By Omar Sacirbey
Cannabis entrepreneurs in Vancouver, British Columbia, are about to find out whether local law enforcement will shutter scores of unlicensed medical marijuana dispensaries in the western seaport city.
Vancouver officials have notified more than 100 dispensaries that they won’t receive licenses under the city’s new regulatory framework, giving them until April 29 to close.
Whether the city enforces the rules is expected to play a key role in determining the ultimate size of Vancouver’s MMJ industry and where the business opportunities will be going forward.
At the same time, entrepreneurs and dispensaries that don’t make the final cut for licenses could find new opportunities in the city’s sprawling metro region if the country legalizes recreational marijuana, which Canada’s prime minster has vowed to do.
“It’ll be interesting to see (which businesses) don’t shut down by the end of this month and what the city’s reaction is going to be,
said Paul Pedersen, a cannabis consultant at Greywood Partners in Vancouver, adding that he believes unlicensed dispensaries will continue to operate.
Regulatory side effects
Although dispensaries are illegal in Canada under federal law, they operate in Vancouver and a small number of other municipalities where local police look the other way as long as the businesses don’t break other laws, such as selling to minors.
Federal officials do not have enforcement authority in Vancouver and a handful of other Canadian cities, so they have been unable to take action against the dispensaries. They have, however, raided marijuana businesses in other municipalities where they do have authority.
Some industry observers estimate that as many as 120 to 150 dispensaries operate in Vancouver, most of which ostensibly will have to close because they don’t meet the new regulations.
City regulators received 176 dispensary license applications from both existing dispensaries and entrepreneurs hoping hoping to open new ones.
Pedersen noted that according to the city licensing office, roughly 130 applicants didn’t advance.
“It looks like the city is really trying hard to keep the numbers down,” Pedersen said.
Around 60 or 70 applicants that weren’t able to move forward in the licensing process have filed appeals. Those appeals started getting heard in February and will continue until the end of the year.
“That’s one of the side effects of working with the government: Some people are going to get pushed to the side,” Russ Orsborn of Orsborn Cannabis Consulting in British Columbia said. “Some of these were going to disappear anyhow. Some of these aren’t good business people.”
Meanwhile, six dispensaries have been approved for development permits and another 17 are under various stages of review and will likely be approved, according to Pedersen, who said he got the numbers from a city licensing official.
After applicants receive a development permit, they can then apply for a business license.
Defiant dispensaries?
The city’s first dispensary licenses could be issued this spring. When the dust settles, Vancouver will likely have 25 to 30 licensed dispensaries, Pedersen said.
Vancouver police did not return calls seeking comment about how they will handle unlicensed dispensaries.
But Pedersen and other observers expect that many dispensaries will defy the order to close.
“If the regulations are too strict, people will just keep operating, and that defeats the purpose of trying to get regulations in place,” said Jaimie Shaw, interim president of the Canadian Association of Medical Cannabis Dispensaries.
Dispensaries that do get approved must pay a $30,000 licensing fee, and they will likely pressure authorities to shut down any illegal competition.
Observers are split over how many dispensaries Vancouver can support.
Currently, Vancouver’s dispensaries serve local residents as well as customers who come into the city from the greater metropolitan area, which is many times bigger in both population and geographic size.
Pedersen said he knows many dispensary owners who are struggling, and he reckons that 100 dispensaries is too many for the city.
Shaw, by contrast, said she hasn’t seen a shortage of product or customers.
Rec effect
The other factor hanging over the city’s medical cannabis industry is the possibility of recreational legalization.
Prime Minister Justin Trudeau has said he wants to legalize recreational marijuana, but progress has so far been slow.
Should the country legalize rec cannabis, many dispensaries in Vancouver could transition into rec shops and relocate or expand to municipalities around the city and be closer to customers who once traveled to see them.
“If I were a new investor I’d be looking at some of these other places around Vancouver,” Orsborn said. “I think there will be a lot of investment opportunities in British Columbia simply because there is so much left to do.”
Under a legalized recreational marijuana market, Shaw believes the greater Vancouver area could support about 200 cannabis retailers.
“There’s still a lot of cannabis that’s not sold through the dispensaries,” Shaw said.
At the same time, many British Columbia marijuana entrepreneurs have expanded their businesses to Toronto.
Dozens of dispensaries have opened there in the last several months, and city officials are also considering formal regulations.
It’s not clear, however, whether the federal government will set up a regulatory system where cannabis is sold through new marijuana-specific storefronts if recreational legalization does happen.
Some politicians and state employee unions are lobbying hard for state-controlled liquor stores to be the outlets through which cannabis is sold.
Under Canada’s current medical marijuana program, the only way patients can get legal cannabis is by mail through one of the country’s licensed cultivators.
Pedersen believes the federal government will leave such decisions to the individual provinces, and that some will opt to create marijuana-specific shops and others will choose to sell through liquor stores or another route.
“I think the federal government has waited too long. There are a number of dispensaries that are ingrained in communities, and there are large numbers of patients who depend on these things,” Pedersen said. “I think dispensaries are here to stay.”
Omar Sacirbey can be reached at omars@mjbizdaily.com
