Provincial Preview: Quebec cannabis market isn’t the entrepreneurial wasteland you might think it is

Did you miss the webinar “Women Leaders in Cannabis: Shattering the Grass Ceiling?” Head to MJBiz YouTube to watch it now!

, Provincial Preview: Quebec cannabis market isn’t the entrepreneurial wasteland you might think it is

(This is the fourth installment in a series that looks at the marijuana markets in each of Canada’s provinces and territories. Other installments: Alberta, British ColumbiaManitobaNew BrunswickNewfoundlandNova ScotiaOntarioPrince Edward Island and Saskatchewan.)

Quebec’s nascent marijuana industry may be home to a disproportionately small number of licensed producers and off-limits to entrepreneurs in the retail sector, but that doesn’t mean the province lacks opportunity.

You just need to know where to look, particularly among cannabis-related ancillary businesses.

The province’s medical market, for one, has nowhere to go but up.

And, pending legalization this summer, Canada’s second-most populous province could be home to the largest recreational market outside Ontario.

“For private companies in provinces like Quebec, there are still opportunities beyond sales and the large scale traditional cultivation/LP (licensed producer) role,” noted Louis Barré, president of Ottawa-based Cannab Intel, a cannabis consultancy.

He pointed to ancillary business opportunities including greenhouse equipment, security and accounting – on top of Canada’s proposed new licensing system paving the way for small cultivators and processors.

Legal experts warn that retaining a local attorney in the province is a must, because certain peculiarities exist in Quebec’s corporate law that complicate doing business there.

Market snapshot

Quebec has been a laggard when it comes to medical marijuana use.

The province has by far the lowest number of patient registrations in Canada as a ratio of its population – just 75.8 registrations per 100,000 people. (The next lowest is British Columbia, at 188.1, but that probably boils down to the prevalence of that province’s black market.)

By contrast, Quebec’s recreational market could explode into Canada’s second largest come legalization this summer.

A report produced by the Parliamentary Budget Office (PBO) in November 2016 paints a rough picture of what the legal cannabis market in Quebec could look like after adult-use legalization is implemented.

Aggregate cannabis consumption in the province in 2019 could fall between 100,000 kilograms (110 tons) to 200,000 kilograms, according to a PBO estimate — the second-most in Canada.

When adjusted for the province’s working-age population, Quebec could see annual recreational cannabis sales of around the 150 million Canadian dollars ($120 million) in 2019 – but that will boil down to how much the regulated market wrestles from the black market.

Estimates of recreational cannabis users in Quebec after legalization range from 1 million by the PBO to over 3 million in 2019 based on polling data.

That isn’t going to translate into a windfall for the Quebec government’s coffers, however, mostly due to high upfront costs associated with building out a state-run retail monopoly and a separate government wholesale supply chain.

Quebec has said it could take in as much as CA$100 million per year in tax revenue, but that may be far-fetched given that Ontario – with almost double the population – projects the same number.

Zero retail opportunities

Quebec introduced legislation that would initially funnel retail sales through 20 government-run stores and ban consumers from growing marijuana at home.

By comparison, Saskatchewan has one-seventh the population and plans to start with three times more storefronts than Quebec.

The province’s retail scheme prompted marijuana entrepreneur Jodie Emery to call Quebec’s legislation “the most restrictive model we’ve seen yet.”

Quebec’s retail plan has some key points of consideration:

  • Recreational marijuana would be sold through the Société Québécoise du Cannabis (SQC), serving as an arm of the province’s alcohol monopoly.
  • SQC employees would be subject to a criminal background check.
  • The agency would be allowed to sell dried marijuana, oil, concentrates, accessories and specialized cannabis publications.
  • Fines up to CA$750 would be imposed on those who violate the ban on home growing.

One caveat is that Quebec’s Cannabis Regulation Act includes a provision allowing the minister of finance to authorize a pilot project on the retail sale of cannabis.

So in theory, at least, the minister could consider privately-owned cannabis outlets down the road.

Other opportunities and ancillary

Just because retail is off-limits to entrepreneurs and standard cultivation licenses take years to acquire, that doesn’t mean the province lacks marijuana business opportunities.

“Importantly, Canada’s proposed licensing system provides for a great differentiation of roles in the supply chain,” Barré of Cannab Intel said. “These new licensing streams should ease the barriers to entry and enable industry niches and specialization to evolve.”

Some opportunities would exist for:

  • Micro-cultivation license holders, who could be licensed for the same activities as standard cultivators, but on a smaller scale.
  • Nursery license holders, who could be permitted to produce seeds and seedlings, including clones, for sale to other licensed producers and researchers.
  • Micro-processing license holders could produce cannabis oil for sale to other LPs and researchers.
  • The same license will also allow for packaging and labelling product sales to the public.

Pierre Killeen, vice president of Quebec-based Hydropothecary, a licensed producer, agreed.

“When you account for Quebec’s economic production advantages, we could see big growth in micro-cultivation here,” he said.

Analysts noted that, just like in other provinces, ancillary opportunities exist in greenhouse equipment, security services, shipping and distribution, marketing/branding, legal and accounting services.


Killeen said the province has major advantages for local cultivators, including low costs for electricity, water, land and highly trained people, as well as Quebecers preference for locally-made goods.

“Quebec has a natural advantage in all of those areas. Some of the lowest-priced hydro in the country, low water rates, an abundance of affordable land and we have highly trained people,” he said.

Quebec is home to only four licensed producers: Aurora Cannabis (TSE: ACB), Canopy Growth (TSE: WEED), Agri-Médic ASP and Hydropothecary (TSX Venture: THCX), though more are in the licensing stage.

“Population-wise, it’s the second biggest market in this country. If you look at Ontario, with 50 licensed producers, and you look at Quebec with four … that spells economic opportunity,” said Killeen.

Matt Lamers can be reached at