Are you interested in pursuing a recreational cannabis license? Have you run into roadblocks in the licensing process?
Community Futures Central Kootenay’s Cannabis Business Transition Initiative was a free business advising services available to residents of the Central Kootenay region between Jan. 15, 2019 and Jan 9th, 2021. This program, was the first of its kind in Canada, and was funded by BC’s Ministry of Social Development and Poverty Reduction.
The Kootenay region is recognized internationally for growing high-quality cannabis. This success is rooted in the large pool of skilled, knowledgeable workers. With the legalization of recreational cannabis, residents can grow, process and sell cannabis commercially. For some local entrepreneurs, getting into the legal cannabis industry presents challenges including:
- Zoning & development
- Site design
- Security
- Good production practices
- Handling & storage
- Analytical testing
- Processing, distribution & retail
- Taxation
- Recall processes
Stepping into the legal recreational production market is not a decision to be taken lightly as the economics of legal production are still shaky at best. We strongly recommend taking a critical look at your site start-up budget, cashflow forecast and sales prospects before making the decision to step in. Compliant production, distribution and selling costs will be far higher than you may be accustomed to, and there are added risks with lab testing and recall that mean your crops may not get to market, or you may not get paid for a crop. Insurance costs are extremely high, and your home insurance, if on the same property (but a different address of course), may be put at risk.
Product prices are also declining in the legal market, and this is compressing cultivation margins the most. If your planned facility is unable to breakeven at $1.75-$2.00 per gram wholesale price (to a processor) in the legal market, you may want to re-evaluate the model or explore other options. Having good relationships with processors, or building processing capacity yourself, will be extremely important for business viability going forward.
Client Success Story: SenPharm
SenPharm worked with our Cannabis Business Transition Initiative to get licensed as a legal producer of organic, craft cannabis. Their micro-cultivation facility in Crawford Bay, BC, created 6 full-time and 10+ part-time jobs in the community. They process and distribute through Shelter. SenPharm co-owner Kevin McBride says, “I don’t think we would have got our project off the ground if it wasn’t for Community Futures.”
Post-Initiative Support
Community Futures remains committed to supporting this important sector of the Kootenay economy. From business loans, to the Cannabis Economic Development Council, we are committed to helping local growers make the best of legalization, and helping drive needed change in the regulated market.
Cannabis Economic Development Council
Want to get involved in shaping the future of the Kootenay cannabis sector?
Helpful links for the cannabis cultivation and processing sectors
Health Canada
Licensing Resources & Information
1. Understanding government policies and their implications Successful startups must be able to navigate the regulatory landscape at the municipal, provincial and federal level. Compliant facility construction, inventory management, QA/QC compliance, accounting standards and managing tax remittances may be new ground for local growers. We can help you understand the requirements so you can operate your business in accordance with them.
2. Efficient production for long term margin gains Production models that may have been viable in an unregulated market will be challenged by increasing competition, economies of scale, production efficiency, and the added costs of regulatory compliance (facility construction, security, QA/QC, sanitation, pathogen control, and creating safe work environments for staff). Firms that can produce quality product efficiently will yield higher margins, now and ongoing.
3. Marketing of differentiated products Many people can benefit from the cannabis plant’s properties, not just smokers. This is reflected in the 2018 segment sales with market trending toward extracts. Extracts, edibles represent 70% of the market, while only 30% of revenues come from primary product (dried flower). You’ll need to have a plan to get the best price from your supply chain and potentially use vertical integration (add processing) to capture more margin.
4. Fast adjustments to changing regulations Regulation is constantly changing. Growers and processors must comply with the latest legislation or risk their investment, endure fines, business closure or even arrest, and they must be able to adjust to changing regulation quickly and smoothly. This requires diligent attention to regulatory policy, and the funds to pivot with evolving regulations. Local and provincial rules may evolve with legalization roll-out, and there are no anticipated changes to the Cannabis Act in the near term.
5. Development of effective cannabis strains Nurseries and cultivators who can develop the most potent and effective strains can potentially attract greater demand for their product, provided they can find ways to market the products within the advertising constraints within Canada or internationally.
- Verify the property zoning for your intended location is suitable for your plans. Contact the Regional District Central Kootenay. Read Regional Land Use Requirements for Cannabis from the RDCK.
- Contact your electrical utility (BC Hydro, Nelson Hydro or FortisBC) to ensure power requirements can be met.
- Verify that water source and septic are suitable for the intended location.
