We are a generation who gets to live through the end of a prohibition. It was almost a century ago that British Columbia dropped its prohibition of alcohol. I get the feeling that while there are things we could probably learn from a close examination of how distillers, brewers, and vintners fared in the marketplace then, I think that with cannabis there are going to be some serious differences in how this will roll out. There is a gold rush on, and while the bigger fish have deeper pockets, my money is on the little guys as eventual winners here in B.C..
There has been quite a bit of buzz in the media recently over the impending legalization. Watching how individual provinces have chosen to deal with it has been interesting. Several have decided that 100% private retail is best, with Ontario going it alone with a 100% government retail framework. I think criticism of Ontario in the press encouraged the other provinces to look a little harder at this and probably pushed the current NDP government in Victoria to bring forward a mixed public/private retail scheme here.
The province released their framework for retail last week. We will be getting a very similar model to how we currently treat alcohol, at least as far as retail sales go. A major difference is a restriction on selling non-cannabis related products in stores that want to sell cannabis. Government stores will also be restricted to selling 100% cannabis. Rural areas will be excepted from this rule, the details are still pending.
The government is also implementing the same model for wholesale distribution that they use for alcohol. The Liquor Distribution Branch (LDB) will list products from producers licensed by Ottawa. Retailers will order from the LDB to stock their stores. Timeliness is a factor, one that will challenge the LDB's distribution system. Cannabis isn't like alcohol. It degrades, it ages, it dries out. It is perishable, and long-distance transportation and warehousing doesn't do it any favours.
The business community has also been making plans. Some of the larger legal producers of medical cannabis are capitalizing and mergers are the story of the day. Several are looking ahead to building out retail networks, including websites, to get their products in front of consumers. I foresee several different fully integrated brand stores on the horizon for larger communities in other provinces. B.C. is restricting the ability of large producers to build their own retail stores to encourage a more level playing field for small producers.
The government also reiterated their commitment to allowing municipalities to opt out entirely from allowing cannabis sales in their communities. This is similar to what Colorado put into their legislation, with Colorado Springs being one of the larger cities to opt out. It seems certain we will see several municipalities in the province who choose to opt out, maybe even one or two here in the Interior. It will be interesting to see how things play out in the communities where the dispensaries are currently fighting for their lives.
So how does any of this make things look good for the little guys? Big money, tight regulations that arguably favour those with deeper pockets, hostile communities; it seems like the wind is pretty stiff in the wrong direction. What can the little guys do, both producers and retailers, that the big guys can't, at least not profitably?
Craft. The little guys can work their craft.
Cannabis production has been very much a craft industry in British Columbia. Innovation is rewarded; thus it is a consistent feature of the current market. Cannabis changes. The germ stock is constantly in flux. Someone somewhere is working on a new hybrid right now with genetics that is specific to a certain THC/CBD/flavour profile. Someone else is learning how to grow; when to feed, what to feed, how to feed. Someone else is learning how to cure; when to cut, when to trim, how long to cure. There are a million variables and every one of them can have an impact on the final product.
This is anathema to the larger producers. They rely on a consistent product for not just the THC/CBD/flavour trio, but for colour, smell, and texture as well. It should also be disease resistant (big room, lots of product) and of course, profitable. Other than differentiation between different in-house labels, the last thing they can tolerate is variability.
This is the edge that the little guys can use. There is a market for variety, one that I believe will be well served by smaller producers. Independent retailers will be ready to carry smaller brands, especially if they are competing with fully integrated operations in their communities. I imagine that smaller markets will also be better served by smaller retailers, ones who will also be more open to carrying a variety of product.
Craft producers will also be much better equipped to service the hospitality industry once the edibles legislation rolls out a year or so after legalization. In an industry built on creativity and branding, I can see a market for variety. And another for freshness. A local producer will be able to provide a fresher product than one from far, far away. This is an important consideration for retailers as well. In a highly competitive marketplace, trying to sell old stock will not end well for the retailer.
I am encouraged that the province has left the door open for the little guy. I think it is a good thing that there might just still be a place for craft in this world. Headwinds in business are just how it is. As long as there is room for new ideas, hard work, and a great product, there will be room for the craftsman and the entrepreneur. I look forward to seeing what B.C.'s best have in store for us.
— Chris George believes one measure of a just society is found in how well it balances fiscally conservative economics with social responsibility and environmental soundness in all of its living arrangements.