No growth: Canada's craft cannabis producers mired in red tape

By Penny Daflos

Six months after recreational cannabis became legal in Canada, only one company in the entire country holds a licence for craft production, but that’s not discouraging micro-producers from gearing up to enter the legal market.

CTV News Vancouver has learned that 120 companies have applied for micro-grow licences from Health Canada, with 18 rejected and only one green-lit somewhere in B.C.

The agency won’t name the approved producer, which transitioned its licence from a micro-cultivation medical licence. When asked to describe whether a certain stage of the approval process may be stalling applications, Health Canada wouldn’t specify.

“The regulations are making it very difficult for small and medium producers to become part of the regulated industry,” said cannabis advocate and ganga-preneur Barinder Rasode. “It's cumbersome for the amount of money required to get the licence, plus these farmers haven't had to focus on a financial plan, a business plan, a distribution agreement.”

So Rasode co-founded Grow Tech Industries, a Vancouver-based small business incubator-investment firm to educate and mentor cannabis-oriented companies just getting started or looking to transition from underground, pre-legalization operations to legitimate and legal enterprises. The company is also working to garner support for a co-op model to administer and oversee the patchwork of small farms quietly operating throughout the province.

“We have close to 6,000 licensed medical producers already outside of legalization in the province of B.C. -- and we thought 'What a good opportunity to bring them into the fold' through a co-op model,” she said.

The former Surrey city councillor and one-time mayoral candidate said the growing capacity offered by a co-op model in particular and craft growers in general would address a supply shortage from approved large-scale producers, but also offer consumers the kind of diverse options beer drinkers now enjoy, able to choose from mass produced brands or micro-breweries.

"It's absolutely critical [that consumers have options],” said Rasode. “We have very sophisticated medicinal and recreational consumers [in B.C.] who are used to buying that product and they still want to buy that product. They will find a way to do that, so for the success of the regulated market, we at Grow Tech Labs feel it's absolutely critical that the pre-legalization small and medium growers and producers have a seat at the table.”

The solicitor general’s ministry, which oversees the BC Liquor Distribution Branch and government-regulated sale of cannabis to retail outlets as well as online BC Cannabis Stores sales website, tells CTV it’s working to understand what the hold up is.

“The Liquor Distribution Branch has been working with a number of craft producers and associations as they prepare to enter the non-medical market, and expects to be able to offer their products via its wholesale and retail channels as soon as they receive the required licensing from Health Canada,” reads an email response to CTV’s questions about access. “The LDB is committed to being as inclusive as possible to any licensed producer that is interested in supplying the BC market, and will continue to engage with smaller-scale producers as they come on-line.”

In the “dried flower” section of the government website, about half the products on offer are consistently labeled “limited quantity” and several cannabis industry insiders say consistent supply and the ability to satisfy demand continue to be an issue as sales have been robust since legalization October 17.

Health Canada points out that it grants new licenses every week and there are now 171 cannabis licensed sites, up from 132 on October 17.

“The time to process an application is affected by a number of factors including the quality, completeness and complexity of the application, and the state of readiness of the applicant (e.g., whether a facility exists that could be licensed),” reads a statement.

Officials say that producers of all size must provide evidence they can satisfy record-keeping requirements, meet stringent security measures, follow “Good Production Practices”, and that all license holders and senior staff must undergo in-depth security clearance.

Micro or craft growers are limited to 2,125 square feet of plant canopy and have slightly less stringent requirements, according to the our Cannabis Licensing Application Guide. For example, while they must be able to physically keep out unauthorized access, they don’t have to keep video records of who attends the grow site, nor install an alarm system to detect intruders. The fees required are also “scaled to the size of the business.”

“New, distinct teams have been set up to review applications for the new licence classes, including nursery and micro licences,” said Health Canada. “To promote awareness of these new classes of licences and provide information about how to apply, Health Canada has conducted targeted outreach to potential micro-class licence holders throughout the development of the new legal framework for cannabis.”

Even former premier turned cannabis investor Mike Harcourt is weighing in on the issue, having experienced some of the red tape and legal hurdles as he works with True Leaf to establish a cannabis facility in Lumby, B.C.

"I think some of the delay is necessary but it's a tough process to go through," he said.

"For the cannabis craft growers, I think there is a role and there should be a role."

Watch more on CTV News.