How indie cannabis is teaming up to take on big bud businessRyan PorterNovember 5, 2019
During a meeting held in late October, both business owners accepted leadership roles in the emerging Weed Pool Cannabis Co-operative: Prairie Cannabis’s Jim Southam was named president and Canada’s David Batten was named member at large of the co-op. “It’s nice that we can work together,” Southam, a former cannabis glassware and accessories store operator, says. “We’re here to educate the public and bring cannabis back to the people after 100 years. We have to work together.”
For mom-and-pop cannabis retail stores, the co-op model is a way to wrangle better prices from the major licensed producers in Saskatchewan, where licensed producers and retail stores negotiate sales directly without a government body as a go-between. Southam has spoken to nine cannabis retail store proprietors throughout Saskatchewan, where he says independent shops make up just one-third of cannabis retailers, about joining the co-operative.
“As an individual store, it was a little daunting thinking that I would have to go canvassing LPs all across the country to compete with the larger chains or LP retailers,” Southam says. “We came up with the idea of forming a buying group and it evolved from there.”
Prince Albert’s pot shops also face a silent competitor in the still thriving illicit market. Southam laughs at the idea of stocking strains that cost $80 for 3.5 grams, a premium price point that he can’t see wooing legacy-market loyalists.
“Our margins in stores are not that great, to be honest,” Southam says. “We want to increase our margins and bring better pricing to our customers. Through the co-operative we are starting to see we can achieve that.”
The Weed Pool is just one example of small cannabis operations across the country finding strength in numbers through a co-op model. The BC Craft Farmers Co-op, organized through micro-processor and micro-cultivator consultancy Grow Tech Labs, has met with hundreds of producers in advance of opening up its membership in the coming months. It will officially launch in 2020. Enrollment requires a $420 annual membership fee and at least one $25 membership share in the co-op.
The BC Craft Farmers Co-op will unite the bargaining muscle of micro-cultivators, processors, independent cannabis retailers, and medical vendors for everything from purchasing shared resources to advocating politically.
“The large producers understand that the small growers are a very significant competitor, particularly in British Columbia, where these small growers are producing product that everybody wants,” says David Hurford, special advisor on the BC Craft Farmers Co-op. Working for Prime Minister Jean Chretien’s Minister of Health Allan Rock, Hurford lead the development of the government’s original policies around medical marijuana from 1998 through 2002.
He sees the lack of BC micro-producers in the legal space as a missed opportunity. He says there are over 25,000 micro-growers producing medical cannabis in Canada, but less than .1% of those have transitioned to producing recreationally.
Tammy Jarbeau, senior media relations advisor with Health Canada notes that it’s important to distinguish between micro-licence holders, “which are authorized by Health Canada under the Cannabis Act and its regulations to cultivate, process and sell cannabis to authorized distributors and retailers or to medical patients” and individuals authorized to cultivate cannabis for their own medical purposes, subject to the limitations of their medical authorization.
Jarbeau notes that as of June, 30, 2019, there were 28,869 individuals registered with Health Canada to produce medical cannabis for themselves. As for micro-licenses, which she defines as “micro-cultivation and micro-processing or both at a single site,” nine sites had been licensed by October 31, 2019, with another 195 applications received, 50 of which had submitted the final evidence packages needed to show they have built compliant sites and are ready for review by Health Canada.
Jarbeau also notes there are six classes of cannabis licenses, covering cultivation, processing, sale, analytical testing, research, and drug licences, in addition to subclasses for different models of cultivation, processing, and sales. “Each class and subclass of licence is subject to specific regulatory requirements,” she says.
As for Hurford, he thinks Health Canada’s regulations are unrealistically strict, presenting a discouragingly complicated application process. A co-op could lobby to loosen those regulations or, at the very least, help a micro-grower navigate the barriers to getting in the game. “The small growers in this situation are very much the underdog and I worry about what will happen if they aren’t able to ply their trade in this legal market,” he says.
Hurford has been in talks with other BC co-ops about coming under their umbrella to form a province-wide super co-op. Joel Podersky, president and co-founder of the Cascadia Agricultural Co-Operative Association, a co-op for micro-producers, has been helping with its development and is considering joining as a founding member.
Once the director of The Healing Tree, one of Vancouver’s first dispensaries, Podersky has seen legalization squeeze micro-producers and medical producers out of the industry. When he launched Cascadia in 2016, it was because he sensed independent cultivators would need to band together.
“I felt there was a corporate oligopoly on the horizon,” he says. “People weren’t receptive at that time.”
While Hurford talks about expanding the BC Craft Farmers Co-op into a national organization, Podersky would rather see co-ops narrow, rather than broaden, their focuses—after all, that was how their inspiration, agricultural co-ops, found success. “No one knows what a region needs better than the region,” he says.
Though the fledgling co-op model remains unproven, for retailers such as Southam, facing an uncertain future in the cannabis market is less daunting when you have allies—even if they’re the supposed “competition” down the street.
“I think everyone feels that being in this group is helping to mitigate being the underdog,” Southam says. “I think everyone just sees that it’s going to help us be more competitive in the market in the future.”
–Edited November 7 to add comments from Health Canada.