in­side canada’s trail­blaz­ing, taboo-break­ing, bil­lion­aire-mak­ing sprint to le­gal­iza­tion, as told by the peo­ple who made it hap­pen.

Montreal Gazette - - NEWS -

On Oct. 17, recre­ational cannabis will be­come le­gal in Canada. This is the story of how we got here and what will hap­pen next, as re­counted by 15 gov­ern­ment and in­dus­try in­sid­ers who have watched the vast so­cial and eco­nomic project take shape. In­ter­views by The Na­tional Post’s Van­mala Subra­ma­niam, Ge­off Zochodne and Jake Ed­mis­ton have been con­densed for clar­ity

Bill Blair, Lib­eral MP I re­tire and I’m ap­proached by Justin Trudeau who comes and speaks to me. We met in Scar­bor­ough. He and I went and sat alone in a restau­rant and talked for nearly three hours. We talked about a lot of dif­fer­ent things but among the things we talked about was cannabis pol­icy and that strict reg­u­la­tory ap­proach as op­posed to an in­ef­fec­tive crim­i­nal sanc­tion.

We found, very quickly, com­mon ground. About a month af­ter we formed gov­ern­ment, he reached out to me and asked if I would serve as par­lia­men­tary sec­re­tary — to be the point per­son on this file.

Vic Neufeld, CEO of Aphria When you read the pulse of Prime Min­is­ter Trudeau and his plat­forms, it was only a mat­ter of time be­fore recre­ational weed would come to the fore­front. Med­i­cal was a great be­gin­ning. It’s the DNA of Aphria. It was only a mat­ter of time for rec. The un­known back then was to what sort of de­gree it would be on a na­tional ba­sis. Would it be on­line only, would it be brick and mor­tar, would the prov­inces have full con­trol over their re­spec­tive ju­ris­dic­tions? A lot of un­knowns. Back then it was very sketchy and there was no clar­ity. To­day

we know where ev­ery province is go­ing.

Bill Blair That was ac­tu­ally a pretty ex­cit­ing time, be­cause we were learn­ing a lot. I also be­came aware of how com­pli­cated this was. We were cre­at­ing a new com­modi­ties in­dus­try in Canada. There isn’t re­ally any model for how you cre­ate an in­dus­try like that, and so I reached out to the busi­ness schools, I went to other sim­i­lar in­dus­tries to ask them about their ex­pe­ri­ence with reg­u­la­tion.

Tony Dean, Se­na­tor I’m a pol­icy guy by back­ground. This was a his­tor­i­cally im­por­tant piece of leg­is­la­tion that touched on so­cial pol­icy, jus­tice pol­icy, health pol­icy, in­ter-gov­ern­men­tal re­la­tions. It’s kind of a pol­icy wonk’s dream, right? It was big and com­plex and meaty.

Tony Dean, Se­na­tor And I vol­un­teered to be the spon­sor. We started with ‘What’s the prob­lem the gov­ern­ment’s try­ing to address?’ Sim­ple ques­tion. Heavy rates of youth con­sump­tion, com­par­a­tively. A drug that we know is harm­ful if used in­ten­sively and fre­quently by young peo­ple. A $6 to $8 bil­lion il­le­gal mar­ket that we’re all ig­nor­ing. And on­go­ing crim­i­nal­iza­tion that was hav­ing an ef­fect on peo­ple’s lives. Those are each re­ally big is­sues that were be­ing ig­nored be­fore this bill was in­tro­duced. And they each de­manded a very close and care­ful look. Trina Fraser, lawyer, Brazeau

Seller Law The Se­nate’s ap­proach to C-45 cer­tainly got peo­ple ner­vous for a few min­utes. They were like, ‘Well wait a sec­ond. No, no. They should just pass the bill. Just pass the bill!’ And then (the Se­nate) started to say, ‘No, no, no, we’re not go­ing to just pass the bill. We’re go­ing to do what we think is in the best in­ter­ests of Cana­di­ans and we want 40-some amend­ments to this bill.’ I had peo­ple call­ing, talk­ing to me ev­ery­day ‘What does this mean? Are they go­ing to back down?’ Deepak Anand, con­sul­tant, Cannabis Com­pli­ance Inc.

(The big mo­ment) was that Se­nate vote. Trina Fraser and I were at a party in Toronto, and ac­tu­ally we were lis­ten­ing to the vote on our smart­phones out in the park.

Tony Dean The gal­leries were full and there was a lit­tle bit of elec­tric­ity in the air. I can tell you that there were some peo­ple in my group who made up their minds hours be­fore that fi­nal vote. They were on the bub­ble. They were still ask­ing ques­tions. Bruce Lin­ton, CEO of Canopy

Growth The me­dia kept call­ing me and mak­ing me think that it was close. The me­dia scared me, even though I thought on my own this process is go­ing to work out. But you get 12 calls a day so you think, ‘God, maybe I mis­read this.’ And it wasn’t even close.

Deepak Anand We were lit­er­ally count­ing the num­ber of peo­ple that had said ‘Yea’ ver­sus ‘Nay.’ Right at the end of that vote, there was this gasp. At one point, it was like ‘Well, did the vote go hor­ri­bly wrong? Did we not win?’ But it had gone through.

Bill Blair We’d gone to the prov­inces and ter­ri­to­ries and said, ‘How much time do you need to im­ple­ment af­ter Royal As­sent?’ They had said, ‘Be­tween eight and 12 weeks.’ But it was a very in­tense eight and 12 weeks. We de­cided in or­der to help them be suc­cess­ful, we’d give them 17 weeks, and so the date of Oct. 17 was set.

Bruce Lin­ton This sec­tor has had a nearly con­tin­u­ous case of hic­cups for five or six years be­cause there’s a lot of fric­tion in­volved in do­ing some­thing that changes per­cep­tion, pub­lic pol­icy, cre­ates an en­tirely new sup­ply chain, doesn’t have gen­er­ally good ac­cess to bank­ing, all of a sud­den be­comes in­ter­na­tional.

Vic Neufeld It’s not an easy thing to build a green­house and know you can pro­duce, you know, 20,000 ki­los a month. It takes a lot of ex­pe­ri­ence, a lot of knowl­edge. And Mother Na­ture is not co­op­er­a­tive at all times.

Bruce Lin­ton Peo­ple said, ‘You can’t grow in a green­house, that won’t work, green­houses are too easy to break into be­cause they are glass,’ all these com­plaints. So I didn’t know how big the com­pany or the sec­tor would be, but I knew our ob­jec­tive — it wasn’t to be small, it was to be No.1. Greg En­gel, CEO of Or­gani-Gram You have to be very creative and work with the right com­pa­nies to help build and find solutions. And a lot of those solutions, you’ve had to cre­ate cus­tom, such as pre­roll equip­ment that’s go­ing to pro­duce mil­lions of pre-rolls (pre-rolled joints) per year. I mean, no one out of the U.S. had that ex­per­tise, and we’ve had to go to engi­neer­ing/de­sign/man­u­fac­tur­ing com­pa­nies to cre­ate that equip­ment. Brian Har­ri­man, CEO, New Brunswick Liquor Corp. We knew sup­ply was go­ing to be crit­i­cal. We knew from our ex­pe­ri­ence that we could build build­ings and hire peo­ple and train them and do all those good things, but do­ing all that and hav­ing empty shelves wasn’t go­ing to work.

At that point, we didn’t have the man­date to run the stores. But we thought, ‘No mat­ter who’s run­ning re­tail stores in New Brunswick, they’ll need sup­ply.’ So we be­gan sign­ing sup­ply MOUs in July 2017. One of the chal­lenges was we, as the New Brunswick Liquor Cor­po­ra­tion, couldn’t sign sup­ply con­tracts with a cannabis pro­ducer given that it was still il­le­gal. So there was some stick­han­dling there to think about who did have the author­ity to sign. At the end of the day, the province was the en­tity that had to sign the doc­u­ments and to sup­port the process.

Bruce Lin­ton I feel as a Cana­dian tax­payer, we should be very proud of how the bu­reau­crats have con­ducted them­selves. If this was done in any other coun­try there would prob­a­bly be an aw­ful lot of bribery. If it was done in any other coun­try, the bu­reau­cratic ca­pa­bil­i­ties wouldn’t last and the out­come wouldn’t work. There’s a rea­son why 25 coun­tries have come to say, ‘Hey, how are you do­ing this here?’

Brian Har­ri­man We had 6,000 peo­ple ap­ply to work for us. We screened through to 2,000, in­ter­viewed 800 and hired 330 peo­ple. But from the 2,000 to 330 job of­fers go­ing out was done in four weeks. So it’s been a pretty mam­moth task. Se­bastien St. Louis, CEO of HEXO When the leg­is­la­tion was an­nounced, we were ex­tremely con­cerned with the ramp-up and ex­e­cu­tion of our med­i­cal busi­ness. And then when (recre­ational) came on, and the size of the op­por­tu­nity, it re­quired a re­struc­tur­ing. Med­i­cal is just dried cannabis, and even­tu­ally they in­tro­duced oil. But now we need to start to think about food. We need to start to think of cannabis as an in­gre­di­ent. We need to start to think about the brand­ing op­por­tu­ni­ties. How do we put in an en­ter­prise re­source plan­ning sys­tem and seed-to-sale track­ing for recre­ational? And how are we go­ing to do the age ver­i­fi­ca­tion?

Brian Har­ri­man Alotof times we’ve been at a cross­roads and been forced to make a de­ci­sion with­out know­ing what the fi­nal fed­eral reg­u­la­tion was go­ing to state. As we were de­sign­ing our stores and we were look­ing at se­cu­rity within our stores, there was no fed­eral guide­line. Can we just leave it on a shelf some­where? Do we need Steve Ot­t­away, In­vest­ment Banker, GMP Se­cu­ri­ties We did the largest IPO in the space at the time (2017), which was MedRe­leaf. That was a $100-mil­lion IPO. And that was piv­otal, be­cause we saw peo­ple com­ing into the book like JP Mor­gan. And then you’re just shocked, be­cause you’re re­al­iz­ing, ‘Wow, this phe­nom­e­non is re­ally start­ing to take off. Peo­ple are look­ing at this as a real in­vest­ment.’ Jamie Nagy, M&A Banker, Canac­cord Ge­nu­ity Group

Inc. The pace of the deals moves very quickly. One of the analo­gies I like to use is the in­dus­try is in dog years. Ev­ery­thing is go­ing so fast. And is­suers don’t want to waste time on, ul­ti­mately, deals that won’t hap­pen.

Bruce Lin­ton So the hard­est deal was the first Con­stel­la­tion one for the $245 mil­lion. Be­cause none of us needed to do that deal. Cap­i­tal mar­kets loved us, they loved them, but it took a lot of work­ing around. Eleven months. So that one was tir­ing but fun. But peo­ple said to me, ‘It’s a change of con­trol.’ Well, when the banks weren’t giv­ing you any money, what do you do?

Vic Neufeld (Con­stel­la­tion’s en­try) led to sig­nif­i­cant ap­petite and sig­nif­i­cant in­ter­est from many in­dus­try lead­ers in dif­fer­ent spa­ces. For ex­am­ple bev­er­ages, whether it’s the re­cov­ery drinks, it’s it locked in a cage? Does it need to be in a vault? So we erred on the side of cau­tion and ev­ery one of our cannabis stores has a vault in the back for prod­uct. Jodie Emery, cannabis le­gal­iza­tion ac­tivist The last two years for me, have been noth­ing but see­ing big busi­ness and big gov­ern­ment try­ing to elim­i­nate and harm the pi­o­neers and the en­trepreneurs who ac­tu­ally built the in­dus­try. It was very scary be­ing side­lined, and ba­si­cally the gov­ern­ment at ev­ery level, they are say­ing to us, ‘You’re go­ing to be locked out of the le­gal sys­tem, you can’t af­ford to get in, and your crim­i­nal record will ban you, and you’ll get locked up.’ We had war de­clared against us. util­ity drinks, it’s beer, it’s wine, it’s al­co­hol, you’re go­ing to get to­bacco very in­ter­ested now, you’re go­ing to get the agri­cul­tural guys like Mon­santo in­ter­ested, they are all com­ing for­ward with a de­gree of in­ter­est, cu­rios­ity and how they can lever­age their re­spec­tive brands and their con­sumer pro­file. Cam Battley, COO of Aurora

Cannabis So the first thing is, if I ever have to go through a hos­tile takeover again, it will be too soon. It’s a very dif­fi­cult and emo­tion­ally chal­leng­ing process. Be­cause you’re in a fight, and it’s a very high stakes fight, and you have to win and it’s as sim­ple as that. Once you launch that hos­tile bid, you can’t go back. I re­mem­ber that day. It hap­pened very fast, and we made a very in­formed but very rapid de­ci­sion that we were go­ing to do it. You’ll re­mem­ber that it was the share­hold­ers rep­re­sent­ing 39 per cent of Can­niMed who came to us and in­di­cated that they felt it was nec­es­sary to change the man­age­ment of the com­pany in or­der to max­i­mize the po­ten­tial of Can­niMed. And we made a de­ci­sion over the course of five days to make that bid. No­body got any sleep. In quar­ter­back­ing that hos­tile bid, I don’t think I got more than five hours of sleep for four months and it was seven days a week of work.

Deepak Anand The $5 bil­lion that Con­stel­la­tion put into Canopy Growth sent sig­nals to ev­ery­body that this is a main­stream in­dus­try. Clearly, the stock mar­kets re­acted very pos­i­tively at the time. But it wasn’t just about the mar­kets. I was think­ing that, all right, peo­ple are now look­ing at our in­dus­try very se­ri­ously. That was a piv­otal mo­ment.

Bruce Lin­ton What I re­ally don’t un­der­stand about stock mar­kets — well a lot of things — but if one com­pany is do­ing a bunch of stuff right, and has all the money, which means they have a bal­ance sheet to ex­e­cute and ev­ery­body else doesn’t, why does ev­ery­one else’s value go up?

Greg En­gel We’ve seen two big shifts hap­pen in the space. One is, we con­tinue to see kind of larger, what may have been more tra­di­tional large funds, come in. And I think one of the key things that drove that was when Bank of Mon­treal came into the space as the first ma­jor Cana­dian bank to come in. I think that sig­nalled to the mar­ket that, OK, this is a large, grow­ing, le­git­i­mate, global in­dus­try that could be based out of Canada. And the other is we’ve seen in­vestor in­ter­est in the U.S. grow dra­mat­i­cally.

Vic Neufeld Let me just say, some com­pa­nies (within the cannabis space) need to ac­quire. They need to ac­quire be­cause fun­da­men­tally they don’t have the strength nec­es­sary to be in­dus­try lead­ers. Ac­qui­si­tions are strate­gic, but I can sug­gest to you that some ac­qui­si­tions are to cover up short­com­ings and they are buy­ing these com­pa­nies at ex­treme pre­mium prices be­cause they know oth­ers have the build­ing blocks that they don’t have.

Chuck Ri­fici, CEO of Auxly Cannabis, and co-founder of Canopy I knew the in­dus­try would get this large even­tu­ally, but I re­mem­ber talk­ing to our first in­vestors, pitch­ing them back in 2013, and I said you know, within five years, there would be a bil­lion dol­lar cannabis com­pany. I never thought there would be a dozen of them, that we would see a few $10 bil­lion com­pa­nies. The in­dus­try has grown at least three times faster than I ex­pected. Bruce Lin­ton We be­came the first pub­licly traded le­gal mar­i­juana com­pany ever (in 2014). And that was kinda neat. And peo­ple got too ex­cited — we came out and the stock went up. And then there was about eight to 10 months where I got emails from in­vestors say­ing, ‘Look, you are an id­iot, the com­pany is not prop­erly run, you should be prof­itable, not us­ing share­hold­ers money. Why did I in­vest in this com­pany?’ Aaron Salz, con­sul­tant, Stoic

Ad­vi­sory I’m sur­prised at how quickly this be­came a main­stream in­vest­ment and how fast the in­vest­ment banks and in­vestors and main­stream fi­nan­cial me­dia like CNBC have jumped on this. I can’t believe how quickly this has be­come so mas­sive and main­stream. Ev­ery day it is shock­ing me.

Steve Ot­t­away The volatil­ity has been stun­ning at times in the space. The mar­ket goes through these var­i­ous swings. And when we see these run-ups, a lot of the time it’s on the ba­sis that there’s some­thing com­ing, about to hap­pen. That can drive the mar­ket. Or, you just have the mar­ket sud­denly de­cid­ing it’s over­val­ued. On each one of these times, I’ve of­ten sat back and thought

‘OK, well, the mar­ket seems to be dead.’ And then all of a sud­den, it’s not. Just to give a more poignant ex­am­ple In mid-Au­gust, all the stocks were drop­ping. And it looked re­ally nasty. And we’re kind of star­ing at our screens go­ing, ‘All right, this is not good.’ And then Con­stel­la­tion hit.

Chuck Ri­fici Well, I saw (Til­ray) as a sup­ply-de­mand is­sue on a stock level. There’s only three main com­pa­nies listed on the big U.S. ex­changes, and be­cause Pri­va­teer (Pri­va­teer Hold­ings, a U.S. pri­vate eq­uity firm) owns so much of the stock, there was very lit­tle float, so it was al­most a per­fect storm of hav­ing a run up. So I feel — I’m shocked, ac­tu­ally. I was sur­prised by the fact that there was so much vol­ume. That’s not just re­tail in­vestors, that’s in­sti­tu­tional cap­i­tal, that de­spite the val­u­a­tions feel that they need, that they must have, in my view, have ex­po­sure to the cannabis in­dus­try.

Aaron Salz I mean (Til­ray) was the sec­ond-most traded stock in the en­tire world by dol­lar vol­ume. The only com­pany that traded more in dol­lar vol­ume was Ama­zon. To me it was not a good thing, I was not happy that day — I think it was all the wrong at­ten­tion on the in­dus­try.

Jodie Emery This is the white-wash­ing and cor­po­ra­ti­za­tion of cannabis. I call it the grass ceil­ing. These peo­ple are not in the busi­ness of pot, they are in the busi­ness of stock. I call it the Great Lib­eral Le­gal­iza­tion Pot Stock Scam. It’s deeply dis­tress­ing to see all these big busi­ness­men, for­mer politi­cians, for­mer law en­force­ment, pre­miers, prime min­is­ters, mak­ing tons of mil­lions of dol­lars on pot stock.

Chuck Ri­fici I very pub­licly sold all of my Canopy stock in 2015. I sold it for about $5 — that’s not pub­lic info but I’ve told enough peo­ple. I did very well, it’s just that you hate when, you know, you’re the one who sold. And cer­tainly, you know, ev­ery time it dou­bles, I’m prob­a­bly not pro­duc­tive that day.

Tony Dean When I was 17 years old grow­ing up in Birm­ing­ham in the U.K., there was a lot of cannabis around, as there is to­day. I saw a news­pa­per head­line one day that said some­thing like ‘Canada to le­gal­ize cannabis.’ That was in 1971 or ’72. And that’s the first time that I saw a ref­er­ence to cannabis be­ing le­gal­ized in Canada and I said to my friends at the time, ‘Ah, that’s never gonna hap­pen.’

Bill Blair We will have the day in which the law comes into ef­fect. But I’d re­mind ev­ery­body this is still part of a process. And it’ ll take some time for the prov­inces to open their re­tail out­lets. That’s fine. They’re do­ing it care­fully and cau­tiously. It’ ll take time for some of the mu­nic­i­pal­i­ties to put their reg­u­la­tory frame­works in place. I know some of the em­ploy­ers, even the po­lice, are mak­ing de­ter­mi­na­tions about the us­age among their own peo­ple. That’s part of the process. We’re work­ing through this to­gether.

Aaron Salz I think the next 12 months are go­ing to be marked by de­lays, pro­duc­tion over­runs and bud­getary chal­lenges, and so to me, that’s nor­mal course, but I’m won­der­ing how does the pub­lic in­ter­pret that, and how neg­a­tively do they in­ter­pret that? Most in­vestors ex­pect that recre­ational is go­ing to just cause hock­ey­stick growth in rev­enue and mas­sive cash flows but if you look at the nuts and bolts of what the prices they are get­ting, it’s not go­ing to be like that, at least not in the first year. Bruce Lin­ton I have no real com­pe­ti­tion ex­cept pub­lic per­cep­tion, pub­lic pol­icy and the il­licit mar­ket. Those are my three com­peti­tors. If you have an un­sta­ble po­lit­i­cal en­vi­ron­ment, pub­lic pol­icy and pub­lic per­cep­tion can be played one way or an­other. So these things some­times cre­ate anx­i­ety for me.

Chuck Ri­fici I think the big­gest chal­lenge will be the pro­hib­ited ad­ver­tis­ing space. I would say the rank and file li­censed pro­ducer has no idea what they are walk­ing into. It is very much, al­most a cut and paste of the To­bacco Act, like it’s 90 per cent to­bacco ad­ver­tis­ing con­trols ver­sus al­co­hol.

Vic Neufeld We are all go­ing to have short-term sup­ply chain is­sues. I’ve been com­mu­ni­cat­ing this for sev­eral months now lead­ing up to Oct. 17.

Cam Battley Le­gal­iza­tion in Canada is a vic­tory for ac­tivists and ad­vo­cates. They fought and they sac­ri­ficed for decades to first force the Supreme Court to force the fed­eral gov­ern­ment to cre­ate a med­i­cal ac­cess sys­tem. That was a crit­i­cal step in re­duc­ing the stigma. I’m a suit, I didn’t come into the sec­tor with a full ap­pre­ci­a­tion of how right the ac­tivists were in what they did for cannabis. We owe them a lot. We need to make sure there’s a role for them in the le­git­i­mate in­dus­try.

Bill Blair I’ ll tell you what a num­ber of peo­ple said to me ‘You spent so much of your life in the en­force­ment of the law, this is such a change for you.’ And I said, ‘No it’s not.’ In fact, what I spent most of my life do­ing, I was in the pub­lic safety busi­ness — in the busi­ness of keep­ing com­mu­ni­ties safe, fight­ing or­ga­nized crime and pro­tect­ing kids. This was en­tirely con­sis­tent for me. Done right, this can ac­tu­ally cre­ate a safer en­vi­ron­ment and that’s the job, that’s al­ways been the job for me.

Chuck Ri­fici It does feel so sur­real. I think it’s go­ing to be a real stark mo­ment when you see peo­ple smok­ing joints where you see peo­ple smok­ing a cig­a­rette. And in­stantly, you’re go­ing to get peo­ple say­ing, ‘Wow, it’s here.’ It’s go­ing to cre­ate a very vis­ual im­age for Cana­di­ans that will re­move the taboo.



Tony D ean


Bill Blair

Trina Fraser


Bruce Lin­ton

Chuck Ri­fici

Jodie Emery

Vic Neufeld

Cam Battley

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