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The Higher ED Blog: How Niagara dug into the brave new world of marijuana horticulture

Blake Landry / December 18, 2017 / economicdevelopment.org

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The Higher ED Blog: How Niagara dug into the brave new world of marijuana horticulture

The legalization of marijuana presents an excellent opportunity for economic development practitioners given the increase in new business, investment, and job creation activity in Canada that is expected to occur after legalization.  Deloitte has recently reported that the economic value of marijuana could be as high as $22.6 billion annually, which includes production, distribution, paraphernalia, tourism and business taxes.  This does not include the funds of the excise tax that was recently agreed upon between the federal and provincial governments.  Cities and regions throughout Canada are starting to witness new investment and business activity as a result of the full legalization of marijuana, and some are well-positioned to greatly benefit from it.

Political Context

The legalization and production of marijuana for both medicinal and recreational purposes will be a major opportunity for economic development in Canada.  Medicinal marijuana is currently legal and the federal government has committed to a July 2018 deadline for the legalization of recreational marijuana.

As of November 2017, 10 provinces have proposed foundational rules for the retail distribution for marijuana.  So far, Ontario, Quebec and New Brunswick have proposed a government agency structure to the sale of marijuana, while Manitoba and Alberta have proposed licensing private retailers.   Moreover, the federal government will be proposing new rules to marijuana impaired driving, as well as systems to track the production, distribution and sale of marijuana from seed to retail sales.

The industry is still nascent and the regulatory environment will continue to evolve and mature as the country legalizes and allows for the commercialization of marijuana (by the provinces and/or private sector); however, I think it is important to recognize and prepare for the economic development opportunity presented by the legalization of marijuana.  Below I will address some immediate successes and opportunities that we are noticing in the Niagara region.

Niagara’s Situation

Large scale licensed marijuana production first came to Niagara when Tweed Marijuana Inc. bought Prime1 Construction Services Corp. for $3.6 million, which included a 350,000 square foot greenhouse in Niagara-on-the-Lake.   By August of 2014, Health Canada announced a license for a 350,000 square foot facility to be operated by Tweed Marijuana Inc. (now known as Canopy Growth Corp.).  In March 2016 Tweed received its license to produce, possess and ship dried marijuana, and by October 2016 Tweed received its license to sell dried marijuana.

Over the past couple of years, Niagara has become home to many industrial scale marijuana producers including Canada Growth Corporation, Up Cannabis Inc., CannTrust Holdings Inc. and RedeCan.  These companies are all licensed to produce marijuana and have generated private investment of over $50 million and currently occupy over 1.7 million square feet of greenhouse with expansion plans of over 1 million square feet.  By the end of 2018, I suspect we will see upwards of 3 million square feet of greenhouse marijuana production in the Niagara region with well of $100 million in private sector investment.

Within the past few years Niagara has also witnessed the start-up of many manufacturing and service companies within the marijuana industry including Avid Growing Systems Inc. (manufacturing), Grow Up Cannabis Conference and Expo (conference), Niagara College’s Commercial Cannabis Production Program (education), and multiple small businesses in the retail and clinical part of the marijuana industry.

Marijuana legalization, production and distribution have posed an excellent economic development opportunity for the Niagara Region, especially given Niagara’s existing assets and capacity in horticulture.  In regards to existing greenhouse area, as of 2016 Niagara is ranked second in Ontario for total greenhouse area under protection at 22,415,269 square feet.  Essex County is ranked first at a whopping 84,140,044 square feet under protection.  This existing greenhouse growing capacity has become of interest to marijuana producers due to the relatively high market value of the product (compared to other greenhouse grown products).

Greenhouses in Niagara historically have been used for floriculture production; however, Niagara has seen the floriculture industry undergo some restructuring and consolidation over the past decade.  From 2011 to 2016, floriculture production in Niagara declined by 26 farms and 578,719 square feet of greenhouse production area.  During this same time period, we saw floriculture production in Ontario decline by 187 farms and 2.95 million square feet in production area.  Nevertheless, Ontario saw  an 8.8% growth in floriculture sales in Ontario at $790.5 million, which means that farms are consolidating (i.e. fewer farms, larger greenhouses) and also becoming more efficient and/or accessing new higher value market opportunities.  This presented a perfect opportunity for high-value licensed marijuana production to move into this excess farmland.

Marijuana legalization has essentially brought a new high-value, stable opportunity to the Canadian greenhouse and horticulture industry and locations with existing greenhouse assets and capacity like Niagara Region and Essex County welcome the opportunity to host this emerging industry.

Researching the Opportunity: Methods

Given this heightened interest and activity for investment in licensed marijuana production in Niagara, our economic development office began to receive many business and economic development related inquiries about the industry.  Marijuana production and use has been historically illegal, so the typical research tools from Statistics Canada and other data providers did not have the necessary data to research the industry.

Given this challenge, we needed to take a creative approach to compiling and developing reliable data on the industry.  The industry-specific news media and the news media in Niagara have been excellent at quickly producing new business announcements and industry activity, so we started by compiling a comprehensive list of news articles that were specific to industry activity in Niagara.  We used a news aggregating tool, Google Reader, to help provide us a stream of these articles from industry specific and traditional news media.  Within those articles, we used a keyword researching tool to quickly identify announcements and information related to business investment, expansion, acquisition, approved licenses, etc.  Once we had acquired the data, we aggregated the numbers, double checked the information for errors and/or duplication of records, and produced some meaningful information on the industry.

In the fall of 2016, we were able to access additional greenhouse production data from the Statistics Canada Census of Agriculture to help confirm some of the announcements in the news regarding marijuana production.  One major issue is that greenhouse products are presented as total production, floriculture production, vegetable production, mushroom production, and other greenhouse products.  Marijuana greenhouse activity shows up in “other greenhouse products”.

At this point, it is difficult to do very detailed research and analysis on the marijuana production industry at the regional level.  We will need to allow time for Statistics Canada to update the statistical systems and corresponding business, economic, industrial and agricultural data products, so that we have reliable tools available to do effective research and analysis at the regional level.  Statistics Canada has already begun updating these systems in preparation for marijuana legalization and has provided a detailed overview on the systems that will need to be updated, and other statistical and research related challenges found here.

Health Canada has also been a good resource for researching the industry.  They currently maintain a website Authorized Licensed Producers of Cannabis for Medical Purpose, which identifies companies that have been granted licenses for the production of medicinal marijuana.  It provides information on all of the licensee companies by province, which is a great tool for identifying licensed producers throughout Canada.  Currently, there are 80 licensed producers in Canada. Health Canada also proactively publishes market data on the medicinal marijuana industry online.  This information includes sales volumes of various medicinal marijuana products, total medicinal marijuana registrants by month, total medicinal marijuana shipments (to registered clients) by month, and total number of health care that have provided a medical document for a client who registered with an producer  in the reporting period.

Reaping What We Sow

Given that the marijuana production and distribution system is still relatively nascent, we currently have to rely on creative means to collect, analyze and gain insights from the information available to us.  As the industry matures and the policy, tax and regulatory environment stabilizes, we will be in a much better place to accurately track and report on, and understand the economic benefits of the industry.  However, given the market update we see for medicinal marijuana and the very high-level of interest among producers, distributors and the market, it is safe to say the marijuana industry poses a great opportunity for economic developers in cities and regions that have the assets and interest to benefit from this great opportunity.

About the author

Blake Landry is currently Manager, Economic Research & Analysis with Niagara Region’s Economic Development division. He is responsible for economic and business research and analysis, economic information systems development, economic development reporting, as well as supporting various investment attraction and other economic development activities in Niagara.  Blake serves on the Board of Directors of the Niagara Industrial Association and is Chair of the Membership and Marketing Committee. He has held a variety of positions in economic development over the past 11 years from business start-up support and innovation commercialization to economic research & analysis and information provision.  Blake holds a BA in Communications from Brock University, a Graduate Certificate in Public Administration from Humber College, and a Certificate in Economic Development from the University of Waterloo.

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Higher ED: Insights for the Next Economy is a platform for students, guest speakers, staff and faculty of the University of Waterloo’s professional and graduate economic development programs to share knowledge with the field at large. The series takes works destined for an academic audience and reworks them into a fresh, easy-to-digest blog article.

Established in 1987, the Master of Economic Development and Innovation (MEDI) is one of the only graduate programs in Canada focused exclusively on economic development. Students learn economic development theory and practice, and are exposed to leading edge knowledge, tools, and approaches to address contemporary challenges in cities and communities across Canada and internationally.

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