Alberta might be one of Canada’s hottest cannabis markets after recreational sales are legalized next year, and “the Alberta advantage” puts the province’s cultivators – and possibly edibles makers and retailers – in a position to capitalize.
Industry executives say “the Alberta advantage” boils down to people, cheap power and sunshine:
- Alberta has an abundance of agricultural expertise, skilled labor looking for work outside the oil and gas industry, and an entrepreneurial spirit.
- The province has some of the cheapest power rates in Canada, compared to Ontario’s sky-high costs.
- Alberta has some of the sunniest places in Canada, which lowers electricity costs for producers.
The province also has some of the lowest tax rates for consumers and businesses in the country.
And Alberta could become the first in Canada to allow entrepreneurs to participate in the retail sale of adult-use marijuana, with the possibility of vertically integrated MJ businesses.
Moreover, the province also has indicated it may permit marijuana cafes and lounges – a move that would provide additional opportunities for entrepreneurs.
Alison McMahon – founder of CEO of Calgary-based Cannabis at Work, Canada’s only cannabis staffing agency – said the province’s “entrepreneurial spirit” and an abundance of skilled workers give businesses in Alberta an edge.
“There’s a strong business perspective and entrepreneurial culture in Alberta, one that’s been growing for a long time,” she said. “Alberta is positioning itself to be an important province and strong player in the Canadian cannabis market.
“We have plenty of access to labor and talent in this market people with transferable skills,” she added. “There are people with strong backgrounds in engineering, agriculture, oil and gas-related skills that can transfer.”
Noting that Albertans are the biggest users of medicinal marijuana per capita, Stan Swiatek – founder and CEO of Airdrie, Alberta-based Sundial Growers – said the recreational market could be larger than expected.
“The legalization of cannabis represents a tremendous opportunity to stimulate economic growth in this province and for Alberta to diversify from its reliance on the energy sector,” he said. “I think that the cannabis market in Alberta will be quite significant when you compare us on a per-capita basis to the rest of Canada.”
Market snapshot
A report produced by the Parliamentary Budget Office (PBO) in November 2016 paints a picture of what the legal cannabis market in Alberta could look like after recreational legalization is implemented, which is expected next summer.
Estimates of recreational cannabis users in Alberta after legalization range from 526,000 by the PBO to over 650,000 in 2019, based on polling data about cannabis use.
Aggregate cannabis consumption in the province could be 77,000 kilograms (169,000 pounds) in 2019, rising to 88,000 kilograms (194,000 pounds) by 2021, according to a PBO estimate.
Like in New Brunswick, demographics are in favor of Alberta continuing to be a hotbed for cannabis:
- Alberta had Canada’s youngest population in 2016 – but by 2041, seniors are projected to number 1.1 million, a quarter of the population.
- Of Canada’s 201,000 registered MMJ patients, 74,013 reside in Alberta – by far the highest per capita MMJ use.
Retail sales
Alberta could become the first province in Canada to allow some private sector participation in the sale of recreational cannabis when it unveils its retail framework in the coming weeks.
There is a real possibility for vertical integration in Alberta.
Alberta’s proposed framework to regulate marijuana, released earlier this month, left open the possibility that private companies could sell adult-use products, a move that would be a boon for growers and others wanting to participate in the province’s retail sector.
The government is still considering two options for retail:
- A government-run monopoly, which would involve significant upfront costs for taxpayers
- Licensed private outlets, which would be separate from alcohol stores
The provincial government also signaled it is open to marijuana cafes and lounges, although such establishments may not be part of the system on Day One. The city of Edmonton, meanwhile, is considering allowing the establishment of cannabis lounges.
Plant-touching and ancillary industries
Alberta-based companies are well positioned to take advantage of some other key plant-touching and ancillary opportunities, according to industry watchers.
Some of those opportunities include:
- Agri-foods: Lethbridge, for example, is the agri-food processing hub of Western Canada, making it a prime location for a company involved in infused products.
- Extraction: Any thriving edibles industry will start with extraction companies.
- Distribution: Alberta is likely going to see Canada’s first private retail model for marijuana sales.
- Ancillary: Alberta has an abundance of accountants, lawyers and other professionals.
However, any agri-foods industry as it relates to marijuana will have to wait, because edible marijuana products in Canada won’t be brought into the mix until a year after the country officially launches its recreational industry.
McMahon of Cannabis at Work said the skilled workforce in the province will be a boon for ancillary industries.
“There’s a real opportunity for the ancillary industry to capitalize on the wealth of talent in Alberta,” she said.
The downturn in the oil and gas sector, Alberta’s main economic growth driver for decades, is expected to be an incentive for skilled workers to explore opportunities in ancillary marijuana industries.
“We also have access to great talent. As people exit the oil and gas sector due to its ups and downs, something like the cannabis sector is really appealing as a way to apply their skills and get out of some of that volatility,” McMahon said.
Cultivation
Even though Alberta is only home to four licensed producers (with more in the pipeline), some marijuana cultivators consider the province to be one of the best places in Canada to operate.
They also point to Alberta’s abundant sunlight, educated workforce and entrepreneurial spirit.
Cam Battley, executive vice president of Aurora Cannabis, said those factors all have played into the company’s success.
“You can get great people anywhere, but in Alberta I find there is a higher likelihood that you’re going to get extremely dynamic and entrepreneurial people,” he said. “Roles change quickly in this business, so having highly adaptable, energetic and entrepreneurial people is a huge advantage.”
Aurora Cannabis, based in Alberta and traded on the Toronto Stock Exchange as ACB, is spending 100 million Canadian dollars ($78 million) to build an 800,000-square foot-production facility adjacent to Edmonton International Airport.
Jason Kujath, co-founder and president of Alberta-based licensed producer 51st Parallel, said the southern half of the province has some of the sunniest cities in Canada, which lowers energy costs for producers there.
“From the production side, it’s an exciting place. Alberta is the beneficiary of an abundant amount of sunlight,” he said.
Kujath is also part of the Alberta Cannabis Stakeholders Group, which advocates for about 20 mostly small businesses in the marijuana industry.
He said the cannabis industry in Alberta is still “immature, being hindered by a conservative mindset, but it’s slowly coming out of the shadows and becoming normalized.
“There’s a lot of upside here. The opportunity is slowly being recognized.”
credit:mjbizdaily.com
