This year marks the first year anniversary of the legalization of Cannabis in Canada. Today, Anthony Frischknecht discusses the different situations that happened throughout the past year in the cannabis industry, especially in Canada. Listen to this podcast as Tony shares with us his insights to what we should do and not do based on the positive and negative things that has happened in Canada’s legal medical marijuana industry.
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Canada Celebrates First Year Of Legalization
I am happy to announce that Canada’s legalization has happened. The actual date was Thursday the 17th is when they went full legalization in Canada. I want to congratulate Canada on pulling it off. I know it’s extremely hard to do. Part of the reason why we haven’t taken that challenge out of Washington DC. Is there’s a lot of moving parts to this. I applaud them for their efforts and to move in the cause of keeping this plant, learning more about it and understanding that it’s got a lot of uses. I’m happy to give them a bravo. What happened in year one? The Canadian Stock Market went through the roof. It started back in August of 2018 and started growing all the way up until legalization. We saw Tilray, one of the big companies out of Canada stock started at $20 and went all the way up to $300. I looked at it and it was at $22. It’s quite a swing there. If you were one of the lucky ones that were able to capitalize on that growth early, congratulations. There were a couple of those. That was the main one I saw. Most states and countries that have legalized this, the first year is figuring out what’s going on and you’re still trying to understand the regulations and everybody’s trying to do is to be compliant, some are not. Canada had a struggle just like we had in Colorado with the thriving black market.It's easy for the government to police the people that are in the system, but it's much more challenging to actually go out there. Click To Tweet
If nobody’s ever been to Canada, I’ve been there a couple of times, mainly Vancouver and you were able to purchase cannabis. I first went there in 2005. It wasn’t legally purchased, there was a building we went to and a room where we able to purchase it. No taxes, no anything. That’s been thriving for decades. To expect one year of legalization to totally eliminate the black market, you’re asking for a lot. It’s taken several years here in Colorado to get rid of the black market. It’s still happening, but everybody on the local side of the law is trying to follow regulations and understand it. Nobody has time to do any enforcement. What I hope is you’re going to start seeing some major flex from the Canadian government in busting some of these massive grows that are happening in Canada.
For years it’s been coming from Canada down to the States. Over a one-year time period you’re crazy to expect that to have a massive change. There was a lot of companies that were hamstrung by the regulations and not being able to grow enough product. If you’re not familiar with Canada, they’ve only been able to sell flowers. There have been no edibles that have been sold in any store up there. On the illicit market, there is. Those guys that have been working in California for a couple of years understand how the black market has affected them. It’s affected their entire country up there. Those guys have been making a lot of money for a lot of years.
They’re not going away until they’re forced to go away. I expect in the next 12 to 24 months, you’re going to start seeing some major enforcement happening out there. It’s easy for the government to police the people that are in the system, the licensees that are in there. It’s much more challenging to go out there and do some real police work and investigation work to find the outliers, people that are doing large grow operations. These big companies have come with a lot of money, but the black market money’s good and those guys aren’t paying taxes. I hope they’re adjusting their regulations. It sounds like they’ve been non-favorable towards the licensees and these guys are struggling and they’re bleeding cash. Frankly, as many as they can buy it for less money through the black market and probably from their friend down the street that’s been selling them for a decade, that’s hard to compete with. The one system that Canada does have is they’ve got the mail ordering and they can ship their medical marijuana to their patients, but that doesn’t have anything to do with recreational. The other thing that probably hindered their ability to get a foothold is they’re allowed to export.
A lot of different companies were exporting over to Germany and are working on that. They got into the medical side and then they launched everything else. They haven’t learned to walk yet and they’re already running marathons. That generally doesn’t work so well either unless you’ve got a really solid team behind you. The good news is as they’re starting to accept applications for all derivative goods such as vapes, edibles and infused beverages. That’s going to give them a lot more opportunity to bring in some of the recreational users. The illicit market I doubt had to create many of these products. That we’ll give them an edge against the black market.It is the hope that when cannabis is legalized nationally that there are some smart people that are involved. Click To Tweet
One thing is their regulations are not allowing them to have any additives in their vape pens, sweeteners, stuff that very similar to what we’re working through here in the States with the people getting sick and what they’ve called the big crisis. There also been a lot of talks about tracing that back. A lot of the illegal market here in the United States has had those issues. It has nothing to do with the legal and licensed companies that are in the US. I was reading a bit of an article on how a lot of the companies in Canada had planned on starting out with vapes and that could potentially dampen the possibilities and the profitability of vapes up there. We also know it’s not a huge market up there. Their big play was exporting and they couldn’t even supply their own country.
I would hate to be in their position. Many of those guys are trying to figure out how to keep their ships floating. You can’t trust $77 million worth of the product they had to destroy. I know very few companies that can take a hit like that. The good part about it is it’s a business loss for that company, but that reduces their tax liability. It doesn’t create that income. For people that are out there like, “They can write it off on their taxes.” They still lost all the profit in that product that was there. I imagine probably took away from the amount of product they could sell in their stores at the time. They were already behind and they got hit on that loss. Who knows how much product they have to sell in their stores? I know in 2010, we might have had two strains and we were selling and then we were training people so we can get varieties.
That first year you really have what you have and remember that you can only grow the plants so fast and that generally takes 8 to 10 weeks depending on what you’re growing. That’s as fast as you can grow it. Don’t want to bring anybody down. The good news is going back to the black market side of it. After a couple of years, we were seeing some major bust happening. There were several ones were in 2012 and 2013 they were doing indictments of 50 plus people across many state lines because of diversion. They were starting to take the big guys down. This is after 2 to 3 years’ worth of regulations when they finally got a handle on it.
There’s still some stuff happening here, but as our market has developed, the owners that are in the businesses in Colorado are in a much better place than they were a couple of years ago. I’m a big proponent for the industry, I hate to see Canada have to take some big lumps on the head, but it is what it is. You’re trying to do something that very few people have done. I hope that when we legalize nationally, there are some smart people that are involved in understanding what’s happening and what mistakes people have done, especially looking at Canada and try not to repeat the same ones. Inevitably, some of them are going to happen. Hopefully, we won’t get the big ones. I want to throw a shout out to Canada and I hope they keep pushing forward because there are a lot of people counting on Canada to keep the movement going. There’s a lot of companies that are invested up there. I hate to see people fail there.
Obviously, it’s going to happen, but I want to see them grow. There’s a lot of people that are depending on jobs in the cannabis industry and that’s amazing. There are very few of us that look at that as all-encompassing. If something does happen, there’s always somebody else to pick up the pieces and being an entrepreneur, take it and move it forward. I appreciate the audience out there checking out my website, BlackMarketBook.com. I also do some videos. I’ve got some Facebook Live videos if you want to check those out. Any feedback from the audience on some stuff you want to read or people you’re interested in interviewing. I’ve got some big interviews coming up, I’m looking forward to sharing those with you. Thanks a lot. Bye for now.
About Tony Frischknecht
Born and raised in Colorado, Anthony always enjoyed the challenge of starting and building a business. That is why it became a natural progression at the age of 25, he became an entrepreneur, with two small construction companies. In 2005, he got his start in the medical marijuana industry in Fort Collins, Colorado, building a small MJ caregiving business, Highway to Healing.
By the time he was 35, he had two dispensaries with sales of $6.5MM annual revenue, including two indoor grow facilities, with a combined 20,000 square feet of production in Denver, Colorado. All four locations consisted of 19 city and state licenses. Anthony then joined a group of five industry leaders and started a successful cannabis brand O.penvape in late 2012. The maker of vaping products and edibles posted a top-line sales of $100 million in 2016 and sells a product every nine seconds. Its busy lab creates over 1 million grams of concentrated cannabis oil a year and it buys 10 tons of marijuana a year. Organa Brands is the only cannabis company with products on the market in 10 states, including at 1,200 dispensaries. Subsequently, Anthony has moved on to other ancillary businesses involving small scale extraction and commercial grow technologies.
If you ask Anthony about his favorite part of this industry? His response, “watching how fast it is evolving. It’s becoming a real industry and getting accepted by many, many of those who used to be skeptics. “ Due to this, we are seeing great leaps in innovation and technology. And this is exactly why Anthony says he is in admiration of this industry.
Anthony has been successful in the Cannabis industry for over 14 years and has been featured on the cover of Newsweek: October 29, 2012; The New Pot Barons and Cannabis Business Times: September/October 2016; Ten Questions