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High Times: How to get in on Health Canada’s legal grow-op market

Growing marijuana is now a legitimate business – and a highly profitable one. The bad news? It’s not as easy as it might sound

Jan 7, 2014

by Robin Schroffel

Always wanted to get into the drug business, but cursed with a risk appetite that stops short of putting your life on the line? Well, now’s your chance to cash in with your very own marijuana crop, without having to contend with the secrecy and illegality (not to mention the non-zero chance of getting shot at) seen in Showtime’s Weeds. In September, Health Canada announced changes in legislation that will create a free market for medical marijuana. The new rules open the door for large-scale, legal grow-ops, but given that the market is expected to be worth $1.3 billion by 2024, there’s plenty of potential for profit no matter how big your operation is.

In Canada, 37,400 patients now rely on medical marijuana as part of end-of-life care or as treatment for conditions including cancer, spinal cord injury, multiple sclerosis, HIV/AIDS, arthritis, and epilepsy. The previous rules restricted licensed individuals to growing medicine for up to two patients each. That’s no longer the case, as patients now must purchase their supply from a producer licensed under the new system. And talk about growth potential: the number of people being prescribed medical marijuana is expected to increase more than tenfold over the next 20 years, to 450,000.

Don Schultz is the founder of Kelowna, B.C.-based medical marijuana education company Greenline Academy, and he’s seen a huge spike in interest from potential growers since the regulations were announced. As of November 5, 2013, Health Canada had received 248 applications from people hoping to become licensed marijuana producers. “There’s a lot of money in it,” Schultz says.

But he cautions that there’s more to growing good pot than planting a few seeds, waiting four months, snipping off the buds, and heading to the bank. In addition to the horticultural expertise needed to cultivate a superior product, there are other things to think about: security, tracking, marketing, quality assurance, packaging, and accounting, to name just a few. Still, even if growing marijuana is not as exciting as it looked for Weeds’ Nancy Botwin, it’s worth taking a look at for anyone with capital and courage to spare. And thanks to the new regulations, you’ll be dealing with fewer corrupt mayors than Botwin did and spending less time on the run. Best of all, you can use your real name.

1. The Business Case
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Illustration Stephen Daniel

One look at the numbers and it’s easy to see why so many people are interested in growing medical marijuana. According to Schultz, a 5,000-square-foot facility will produce around 50 pounds of pot a month. If you’re selling at $6 a gram, you’ll be bringing in revenue of $135,900. And it’s unlikely you’ll be selling it at that price: Schultz says the earliest producers operating under the new system are charging between $9 and $14 a gram, but predicts the average price will settle at $7 or $8 a gram.

Not all marijuana is created equal, either. Currently, dispensaries offer menus packed with different strains, each with its own properties and “tasting notes” on flavour and effect. While market price will obviously be influenced by supply and demand, different varietals (such as Bubba Kush, Sweet Skunk, and Rock Star – or, perhaps, more expertly-branded ones going forward) will likely continue to carry different price points just like coffee or wine. In other words, if growers produce (and market) a premium product, they’ll likely command premium prices.

For a small facility, the initial investment will run between $100,000 and $150,000 just for equipment, depending on the amount of automation you’re going for and whether you’re growing in soil or in water. A hydroponic system means a more sterile environment, but it’s more expensive and can be touchy. Soil is more forgiving, but you’ll potentially be dealing with gnats, molds, and other contaminants. Security measures on a facility of the same size will cost about $25,000, including tracking and monitoring systems.

Oh, and if you don’t know the difference between a sativa and an indica, there’s a chance you may be in over your head. But that doesn’t mean you should give up on your pipe dreams just yet. According to Schultz, mentoring can make or break your foray into the medical marijuana industry. “It’d be a real challenge for a person to do it on their own,” says Schultz. Greenline Academy will soon be offering online courses to help newcomers transition into the industry. Other U.S.-based companies, like the Cannabis Career Institute, offer seminars and certifications on growing, marketing and more.

2. What You Need
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Illustration Stephen Daniel

Anyone 19 or older can apply to become a federally licensed producer of medical marijuana. But in order to get approved, you not only need a clean criminal record spanning 10 years but also a sparkling reputation as well. If you’re known to local authorities but just haven’t been caught yet, chances are you’re not going to get one of those coveted licences. The 15-page application, available as a PDF from Health Canada’s website, is fairly complex: when all is said and done, you’ll be submitting an inch-thick ream of documentation including finger printing and security clearances, building site plans and security plans, proposed quality assurance measures and record-keeping plans, and approvals from landlords, as well as local government, police and fire authorities. No napkin sketches allowed here, in other words.

The new system is strictly mail-order only, which means today’s dispensaries and compassion clubs are being phased out. Patients will instead deal directly with growers, who will receive prescriptions and send out the product (up to 150 grams per month per patient) via certified mail. Oh, and that’s dried marijuana only – no salves, tinctures or brownies allowed.

3. The Competition
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Illustration Stephen Daniel

Health Canada won’t limit the number of growers it approves, but Schultz says the Canadian medical marijuana market has the potential to support a thousand growers country-wide. Greenline Academy’s sold-out October seminar in Toronto speaks to just how much interest there is. The event drew hundreds of attendees, from lawyers and horticulturalists to doctors and pharmacists to laymen looking for a career change, with each paying nearly $2,000 to learn the ins and outs of the business.

It’s too early to tell how the marketplace will shake out once the new regulations are in place. Health Canada isn’t aware of any interest from the tobacco companies in growing marijuana, according to media relations officer Sara Lauer. But Schultz wouldn’t be surprised if big pharmaceutical companies dipped a finger or two into the pie.

But perhaps the best thing about medical marijuana from the perspective of a prospective entrant is the fact that those big players don’t necessarily enjoy insurmountable advantages over smaller players. “You don’t have to be really, really big to jump into it,” Schultz says. “You can do this as an individual or you can do it as a corporation.”

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