We've updated our Privacy Policy to make it clearer how we use your personal data.

We use cookies to provide you with a better experience, read our Cookie Policy

Advertisement
Analytical Cannabis Logo
×
Home > News > Policy > Content Piece

What Can Other Countries Learn After 3 Years of Cannabis Legalization in Canada?

by MT Maruma
Published: Nov 03, 2021   
Listen with
Speechify
0:00
Register for FREE to listen to this article
Thank you. Listen to this article using the player above.

On Friday 22 October 2021, the government of Luxembourg announced that citizens of the small European state will be allowed to grow, possess, and consume cannabis legally. Cannabis liberalization laws are also being considered in Germany, where the Free Democrats estimate €1 billion could be raised annually if cannabis is taxed similarly to cigarettes.

The Luxembourg announcement came five days after Canada celebrated three years of nation-wide legalization. With a movement in Europe and across in America and Mexico to liberalize cannabis laws, what can these countries learn from Canada’s cannabis experiment?


Cannabis licenses

The Cannabis Act came into force on 17 October 2018, allowing Health Canada, the federal body tasked with implementing legalization, to regulate all production of cannabis. Two license categories were developed: cultivation and processing. And within these license categories were two levels: standard and micro.

The standard cultivation license has no size limit on the growing area for the facility, whereas the micro-cultivation license is limited to 200 square meters of growing area. A big change since legalization in 2018 has been the issuing of micro-licenses, which increased in 2020.

As of 15 October 2021, Health Canada shows there are currently 646 active cultivation licenses split among standard and micro-cultivation operators. Of these, 255 are micro-cultivators, which is 39 percent of total licenses issued. Roughly 155 of these have been issued since October 2020.

“The difficulty that comes to move from the legacy market to the legal market is all financial challenges,” Janeen Davis, director of sales and marketing at Joint Venture Craft Cannabis, tells Analytical Cannabis.

Much of the first two years of legalization in Canada were dominated by cannabis produced by the country’s larger, often publicly traded cannabis producers. However, the idea of micro-licenses was to encourage legacy growers to enter the legal market. Micro-cultivators also have a competitive advantage over the bigger cultivators as they can focus on quality rather than quantity.

“It’s been difficult to get approved in the provincial markets because the provinces, from their perspective, would rather deal with a handful of very large companies rather than hundreds of very small companies,” says David Brown, who was senior policy advisor with Health Canada’s cannabis branch for two years.


Cannabis retail

Retail store numbers vary by province significantly. Ontario, Alberta, and British Columbia lead the way in number of stores, but other provinces have quickly gained ground. The roll out was extremely slow in Ontario; it took six months to open its first store.

The province has now reached 834 licensed retail stores according to the most recent quarterly review of Ontario Cannabis Store (OCS), a provincial online retailer and wholesaler of cannabis. According to the Alcohol and Gaming Commission of Ontario (AGCO), there are now over 1,200 private retailers “authorized to open” in Ontario.

Alberta, on the other hand, was the province with the quickest process to license new stores. There are now a little over 600 stores. While Quebec does not allow privately owned cannabis retail, it operates its public-sector retailer based on undercutting the illicit market. Saskatchewan lifted its limit on cannabis retail and now the province has 24 stores with 8 more on the way.

A big change to the retail sector has been delivery and pickup as a result of the pandemic. Delivery can help new businesses compete with illicit cannabis services (which still openly sell cannabis online for delivery).  However in places like Ontario, the OCS has a monopoly over e-commerce.

“Canada is not allowing for legal cannabis retailers to provide the same level of customer service that illicit cannabis retailers can provide,” Davis tells Analytical Cannabis.

During the pandemic, however, the province did allow retail stores to offer delivery services, but these came with strict rules, which put them at a huge disadvantage to the OCS.


Cannabis taxes

After three years of legalization, tax is a big issue. According to David Brown, the current federal excise tax on cannabis – which is set to C$1 a gram – does not reflect the realities of the market. The issue is particularly acute because the wholesale price of cannabis is currently very low.

The Canada Cannabis Spot Index (CCSI) report for 29 October 2021 has the average selling price of one gram of cannabis at C$5.14. Therefore, a licensed producer pays 24 percent per gram that it sells into the provincial market. And that is just the federal excise tax.

The current excise tax is based on pre-legalization era price assumptions of C$8-9 a gram wholesale. Three years into legalization, the average price of cannabis flower and extracts has fallen below those expectations.

“There's a lot of critiques I could make of the regulations,” says Brown. “But I think that’s probably one of the biggest at this point that is really holding back the industry.”

Industry analysts would rather see the excise tax based on a percentage of sales and scale, similar to how it is done in the beer industry in Canada. Analysts also propose that the tax is paid on the consumer price rather than the wholesale price of cannabis.

“We see this in most US states, there’s big complaints from industry about the level of taxation as well,” says Brown. “It makes it very difficult to compete with the black market.”


Cannabis testing

A major feature of regulation is the testing of cannabis products for contaminants and desirable traits. However, many of these testing requirements differ across Canada. “Currently you can sort of pick and choose from a couple of different options,” says Brown.

Another area of testing that is a concern is poor sampling and laboratory practises. Many on the C45 Quality Association argue that there have been no repercussions for incidences of shoddy sampling or unaudited labs. One way to fix this could be unannounced lab audits by Health Canada.


Cannabis labelling

Labelling on cannabis products is another area of debate within the industry. The current labelling regime is a relic of the old medical regulations, which require THC and CBD levels to be included on packaging. However, the questions over how accurate testing is has led to further questions over how relevant package labelling is.

For example, a 3.5-gram packet of cannabis flower can have a 23.91 percent THC label on it. Some analysts question the validity of this measurement to two decimal points, as well as the implication that every single dose taken is going to contain 23.91 percent of THC. There is a push within the industry to convey THC levels as a range such as low, medium, or high strength.


Cannabis 2.0

Unlike many US states that legalized cannabis smokables and edibles at the same time, Canadian authorities chose to stagger their legalization rollout, only permitting the sale of edibles on October 17, 2019, a year after legalization began.

Speaking to Analytical Cannabis in 2019, Steve Rolles, a senior policy analyst at Transform Drugs Policy Foundation, praised the decision. “I worked as an advisor for the federal task force [charged with implementing legalization] and we actually suggested the two-phase rollout,” he said, “because edibles and concentrates involve a different set of regulatory challenges.”

“I think that was wise. Regulating foods that contain drugs is not something that the Canadian government or any government has a great deal of experience with. It’s quite a novel concept.”

Since then, it appears sales of edibles have grown rapidly. According to the cannabis market research firm BDSA, edibles comprised 5.6 percent of the country’s entire legal cannabis market, a figure that the firm expects to have nearly doubled by the end of 2021.


Three-year review

Generally, legalization is seen as a success in Canada, although commercial success for individual producers and retailers is often the exception and not the general rule. The aim of legalization, however, was to protect public health and public safety and compete with the illicit market. “Those were the three main tenants of legalization,” says Brown. “I think that it’s done a good job.”

Health Canada itself will produce a three-year review of legalization, examining the impact on young people, the impact on indigenous communities, and on home production. It is expected to take 18 months to report back to the House of Commons in 2023.

 

Like what you just read? You can find similar content on the topic tag shown below.

Policy

Stay connected with the latest news in cannabis extraction, science and testing

Get the latest news with the FREE weekly Analytical Cannabis newsletter

 
Advertisement