New Brunswick strikes sup­ply deals for cannabis

Crown cor­po­ra­tion cre­ated to over­see recre­ational mar­ket sales

Edmonton Journal - - FINANCIAL POST - GE­OFF ZOCHODNE Fi­nan­cial Post gzo­chodne@postmedia.com Twit­ter.com/ge­of­f­zo­chodne

New Brunswick has set up a new Crown cor­po­ra­tion that will over­see marijuana sales, but not ac­tu­ally re­tail the drug, when the fed­eral gov­ern­ment’s planned le­gal­iza­tion of recre­ational cannabis goes into ef­fect next July

Pro­vin­cial Fi­nance Min­is­ter Cathy Rogers and Health Min­is­ter Benoît Bourque made the an­nounce­ment Fri­day in Monc­ton, adding that New Brunswick has al­ready struck deals with two li­censed med­i­cal marijuana com­pa­nies to help sup­ply its recre­ational mar­ket.

How­ever, the prov­ince has still left the door open to a pos­si­bly less-re­stric­tive re­tail regime than the one pro­posed by On­tario, which is set­ting up a sin­gle, gov­ern­ment-run retailer.

“In ad­di­tion, the creation of this new pro­vin­cial Crown cor­po­ra­tion pro­vides the flex­i­bil­ity and lays the ground­work for the even­tual re­tail model once fi­nal de­ci­sions around that have been made,” Rogers said in a re­lease.

While New Brunswick in­tends to have the gov­ern­ment main­tain “full con­trol” over the sales of non­medic­i­nal cannabis, the re­lease said that the Crown cor­po­ra­tion “will not di­rectly con­duct re­tail op­er­a­tions.”

Rather, the new agency “will even­tu­ally en­gage with an­other en­tity or en­ti­ties to pro­vide that frame­work,” Rogers ex­plained, ac­cord­ing to the re­lease.

“It is ex­pected to take other steps in the near fu­ture to en­sure the re­tail model is op­er­a­tional in or­der to meet the fed­eral gov­ern­ment’s time­lines,” the gov­ern­ment said.

The plan for ac­tu­ally re­tail­ing marijuana to con­sumers will be fi­nal­ized when New Brunswick’s Lib­eral gov­ern­ment is done con­sid­er­ing the find­ings of a leg­isla­tive com­mit­tee and work­ing group, the prov­ince said.

The work­ing group rec­om­mended in a June in­terim re­port that a Crown cor­po­ra­tion model be em­ployed for re­tail.

New Brunswick’s an­nounce­ment was pre­ceded by news it had al­ready struck a deal with a pair of li­censed med­i­cal marijuana pro­duc­ers — Monc­ton, N.B.-based Or­gan­i­gram Hold­ings Inc. and Smiths Falls, Ont.-based Canopy Growth Corp. — to en­sure am­ple sup­ply for the prov­ince’s mar­ket for recre­ational cannabis, which the fed­eral gov­ern­ment is aim­ing to le­gal­ize by July 2018.

Or­gan­i­gram said the agree­ment would see it sup­ply New Brunswick with at least five mil­lion grams of recre­ational marijuana per year, or about 25 per cent of its an­tic­i­pated pro­duc­tion.

The com­pany claimed the ar­range­ment has an es­ti­mated an­nual re­tail value of $40 mil­lion to $60 mil­lion.

Canopy said it had a two-year sup­ply agree­ment that in­cluded four mil­lion grams of cannabis and cannabis derivates for the first year, which the com­pany valued at $40 mil­lion.

The sup­ply deals are “his­toric,” Or­gan­i­gram chief ex­ec­u­tive Greg En­gel said in a phone in­ter­view

“Th­ese are the first agree­ments that any prov­ince has signed for sup­ply from li­censed pro­duc­ers in Canada,” En­gel said. “Part of the ini­tia­tive to get this sup­ply agree­ment in place was they un­der­stand that there will be a sup­ply de­fi­ciency for the first cou­ple years of the adult recre­ational mar­ket, and they wanted to make sure that they were in a po­si­tion to get a sig­nif­i­cant

Th­ese are the first agree­ments that any prov­ince has signed for sup­ply from li­censed pro­duc­ers in Canada.

sup­ply go­ing for­ward and be the first to do so.”

Fol­low­ing the news, shares of both Canopy and Or­gan­i­gram rose Fri­day, clos­ing up by 2.09 per cent and 16.74 per cent, re­spec­tively.

As part of their sup­ply agree­ments with New Brunswick, Canopy and Or­gan­i­gram said they will help fund pub­lic ed­u­ca­tion or so­cial pro­grams as well.

“New Brunswick has led the coun­try in its ef­forts to at­tract cannabis jobs and in­vest­ment and Canopy Growth is proud to be uti­liz­ing lo­cal trades and to hire in New Brunswick for the site we are estab­lish­ing in Fred­er­ic­ton,” said Mark Zekulin, pres­i­dent of Canopy, in a re­lease.

Fri­day’s an­nounce­ments fol­lowed those of the On­tario gov­ern­ment, which plans on estab­lish­ing a sin­gle le­gal retailer of marijuana, with sales over­seen by the prov­ince’s liquor con­trol board. The retailer would sell recre­ational cannabis through 150 stand-alone stores and an e-com­merce site.

On­tario, how­ever, has not struck a sup­ply deal, a gov­ern­ment spokesper­son told the Fi­nan­cial Post.

RON WARD/ THE CANA­DIAN PRESS FILES

Li­censed med­i­cal marijuana pro­duc­ers Or­gan­i­gram and Canopy will en­sure am­ple sup­ply for New Brunswick’s mar­ket for recre­ational cannabis, which the fed­eral gov­ern­ment is aim­ing to le­gal­ize by July 2018.

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