Name change reflects Edmonton-based liquor retailer’s ambition to dominate alcohol, cannabis markets

Corporate giants, like Anheuser-Busch, may enter cannabis trade if they decide a profit can be made, prof says

Alcanna is looking to get into the cannabis business with the support of major cannabis producer Aurora (Radio-Canada)

The name change of Liquor Stores N.A., which owns the Liquor Depot chain, to Alcanna this week represents the company’s intent to expand into the Canadian cannabis market alongside Aurora Cannabis, the second-largest cannabis grower in Canada.

“They’re our business partner,” James Burns, vice-chair and CEO of Alcanna, told CBC News. “It gives us one of the top, most incredible-leading, fastest-growing cannabis producers in the world.”

Alcanna — a portmanteau of alcohol and cannabis — reflects the company’s vision of having two separate divisions of alcohol and cannabis, since legislation will likely bar the sale of the two in the same building.

Alcanna, the largest publicly traded alcohol retailer in North America, boasts a star-studded board of directors.

Chair Derek Burney is a former political strategist to Brian Mulroney’s government and a former ambassador to the United States.

Derek Burney, Canada’s former ambassador to the United States, is chair of Alcanna’s board of directors. (CBC Power & Politics)

Board member Karen Prentice, widow of former Alberta premier Jim Prentice, was an executive vice-president for Enmax and worked on the Alberta Securities Commission.

The decision to diversify into the cannabis business was a no-brainer for Burns.

He said in the U.S., where the company has stores in states that have legalized cannabis, they’ve seen liquor sales drop as much as 10 per cent.

“When a new product comes in that affects the product we sell, it made sense to us to be involved in the retail of that product as well,” Burns said. “Same customer, in some senses.”

‘A natural fit’: business prof

Kyle Murray, the vice-dean of the University of Alberta’s school of business, said he’d be surprised if liquor retailers didn’t invest in the cannabis market.

“It seems like such a natural fit,” Murray said. “Their ability to grow their current business is fairly limited, [so] they have to look for new opportunities to grow.”

Alcanna has 25 years of experience working with the Alberta Gaming, Liquor and Cannabis Commission and regulations around the sale of alcohol, which Murray said will give these companies a head start.

“I think what it is is just saying, ‘Hey look, we have this competency — we’re the leader in retailing alcohol, and this new business seems like it’s going to be a lot like alcohol so we’ll probably be pretty good at that as well.’ ”

Kyle Murray, of the University of Alberta’s school of business, says being the first industrialized country to legalize recreational marijuana will give Canada an advantage in the emerging international market. (Terry Reith/CBC News)

Murray said he’s not worried the partnership will smother competition, because the two companies are relatively small compared to some of the large retailers in Canada, like Canadian Tire.

What is more interesting, he said, is watching those large companies with experience in retail to see if they’re going to join the cannabis business.

“There are lots of companies out there that are good retailers — how many of them are going to want to get into the cannabis business? I think that’s a pretty short list,” he said.

Bigger companies with more capital have the ability to wait out the market and jump in if they think there’s money to be made.

A company like Anheuser-Busch, for example, could acquire a company like Aurora for about two or three per cent of their market cap, Murray said.

Aurora Cannabis is a significant player in Canada, but Murray says he’s waiting to see if larger Canadian companies want to jump into the industry. (Radio-Canada)

“There’s a lot of risk there [for big companies] — reputational risk and just unknowns in how big the market will be,” he said. “It’s not clear that they need to rush in.”

Nonetheless, the current deal is a major move locally and one that Burns said can put Alberta on the map for both alcohol and cannabis sales.

“With us and Aurora together, as you say, one plus one equals three sometimes,” Burns said. “We’re proud Albertans and we think from our base in Edmonton we can take on the world.”


No longer in the weeds: Alberta Olds college offering cannabis course

OLDS, Alta. — With the clock ticking down to legalization of recreational marijuana in Canada, demand has exploded in the cannabis industry for qualified workers who can ensure the product is ready to go to market.

So a central Alberta college is planning to offer a new cannabis production course starting in July.

Olds College will teach the horticultural skills needed to work in greenhouses, as well as to deal with the strict regulations that will be in place.

Talks about such a program have been going on for a number of years, says Debbie Thompson, vice-president academic at the agricultural college.

“We wanted to ensure that we were responding to a legal industry and because we’re known for horticultural programming … it seems like a very good fit and natural for people to approach Olds College,” Thompson said Thursday.

She understands why some people might raise an eyebrow over a course on pot production being offered at a college.

“I would imagine that upon first glance people will have all sorts of differing opinions or thoughts about what the courses would entail, but they’ll be quite specific to the horticultural industry and narrowing down into the specific part of the industry being cannabis.”

The course will run for 2 1/2 months and will include an online component before ending with two weeks of hands-on experience at a cannabis production facility.

Olds College is partnering with Sundial Growers in Airdrie, Alta., and Terra Life Sciences in Olds to provide the work experience.

The program includes an introduction to general horticulture, crop growth and facilities, cannabis legislation and cannabis production itself.

“We are responding to the need identified by industry and, right now, what they are looking for is their future employees to have that introduction to horticulture production overall,” Thompson said.

There’s already a waiting list to take the non-credit, certificate course.

Anil Jain, president and CEO of Terra Life Sciences, said the course is necessary “given the growing need for educated and trained employees in the medical cannabis sector.”

Sundial President Geoff Thompson said his company will be hiring an extra 700 workers over the next two years as demand continues to grow.

“We’ve already started hiring people here in Olds and we think we can get very, very horticulturally skilled people because of the background of this being a very strong farming and horticultural community,” he said.

“There’s a huge job creation across the country. My expectation is there’s going to be 5,000 to 10,000 cannabis jobs in the province by 2020 between the manufacturers and the retailers.”

Olds College has a second course planned for this fall for people interested in the retail side of the business.


Canadian Merger Aims to Create ‘World’s Largest Cannabis Company’

The rapid consolidation of Canada’s cannabis sector continued today when two of the nation’s largest licensed producers announced the biggest transaction in the country’s cannabis sector to date. Aurora Cannabis intends to buy all common shares of MedReleaf, merging the two companies into one. The companies said the deal, which is subject to shareholder approval, is worth C$3.2 billion.

The move left many industry analysts divided over the ramifications. Some are seeing hard times ahead for smaller cannabis producers, while others predict the market will be large enough to welcome companies of all sizes.

The merged Aurora/MedReleaf will be worth an estimated C$7 billion, surpassing the size of Canopy Growth, which is currently the largest Canadian licensed producer in terms of market value.

If the deal is approved, B.C.-based Aurora will have the capacity to produce 570,000 kg of cannabis per year through nine facilities in Canada and two in Europe.

At a news conference on Monday, Cam Battley, chief corporate officer at Aurora, said the company’s objective is “to become the world’s largest cannabis company.”

“This deal checks every box,” the company’s chief executive, Terry Booth, added. “We’re leaders in every box now, and we’re not looking back and we’re not going to stop here.”

Pressure on Smaller Producers

As Canada’s federal legalization of recreational cannabis draws near, consolidation is becoming a trend in the country’s cannabis industry—one that’s long been predicted by industry analysts and insiders.

Four months before striking this deal with Ontario-based MedReleaf, Aurora bought Saskatchewan-based CanniMed Therapeutics in a C$1.1 billion stock-and-cash deal.

In February, Ontario-based Aphria acquired B.C.-based Broken Coast Cannabis in a stock-and-cash transaction that was valued at more than C$200 million.

Ontario-based Canopy today announced that it has a non-binding agreement to buy the remaining 33% stake of BC Tweed Joint Venture in return for up to C$374 million worth of its shares.

What’s this all mean? Jason Zandberg, an analyst covering the cannabis space for PI Financial, told Leafly that consolidation could squeeze out many smaller cannabis producers. “As major producers become bigger it puts pressure on the others,” he said. “It’s difficult for smaller producers to compete with that much firepower.”

According to Canaccord Genuity, a financial services firm, Aurora’s 570,000 kg output could represent nearly the total amount required by Canada’s combined recreational and medical markets by 2021.

CIBC analysts recently estimated that the total market will require about 800,000 kilograms by next year.

“Aurora would effectively soak up much of the demand” for Canadian cannabis, said Zandberg, even though the company would ship some of its product abroad.

Allan Rewak, executive director of Cannabis Canada, an industry association, disagrees. “I think there is plenty of room in the market for players of all sizes,” he told Leafly.

More Mergers Expected

Zandberg predicts that the trend of consolidation will continue. “We will see similar transactions in the future,” he said, referring to the new deal between Aurora and MedReleaf. “You will see lot of activity among medium-sized players.”

Regardless of how it might affect smaller players, consolidation in the cannabis sector is good for consumers, Zandberg added. “In general, when you get some sophisticated players in a sector, it is good for consumers because you have coordinated production and sales schedules.”

He dismisses the notion that less competition in the cannabis industry could lead to price hikes on the retail side. To get their product to market, he noted, producers will have to sell to central buyers in the provinces rather than to consumers directly, so prices will have to be reasonable.

In Rewak’s view, consolidation is a great sign for the industry. “It shows the continued normalization of [the] sector,” he said, “and incredible interest in it by financial markets, consumers and others.”


Aurora Cannabis buys CanniMed in Canada’s biggest deal

Cremona, Alta.-based Aurora agrees to pay $43 a share in stock, cash for each Saskatoon-based CanniMed share.

The deal means CanniMed will abandon its plans to acquire Newstrike Resources Ltd. (Jim Mone/Associated Press)

Two of Canada’s major marijuana producers have agreed to the biggest deal in the country’s booming pot sector after months of negotiations that started with a hostile takeover bid.

Cremona, Alta.-based Aurora Cannabis will buy rival Saskatoon-based producer CanniMed Therapeutics Inc. for $1.1 billion in what the two companies are describing as a “friendly” deal.

“We are very pleased to have come to terms with CanniMed on this powerful strategic combination that will establish a best-in-class cannabis company with operations across Canada and around the world,” said Terry Booth, chief executive officer of Aurora.

The deal comes months after Aurora made its first attempt to takeover CanniMed in mid-November with a bid that valued the company’s shares for up to $24.

CanniMed argued that the offer was too low, considering the volatile jump in stock market valuations for marijuana producers in recent months.

The companies started a public row with executives from both sides exchanging harsh words.

Earlier this month, CanniMed even filed a lawsuit against Aurora, claiming it had conspired to injure the company’s economic interests.

On Wednesday, the companies said the new deal would amount to about $43 per share based on an implied Aurora share price of $12.65 and a 3.40 exchange ratio.

The final value of the deal, however, could fluctuate before it closes due to the volatility of marijuana stocks.

CanniMed shares closed up nearly 12 per cent on the Toronto Stock Exchange Wednesday on news of the takeover.

More deals ahead

The deal is the biggest of its kind in the Canadian industry since Canopy Growth, the country’s largest marijuana producer, bought Mettrium Health for $430 million in 2016.

With the CanniMed acquisition, Aurora will become one of the country’s biggest marijuana producers by market capitalization.

Russell Stanley, analyst at Echelon Wealth Partners, said the sector will definitely see more consolidation this year as Canada legalizes the recreational use of marijuana.

Canada is set to become the first G7 country to allow recreational use of marijuana by the summer.

“I do expect more transactions to follow. I think it’s a question of when and not if, and who the dance partners will be,” Stanley said.

“The largest cannabis companies in the space trade at higher multiples than the smaller names, and that means they have strong acquisition currency to use for transactions like this,” he added.

The deal means CanniMed will have to abandon plans to buy Newstrike Resources, which will cost the producer a $9.5 million break free as Newstrike shareholders had already agreed to the takeover.

Boosting capacity

Looking ahead, Stanley said we could see more mergers and acquisitions in the sector that would not just be about “buying scale.”

“We could transactions that could give companies better geographic exposure or strength on different product development,” he said. “I don’t think they’ll all just be about size.”

Vahan Ajamian, an analyst at Beacon Securities, agreed with that sentiment, saying it was too late now for marijuana producers to grow their businesses organically in time to meet the demand from this summer.

“One way to get faster access to capacity is to make more acquisitions,” he said.

“We’ll probably see a lot more marriages where what province you’re in matters and what types of products you can offer matters, in addition to getting more brute quantity of what you can sell.”


Canadian cannabis producers set their sights on global domination

As medical marijuana is legalized around the world, Canadian producers are ready to export it

Tilray is exporting its product, but also building a new medical marijuana operation in Portugal. (Tilray)

Medical marijuana consumers in Prague rang in 2018 with a new Canadian import, Tilray Milled Cannabis, a high THC marijuana product grown on Vancouver Island.

The Czech Republic is just the latest nation to sell Canadian weed, joining Germany, Australia, New Zealand and a growing list of other nations which are turning to Canada as a safe and legal source for medical grade cannabis.

In recent months, more than a dozen countries have legalized medical marijuana. New laws are pending in at least a dozen more as national regulators and even the World Health Organization recognize legitimate medical uses for a drug which had long been banned under international treaties.

The moves have sparked an unprecedented demand for legally grown, high quality marijuana, as well as the oil which is extracted from it. Seven Canadian producers have been granted licences to export the crop. By the end of March they will have sent 528 kilograms of dried cannabis flower and 911 litres of oil overseas. That may well be just an initial trickle, as the floodgates open on an international medical cannabis market.

“I’ve never experienced anything like this,” says Ranjeev Dhillon, a corporate lawyer and partner at the law firm Bennett Jones. Most of his practice now centres on the cannabis export business.
Brendan Kennedy of Tilray says Canada is the source of the safest product when regulators in other countries go looking for medical marijuana. (Evan Mitsui/CBC)

“I think it means that we’ll be a global player,” he says, stressing this is a positive development for the Canadian economy. “This could be our opportunity to be viewed the same as we are in mining or hockey. We’ll be world class and be world leaders and I think that will stay to be the case for a very, very long time.”

Medical research forcing an end to prohibition

For decades an international ban on the production and use of cannabis kept to a minimum any legitimate research into potential medical uses. Prohibition ensured that marijuana cultivation stayed in the hands of illegal growers, and distribution was limited to the criminal underground.

But many users saw value in cannabis as treatment for a variety of conditions, ranging from controlling epileptic seizures to pain relief to stress control.

Israeli scientist Raphael Mechoulam began limited research on the drug in the early 1960s, which led to the discovery of the human endocannabinoid system. By the mid-1990s, scientists determined that cannabinoid receptors play a vital role in the function of the human body. For the first time synthetic cannabinoid derivatives were approved for medical use, primarily for the treatment of nausea and wasting syndrome.

At the same time anecdotal evidence was building to suggest cannabis could have other, more widespread medical uses. Patients who claimed benefits from cannabis went to court seeking the right to use marijuana as medicine without facing the risk of criminal prosecution.

In 2000 the Ontario Court of Appeal ruled that Terry Parker, a man with severe epilepsy, should have the right to use marijuana to moderate his severe seizures.

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One year later, Canada’s Medical Marijuana Access Program was introduced, allowing patients who had obtained a doctor’s consent to grow their own marijuana under a special permit. By 2013 more than 28,000 Canadians had been granted personal use production licences, leading to a flood of unregulated home-grow operations, and along with it a risk of fires, mould contamination in homes, and legally grown weed being diverted to the black market.

In an effort to crack down on the home grow-ops, the Harper Conservative government introduced new legislation that established legal grow operations which could provide medical marijuana through a mail order service. The Marijuana for Medical Purposes regulations,enacted in 2014, set Canada apart as the first nation to establish a regulated commercial cannabis cultivation industry.

Canadian pot finds a role in the world market

As Canada moves towards legal recreational weed in July, the number of licensed growers has swelled to 84, production is skyrocketing, and research into new growing techniques and improved strains is increasing exponentially. This has placed Canada in a unique role as other nations scramble to find safe and legal supplies of medical cannabis.
Cam Battley, executive vice president of Aurora, shows off Aurora Vie’s Pointe-Claire, Que., facility. Canadian producers have expertise in greenhouse technology, extraction methods, strains and genetics. (CBC)

“When regulators in other countries are looking for a product, Canada is really the source of the safest product. It’s the safest bet,” explains Brendan Kennedy, the CEO of Nanaimo-based Tilray, a pioneer in cannabis exports.

Tilray is among several Canadian producers already exporting to Germany, which established a widespread marijuana access program last spring. Not only is cannabis stocked in German pharmacies, the government pays for the drug under its government health insurance program.

Until it can establish a domestic industry, Germany is importing from Canada. Along with Tilray, Canadian producers Aurora, Cronos and Canopy Growth are tapping the German market. Aurora has even gone a step further, purchasing pharmaceutical supplier Pedanios, with an eye to expanding its distribution in the European market.

Following Germany, several other European countries, including Greece, Italy, Poland and the Czech Republic, passed new medical cannabis laws. Several others are following. A report published in November places the value of the European cannabis market at $84 billion Cdn a year.

That’s led Tilray to begin construction of a $30-million production facility in Portugal to help supply the growing market.

Beyond exports, Canada has expertise

“Part of the reason we decided to invest in a cultivation facility in Portugal was that we also saw a massive increase in demand for medical cannabis product in the EU,” explains Kennedy, who sees a bright future well beyond Canadian exports.

Canadian expertise in growing and greenhouse technology, extraction methods, strains and genetics, along with plain old business know-how, are also in demand. In addition to exports, Canada’s cannabis companies are also teaming up with local partners to build facilities in Germany, Denmark and Israel.

Australia is seen as another prize for Canadian producers. When it announced last February that it would allow importation, Canadian producers Aurora, CannTrust, Canopy, MedReleaf and Tilray swooped in, not only with bags of weed and vials of oil, but with partnerships to build facilities there.

Peru and Mexico have also passed legislation to legalize medical cannabis, and Canadian companies are promising further announcements soon. Overall, they say, the world market could be worth around $200 billion.

What it all means

The rapid legalization of medical cannabis has spurred new research into potential treatments using the drug. In Israel, where the medical research began, there are about 120 trials underway using components of the marijuana plant.
Neil Closner, CEO of Ontario-based MedReleaf, believes Canadian medical marijuana producers have the potential to become global giants. (Canadian Press)

As cures and treatments are discovered and proven, the role of cannabis is sure to expand, creating even greater potential beyond flowers and oil. CEO of Markham-based MedReleaf Neil Closner believes at least two or three of Canada’s producers will become global giants.

“I think overall who wins is Canada. I think we’ve got a leg up on the rest of the world, which is very exciting at a national level for us. I’d like to think that MedReleaf is strongly positioned to be one of the few handfuls of global winners.”

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And while California is the latest U.S. state to legalize marijuana, American producers are shut out of the global market because of the federal prohibition on the drug.

That leaves Canada room to pursue the international market and all the potential riches that go with it.