City of Calgary officials planned for the worst by scrutinizing the messy early days of the US experience. Want to know what’s next? Look south.
Alberta has emerged as the exception to the national trend of a struggling legal cannabis market. It has almost as many retail stores licensed as all other provinces combined, with sales that rival those of Ontario or Quebec despite having a fraction of their population.
There are a number of factors that contribute to Alberta having successfully navigated legal cannabis’ infancy. Timing was key; Alberta’s preparations weren’t interrupted by a provincial election as they were in BC and Ontario. Equally as important, this unobstructed on-ramp afforded Alberta and its municipalities the time needed to prepare and implement a realistic plan based on the lessons learned in other jurisdictions.
Canada is the first G20 country to legalize recreational cannabis on a national scale, but the experiment of legalization is not without precedent. Nine American states had legalized the sale of recreational cannabis by October 17, 2018, the day legal recreational cannabis hit the shelves in Canada. These pioneering states gave Alberta’s regulators a sense of what to expect in the lead-up to legalization. Their experiences can also shed light on what Canadians can expect, and what regulators should prepare for as Canadian legalization enters its adolescence.
Calgary was quick to respond to legalization, and now has a nation-leading 85 provincially licensed cannabis retail stores. (See figure 1.) Preparations began shortly after the release of the federal Framework for the Legalization and Regulation of Cannabis in November of 2016. In February 2017, Calgary City Council convened a panel of health experts, local entrepreneurs and a municipal official who had spearheaded Denver’s response to legalization in Colorado. Municipal priorities and advocacy positions were soon established, setting clear direction for a Calgary response. If cannabis was going to be a legal business in Canada, Calgary was going to treat it as such.
These early advocacy positions also proved important for early interactions with both the provincial cannabis secretariat as well as the Senate, to ensure that Calgary’s voice was heard when drafting provincial and federal regulations. Calgary’s early preparations also served to inform other Canadian municipalities through contributions to the Federation of Canadian Municipalities’ guide to legalization. Its bylaws acted as prototypes for several smaller Albertan municipalities.
As City of Calgary administrators researched the American experience with the roll-out of cannabis legalization, it became apparent that retail stores could expect a crush of interest – particularly in the early days. Lineups would dominate the news headlines with customers wanting to be a part of history in the making.
But long before the lines of customers, we knew we could expect retail store applicants lining up for their chance at a piece of the green rush.
Calgary’s stated vision is: a great place to make a living, a great place to make a life. Supporting business has been a municipal priority amplified in the wake of the oil price crash in 2014. With this in mind, Calgary began preparations for ensuring that this new industry could be integrated into the local economy as smoothly as possible. Bylaws were established months ahead of legalization, and applications were facilitated through an online portal – the first of its kind in Canada – where entrepreneurs could apply for business licenses, development permits and building permits all in one place. An online mapping system was developed so Calgarians could easily understand where new stores had been applied for, and where they weren’t allowed because of setback restrictions. In the first 15 minutes after the system opened, more than 200 applications were successfully accepted. These numbers wouldn’t have been possible had Calgary not adapted to the lessons learned in other jurisdictions.
Canada’s potential entrepreneurs and consumers clamouring for their piece of the legal market weren’t the only events made predictable by the experiences of our American neighbours. The product shortage experienced here in the early days was preceded by similar shortages in Nevada and Colorado. The subsequent overflowing storerooms we are seeing in Canada have also been experienced in Oregon and Washington. Similarly, a resilient and stubborn black market has been the hallmark of almost all states that have legalized thus far. These circumstances should not come as a surprise for Canadians paying attention to the forerunners.
Additionally, the events in these more experienced states could well presage what Canadians, and regulators, should be preparing for next. The first iterations of legal cannabis lounges have appeared in Colorado and California, with regulations passed to accommodate this new aspect of the industry in Alaska. Despite Alberta’s regulatory body indicating that cannabis lounges are not on the table for the foreseeable future, the City of Edmonton has begun to examine what they could look like.
In the wake of a first year that has fallen short of expectations, Canada’s cannabis industry has cited a number of regulatory requirements as particularly limiting. Excise stamps, product limitations, packaging requirements, lack of stores, and high taxes have all been identified as tipping the scales in favour of the illicit market. Similarly, California’s legal cannabis industry has also identified regulatory requirements, including high taxes, as being among the reasons why it is losing ground to the illegal industry.
In addition to advocating for fewer restrictions on the legal industry, the focus in California has been on having enforcement agencies redouble their efforts against illegal operators. Their advocacy appears to be paying off as 150 National Guardsmen were recently reassigned from the national border to cannabis enforcement. Some have pointed to cannabis legalization as signaling the end of the war on drugs, but California’s experience could indicate that the battle lines are simply being redrawn between the legal and illegal industries.
Legal cannabis is now a billion-dollar industry in Canada. With the excise tax, GST and provincial sales taxes, government tax revenues are measured in hundreds of millions of dollars. More than 9,000 Canadians are employed in cannabis production, with thousands more working in retail. This is an industry that is gaining in economic impact and political clout, and has recently started advocating not just for relaxation of restrictions but also for the enforcement of federal laws against its illicit competition. If California’s experience is any indication, Canada’s enforcement agencies and policy-makers can expect to face increased pressure not just to reduce restrictions on the legal market but to act in defense of a newly legal, taxpaying industry.
For those watching Canadian legalization, a focal point is currently cannabis edibles, extracts and topicals. Calgary’s consumption bylaws were initially drafted anticipating the eventual legalization of edible and extract products. The city’s land use bylaws were developed not just for the large scale grows that dominated the headlines in the early stages of legalization, but also included potential for the craft cannabis growers and value-added cannabis processors that emerged in the wake of American state legalizations. Regulatory preparations for today’s legal cannabis landscape began well in advance of Canada’s first round of legalization and if the experience of the US cannabis forerunners is any indication, regulators should already be looking beyond Cannabis 2.0 to the next phase. Precedents in the US such as cannabis lounges, and increasing pressure to address the illicit market, can serve as waymarkers when trying to anticipate the industry’s continuing maturation.
After a year of legalization, Canadian headlines have been dominated with examples of how the industry has failed to meet expectations. The reality could be that this was not so much a failure of the experiment, but a setting of unrealistic expectations. There are aspects of Canadian legalization that are entirely unique, nothing like that of its predecessors; most notably a national strategy, including packaging, product and advertising restrictions focused on the protection of public health and keeping cannabis out of the hands of children. As a result, Canada now has a legal market with distinctly tighter controls than most legalized American states. But there has also been a well-established series of precedents that predicted much of what has been experienced in Canada’s legal cannabis sector, and that can be looked to when setting expectations for the next stages of cannabis legalization.
This article is part of the The Making of a Cannabis Industry: Year One special feature.
Photo: Calgary Co-op, a cannabis retailer, in the downtown core.
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