they can ensure that the bricks-and-mortar retailers will also ensure that they keep their prices low,” he said. “From that perspective, it’s very useful to control black-market growth.”

Rielle Capler, a University of British Columbia PhD candidate who has been studying how Canadians access legal and illicit cannabis for almost two decades, said provincial governments may be damaged politically for creating retail systems that make it easier for people to buy cannabis, but that is the only way the black market will be squeezed out.

“They have to look at the evidence and not the politics,” she said.

A study published in the March, 2016, issue of the peer-reviewed journal Health Affairs found that U.S. states with less government control over legal cannabis sales saw more people join the regulated market, she said. She added that some people will continue to fear and distrust any government involvement in the cannabis market as long as criminal penalties related to the drug exist.

Skye Bergen says she has a prescription to use the federal e-commerce system for medical cannabis, but she says her trusted street dealer has more strains, which she can get cheaper and faster than from one of the country’s six dozen licensed commercial growers. The Edmonton mother of two says some of the licensed firms are better than others, but the price must come down and shipping times must be cut drastically for any legal medical or recreational market to beat out its underground competitors.

“It doesn’t make sense to put that order in and wait for a week and a half to two weeks when I can call somebody and have them come to me,” she said.

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Article originally found at https://www.theglobeandmail.com/news/british-columbia/provinces-keep-lucrative-online-market-for-legal-marijuana-tothemselves/article37019186/

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

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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.”

Original Article at https://www.cnbc.com/2018/12/14/facebook-google-dont-allow-cbd-ads-so-zenpup-has-to-get-creative.html

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How Cannabis Could Become The Next Real Estate Disrupter – Forbes

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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 Realtor.com 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

Article originally found at https://www.forbes.com/sites/amydobson/2018/11/27/cannabis-as-real-estate-disrupter-how-the-largest-marijuana-retail-space-plans-to-revamp-a-district/

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[Winner] November 1, 2018 Giveaway (Episode 2)

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Brady Shepherd wins our 2nd Rate.Review.Win! Giveaway!

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