Micros and nurseries have a lot to say about the recent notice from Health Canada looking at some key aspects of the Cannabis Act and Regulations.
Health Canada posted their notice of intent on December 11, providing stakeholders with the opportunity to comment on the regulator’s intention to amend the regulations to allow for non-therapeutic cannabis research involving human participants and cannabis testing.
The proposed change to the regulations they are seeking feedback on seeks to streamline the regulations to make such research easier to conduct.
In addition to these proposed changes, Health Canada has also used the notice to ask stakeholders to provide feedback on other aspects of the federal regulations, especially public possession limits, product labeling, micro and nursery licence, and the measures the government has taken to address COVID-19’s impact on the industry and the regulator.
NOTE: A more in depth review of the Cannabis Act and its administration and operation will take place three years following the coming into force of the Act (i.e., by October 17, 2021), A report outlining the results of the review, including any findings or recommendations, must be tabled in Parliament within 18 months of the initiation of the review (i.e., no later than April 17, 2023). This review will examine the impact on public health and, in particular, on the health and consumption habits of young persons in respect of cannabis use, the impact of cannabis on Indigenous persons and communities, and the impact of the cultivation of cannabis plants in a dwelling-house.
StratCann reached out to several micro cultivators, processors, and nurseries to gauge their perspective on their biggest challenges with the regulations, especially as it relates to their ability to compete with standard licence holders in the marketplace.
Like the licence holders themselves, there is of course a diverse array of perspectives and approaches. Some say they find it difficult to compete as a micro, while some say they see many advantages to the pared-down licence category.
Inability of cultivators to package and sell their product for retail sale
One of the most common points raised by licence holders was the inability that stand-alone cultivators have to also get a processing licence and sales licence in order to sell their product into the market. While a cultivation licence is seen as relatively straightforward and affordable, several cultivators expressed concern that if they want to have more control over their product—allowing them to keep more of the profit—the cost of infrastructure to get a processing licence is more daunting.
“(Processors) will say ‘we’ll take your product and we’ll package it for you, we’ll charge you for packaging, but we don’t have our sales licence’, and then will go to work with another LP that has a sales licence,” says Jacob Safer-Spiro at Willow Weed, an outdoor micro cultivator in Ontario that will soon have products on some retail shelves.
“That middle processor adds no value. Because it’s not like they have automated machine packaging, it’s not like they do anything special, they just have a licence and that’s it.”
Safer-Spiro says the microbial limit of 10,000 colony forming units per gram (CFU/g) makes it hard to compete with larger producers who can more easily afford to remediate their product (irradiation, e-beam, etc).
“It’s impossible to get to the 10,000 cfus, where it is currently, for outdoor growers without some sort of remediation”, he says. “It’s great what Health Canada is proposing, to take into account shareholders’ perspective. I just hope it’s not a red herring and that it actually amounts to something.”
Extending COVID-19 measures, expedited security clearances, canopy expansion
Serena Donovan at Because You Cann, an indoor micro cultivator in Alberta, says she would like to see the 200m2 canopy limit for micros looked at, potentially being changed to only apply to flowering plants.
“I think we are kind of at a disadvantage,” she says. “Maximizing our canopy space at 200 square metres makes it really hard to be able to produce quality small batches in that square footage. It means we have to have all of our plants at the same stage.”
This small change would allow her to grow more cannabis, which would make it easier to sell into markets where provincial distributors often aren’t interested in buying smaller batches below around 50kg of dried flower.
“The problem is that there’s so much to do and then so much down time unless we arrange our grow rooms for larger batches. And if I don’t have large batches, then I can’t sell my product at the AGLC because the AGLC won’t accept them.”
“I’m okay with 200 square metres but I’d like it restricted to flowering so that I then have extra room for (mother plants).”
Another issue raised by Donovan was that she would like to see some of the temporary allowances Health Canada initially brought on earlier this year to address COVID shutdowns, like the allowance for enabling the destruction of cannabis to be witnessed virtually and simplifying the requirements for the presence of a security cleared person accompanying cannabis being treated at an external destruction or irradiation facility. These measures are in place until March 31, 2021.
“I’d like to see that remote, virtual witnessing of waste stay in place,” says Donovan. “Most of the micros that I know of are family businesses so we don’t have the risk factor, we’re not disposing of a lot of product, so the need to have two staff members witnessing the destruction of fan leaves that have no THC value on the market, pulls two people off my floor who could be doing something else.”
“And the ability to bring through extra security clearances. When micros only have two to three people who are cleared and then we have an issue like COVID, we have the risk of all us being exposed at the same time because we’re working in close quarters. Being able to have that ability with Health Canada to step back and allow for that (would help).”
Easier access for nurseries to medical stream
Rod Wilson, who owns Hidden Harvest, a cannabis nursery in New Brunswick says he would like to be able to more easily sell his seeds and clones to medical patients, and thinks that micro cultivators should be able to more easily package and sell their own dried flower.
“There should be something, an amendment maybe, to a micro cultivator licence if all you want to do is your dried flower,” says Wilson. “Now, if they want to make extracts or turn that into brownies or cookies or gummies, I agree. That’s a different business. But to just put your dried flower into an approved package should be a simple amendment.”
“It’s the same thing with selling to medical growers. I have to apply for a licence that would allow me to sell dried flower, edibles, the whole thing. I don’t want to do that. All I want to do is sell to people who grow their own for medical use, I just want to be able to sell them seeds and clones.”
“They need to look at how they can get the products more cost-effectivly to the consumers,” he continues. “Micros and nurseries need to be able to get to consumers without having a whole bunch of hands in your pocket. And it’s not just the (federal regulations) that are causing the micros problems. The other big problem is the market doesn’t want to look at anything that comes in under 20% THC.”
Increase capacity for micro processors
Mukhdeep Mangat, who owns iNaturally Organics in Alberta, and currently one of only two micro licence holders with a sales licence, manages two micro processing licences.
Mangat says he would like to see the processing capacity for micro processors increased, so as to allow for higher THC concentrations in their products.
“For micro-processors, I think you need to double the 600kg capacity,” says Mangat. “Because what we’re finding is the lower milligram products, the 2.5mg or the 5mg, the consumers don’t give a damn. What we find is they want that 10mg because that’s the maximum dose. If the maximum dose was 20mg, then that’s what people would buy, because they want the most THC they can get. So with these micro processing limits, it really cuts into what products we can make.”
Despite this, Mangat says that iNaturally Organics is doing quite well, and has been selling their cannabis oil, softgels and nano emulsion drops in several provinces under their Emprise brand. Although he would like to see the input limit raised, he says he’s not yet ready to begin looking at expanding to a standard processing licence
“Micro processing is the best license available,” says Mangat. “All they need to do is double the (600kg) capacity… and it will revolutionize the industry.”
Many challenges are at the provincial level
Travis Lane, who runs an indoor facility that is home to two micro cultivation licences and a cannabis nursery licence, Whippletree Organics, Captured Light Organics, and Nuvem Nurseries, says he sees both advantages and disadvantages to the micro category compared to standard licence holders.
“If anything, I feel I am at an advantage being at a smaller scale in that the required security measures and some of the other requirements for us is a bit lower,” says Lane. “The advantages to being able to do a micro for say $100k on land you already own, I don’t see micros being non viable.”
“The reason I think people look at micros as being a difficult pull I guess is because without economies of scale and controlling your whole supply chain to retail, you’re essentially looking at getting $3-5 a gram on the high end and much, much lower for outdoor or lower quality. So it does come down to the cost of production on your product has to be reasonable and you have to match the segment of the market you are selling, at price-wise, with your production cost.”
Lane also echoes many of his colleagues sentiments when it comes to microbial limits, security clearances, as well as problems with provincial distributors.
“The question around what could help viability, I think it’s a lot of similar things that we’ve already been lobbying for like at-large security clearances, a different type of microbial screening that doesn’t involve total yeasts and moulds. Little things like that I think will make things much smoother,” Lane continues.
“But outside of that it’s going to be hard for me to say ‘hey this thing during operation is holding me up from meeting my potential’ because I think a lot of what I’ve talked in the past for what will limit a lot of our business potential rests in the distribution system, rests in the fact that I can’t do direct sales to a retailer and have a relationship with them and that’s not really federal purview. So a lot of the issues I have as a small cultivator that is now licensed, I think probably rests with the provinces.”
Lane acknowledges he was only licensed in September, but says he thinks there’s a lot of opportunity in the category, which is why he chose it.
“With the micros, if you feel the 200m2 is inhibiting your ability to make money, then apply for a standard licence. I don’t think that’s a very complicated equation, either. I think that the reality is that whether it was 200m2 or 300m2… or wherever that line ended up, even if it ended up being an acre, some people were going to say its too small and some people were going to say its too big. The fact of the matter is if you can put together what you need for a micro relatively cheaply, you can pretty much add higher end security to it and do a standard.”
“So I don’t think that micro licenses are at a disadvantage as long as they go in knowing what their limitations are. Just apply for the licence that’s best for you. And just because you’re a standard doesn’t mean that you’re not growing good weed or growing organically or craft or whatever buzzword you want to use… it shouldn’t really matter that much, just make the best decision for your business.”