Provincial Preview: Manitoba cannabis businesses ‘sitting on perfect storm of opportunity’

(This is the ninth installment in a series looking at the marijuana markets in each of Canada’s provinces and territories. Other installments: AlbertaBritish ColumbiaNew BrunswickNova Scotia, NewfoundlandOntarioPrince Edward IslandQuebec and Saskatchewan.)

The very small number of licensed cannabis producers in Manitoba has kept a lid on ancillary opportunities, but executives say that hasn’t stopped them from leveraging the province’s benefits.

Ken Macdonald, commercial industrial realtor for Avison Young dealing in the cannabis industry, said Manitoba comes with a host of advantages, including a business-friendly recreational marijuana framework and some of the cheapest electricity in North America.

“We think we’re sitting on a perfect storm of opportunity,” he said.

Macdonald noted that power costs are about 1/8th of neighboring Ontario’s.

The government approved legislation to allow private businesses to sell recreational marijuana once Canada’s adult-use market launches in the coming months. However, cannabis consumption will be banned in most places beyond private homes, including campsites and parks.

Market snapshot

A glimpse of the legal cannabis market in Manitoba was provided in a report by the Parliamentary Budget Office (PBO).

The data, when adjusted for the province’s working-age population, points to approximately 144,600 annual recreational cannabis users in Manitoba in 2018 and 161,000 in 2021.

Aggregate cannabis consumption in the province could be 20,500 kilograms (47,000 pounds) in 2019, rising to 23,200 kilograms by 2021.

The government’s estimates are lower than those from the Marijuana Policy Group (MPG), a Denver company that provides analysis and policy advice to private and government clients.

MPG says market demand could be roughly 30,000 kilograms on an annual basis – 50% higher than the government’s forecast.

Manitoba’s 502 registered patients per 100,000 people indicate MMJ isn’t a major market in the province. For comparison, Saskatchewan has about 770 medical registrants per 100,000 people and Alberta has 2,543 per 100,000 people.

Government support

Manitoba has a research and development tax credit that some marijuana-related companies plan to take advantage of, including Winnipeg-based Color Ad Packaging, which makes childproof packaging for cannabis and other industries.

“Being a flexible packaging company that didn’t provide a child-resistant package, we had to do some R&D to develop this,” said Chris Bromley, regional sales manager. “So we will get a portion of our expenses back from what we had to invest to develop a product to enter the cannabis industry.”

Manitoba doesn’t offer cannabis-specific programs like Newfoundland or New Brunswick, but its general business incentives may be applied where relevant.

According to government spokesman John Neufeld, “Manitoba’s Small Business Venture Capital Tax Credit is another financial program open to the cannabis industry.”

Why Manitoba?

Industry sources say Manitoba offers various incentives and opportunities for business to make it their home base.

Some include:

  • A central location in North America
  • Lower labor and power costs
  • Research and development subsidies
  • Business-friendly provincial and local leadership
  • Affordable industrial real estate

“The reason we chose Winnipeg, Manitoba, was its central location in North America and ease of distribution in any direction, east, south and west,” said Bromley of Color Ad Packaging. “It’s perfect.”

Color Ad has been in the flexible packaging business for over two decades and hopes cannabis can become 5%-20% of its overall business.

Government support and low input costs also provide advantages, according to Avison Young’s Macdonald.

“If I was a licensed producer in southern Ontario and wholesale prices are falling, I’d like to locate in the cheapest energy area in North America,” he said.

Other opportunities

With only two licensed producers in Manitoba, the ancillary opportunities have been relatively low.

However, some companies have been lured to Manitoba by the aforementioned advantages, including Conviron, a major provider of controlled environmental solutions to licensed producers across Canada.

Others cite R&D as an ancillary opportunity.

“I think there’s an ancillary opportunity for people to pursue research grants and opportunities with some of the big organizations in Manitoba,” said Ashleigh Brown, community manager for Strainprint, a mobile app for medical cannabis users.

“I don’t think we’ve seen a real expression of interest in ancillary businesses in Manitoba yet,” she added. “Once people realize they can’t make money growing, or that they can’t even get into that market, they might look to other opportunities.”

As with other provinces, Canada’s newly proposed licensing system comes with a host of opportunities up and down the supply chain.

Retail

Manitoba became the first province in Canada to carve out a space for the private sector to participate in recreational marijuana sales, unveiling a “hybrid” model that gives entrepreneurs and the public sector roles.

However, Manitoba’s system heavily favors corporate retailers because only a small number of chains were granted licenses to sell recreational marijuana out of the gate.

The province said it will consider opening up the retail sector to entrepreneurs down the road.

The hybrid model gives the government’s Liquor and Gaming Authority an expanded mandate to regulate the entire sector.

Alex Shiff – senior consultant for Navigator Ltd., a Vancouver, British Columbia, communications firm – noted that Manitoba is unique because it is one of the few provinces that will allow private retailers to sell cannabis online.

“Every other province has restricted online sales to the purview of government retailers,” he said. “This will allow for unique e-commerce opportunities that will not be available in other provinces.”

Matt Lamers can be reached at [email protected]

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