Health Canada wants smaller players to have a stake in the cannabis industry

The ministry is proposing a “micro-cultivation” license for small-scale growers
November 21, 2017, 5:52pm

Health Canada is proposing an expansion to the current system of licenses and permits for the cultivation and sale of cannabis that aims to encourage smaller growers to participate in an industry that has thus far been dominated by just four to five major licensed producers.

The ministry’s cannabis consultation report, released late Tuesday afternoon suggests bringing in “micro-cultivators” to the market, small-scale growers that would be authorized to grow in the same manner, and under the same rules as “standard cultivators,” but on a smaller-scale.

The Ministry has yet to determine how “small” these growers will be, that is, the specifics of plant-size, growing area, and production value.

Micro-cultivators, however, will not be able to sell directly to the public or to other federally and provincially licensed sellers like the proposed Cannabis Control Board of Ontario, which calls into question the extent to which they will really be able to have sway in a landscape where bigger licensed producers are already scooping up exclusive distribution deals with provinces.

Currently, only one legal licensing regime exists for cannabis producers, the ACMPR, or Access To Cannabis For Medical Purposes Regulations — producers can sell dried cannabis, fresh cannabis, cannabis oils and starting materials to the public or other licensed growers. There are just 74 licensed cannabis producers, the bulk of which are based in Ontario.

The proposed regulations expands the licensing category four-fold. Big licensed-producers like Canopy Growth Corporation, Aphria Inc., Medreleaf, and Aurora Cannabis will presumably fall under the “standard cultivation” category, that authorizes the large-scale growing and harvesting of weed.

In addition to the “micro-cultivation” license, there will be a new license for industrial hemp and a “nursery” license, which will allow for pot to be grown for starting material, like seeds and seedlings.

“This system of licensing will allow for a diverse and competitive industry,” Federal Health Minister Ginette Petipas Taylor told reporters at a press conference.

Indeed, one of the biggest criticisms of the Canadian cannabis industry is that it has morphed into an oligopoly of sorts, led by Canopy Growth, the world’s biggest cannabis producer with a market capitalization of over $3 billion.

Canopy’s dominance when it comes to sale and distribution of its own products has left smaller weed producers struggling to gain a footing in the industry, unless they gain exclusive control over the sale of weed in their own provinces, like New Brunswick’s Organigram. Experts predict that many smaller growers will presumably end up using the resources and research expertise of Big Weed in order to subsidize their own production, or get acquired by bigger players.

It is unclear as to how the micro-cultivation license category will actually change this scenario in the short-run, but it does indicate the government recognizes the monopoly Big Weed is gaining on the industry as a whole.

On a separate but related note, Health Canada will, broadly speaking, continue to bar those with criminal records from entering the cannabis industry. The consultation report does, however, acknowledge that the ministry might consider allowing those with a history of “lower-risk or non-violent criminal activity” to participate in the industry, though no further details on exactly what that means, were given.

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