Quebec’s plan for cannabis sales has pros and cons

Leaving production to licensed firms is wise, Michael J. Armstrong says.

November has become cannabis month.

Parliament is finalizing its legalization bill, while the provinces take turns announcing their own plans. Quebec introduced its legislation Thursday. It’s emphasizing control of its fledgling cannabis supply chain, from production to wholesale to retail.

Quebec is wisely leaving cannabis production to licensed firms, much like other provinces are. Unlike other provinces, Quebec will prohibit consumers from growing their own. That may inadvertently encourage black-market growers.

Given that responsibility, producers have work to do on quality control. Investigative journalists have repeatedly uncovered pesticides and mould contamination in blackmarket products. Even legal Canadian medical cannabis suffered recalls this year.

A U.S. study earlier this month reported inconsistencies in medical cannabis purchased online there. Almost 70 per cent had significantly different cannabidiol (CBD) levels than their labels claimed.

As with alcohol, the Quebec government will monopolize wholesaling, via a Société des alcools du Québec (SAQ) subsidiary.

Ontario, Manitoba and New Brunswick are likewise using their liquor agencies.

This centralized approach gives government direct control of cannabis supply chains. That could help exclude black-market products and support tax collection. Hopefully each agency will be open to growers from any province.

Interprovincial free trade would help Canadian firms gain scale and compete abroad.

For example, Aurora Cannabis’ Pointe-Claire facility plans to export to Europe.

Such openness would also let cannabis avoid alcohol’s constitutional challenges over provincial trade barriers. The Supreme Court begins hearing that case in December.

Centralized wholesaling should also help product quality by making large-scale testing feasible. This should give legal cannabis a marketing advantage over the black market.

Retail is where the provinces diverge. Quebec’s Liberals, like their Ontario and New Brunswick counterparts, are conservatively keeping retail sales public-sector.

Manitoba’s Conservatives are more liberal. They’re letting the private sector handle retailing. Each approach has advantages. Private sector retailers will likely respond better to customer preferences. This could increase consumer (and voter) satisfaction.

Public sector retailing might be better at consumer education and harm reduction. And increase government revenues.

However, convenience is lacking. Quebec reportedly plans a website plus 15 outlets.

By contrast, alcohol is sold in more than 400 SAQ stores, plus numerous licensed retailers — and served in countless brasseries and restaurants. Cannabis will be far more inconvenient. Think of your nearest Costco or Walmart.

Costco operates 10 Quebec stores, while Walmart has about 70. Your future SQC “WeedMart” will be more convenient than the former, but much less than the latter. That’s enough for planned shopping trips, but not for last-minute buyers seeking instant gratification. The black market will have an advantage there.

Quebec and other provinces apparently are banning alcohol and tobacco from cannabis outlets. This could slow the spread of cannabis use. But such specialization limits stores’ revenue sources. This will restrict the longterm number of economically viable stores, and therefore shopping convenience.

Value-added processing is where the cannabis supply chain remains undefined. Currently, producers mostly sell what drug companies consider raw material: dried plants. Consumers smoke them and hope for the desired effect.

Contrast that with, say, pain relievers. Perhaps some headache sufferers still brew willow bark tea for its salicylic acid. But most of us take purified acetylsalicylic acid (ASA) pills, like Aspirin (TM). Edible cannabis products, like brownies, will be the first improvement here. Cannabis-infused beverages may follow, as suggested by Constellation Brands’ investment in Canopy Growth. We should later see purified pills or liquids that contain precise concentrations of active ingredients. They would provide consumers with far more reliable results.

Quebec’s cannabis supply chain is a work-inprogress. Businesses and consumers still have time to lobby for improvements in the draft laws and supporting regulations. The details could determine whether the province gets a blossoming industry or stunted growth.