May 23rd 2018 - Social Affairs Committee with Various Witnesses
Senator Poirier: Thank you, gentlemen, for all being here. I have a couple of questions.
My first question is for Dr. Lake. In an article that I saw in the Financial Post, it stated that you will be selling product at an average of $5.40 a gram to the province of Quebec, and according to StatsCan, the price in Quebec for the month of March averaged $5.93 a gram. The margin for the province to compete with the illicit market is very thin at this point. In context with Bill C-45, where the government aims to eliminate the illicit market through legalization, would you agree that it is part of your social responsibility to help the government offer a price where there would be more wiggle room than 50 cents?
Dr. Lake: First, thank you for the question. That $5.40 was an average over our entire product line. That includes much lower-priced product and then products that are in the higher end. For instance, our sublingual CBD spray is about $80 for a 15-millilitre bottle. That would be at the higher end. That $5.40 is a bit deceptive in that it includes the higher-end products as well. In terms of the flower product and some of the lower-end products, those would compete very well with the black market.
But I think you bring up a very good point. As Allan stated, this is a process, not the end of the way we are going to go, the evolution. We, as producers, will have to become more and more efficient in the way we produce our product to ensure that the price is able to compete with the black markets. There’s no question that, if we do all of this and still have a thriving black market, it’s not going to work. Washington State saw that happen because they had, I think, a 37 per cent accumulative tax on products, so the black market was thriving a year later. They adjusted that, the price has come down, and the black market has been reduced considerably. So I think all of us, governments in terms of taxes and we as producers, have to make sure we have our eye on the ball and get the prices down so that we can compete.
Senator Poirier: I’ll have another one for you, if I have time when I come back, but I need to go to our mayor with my next question.
According to Dr. Paula Stewart, the rate of cannabis use in Smiths Falls has already been among the province’s highest, showing that half of the town’s youth between the age of 15 and 25 have used cannabis in the last year. Her main message had been that it is a drug, not a leaf. On the other hand, your community has welcomed the industry — and you’ve been very clear about that — with open arms because of the economic boost that it has brought to your community. Yesterday, we heard from a witness in Colorado that, since the legalization, adolescent perception of the risk of marijuana has declined dramatically. Does the potential economic windfall from the cannabis outweigh the risks to public health for cannabis legislation? How does your community approach the normalization of the cannabis, especially for the most vulnerable at risk, which is our youth?
Mr. Pankow: Smiths Falls has always been a bit of a tough town. We have known that, and the figures Dr. Paula Stewart illustrated are, I’m sure, very accurate. Cannabis use, again, involves many of our youth, and not just our youth, some of our adults. I spoke with Lanark County Mental Health after we went through this economic downturn. One thing that became very clear is that, as job losses went up and poverty grew in our community, so did the rates of dependence and addictions. If people are discouraged and depressed and going through some really tough times, it is not uncommon to see them turn to alcohol or drugs. If you have adults who are using, you’ve very likely to see their children using the products.
I think an opportunity for a controlled substance and elimination from the black market puts further restrictions on it. I don’t think we will ever stop youth from using it or trying to get their hands on it, but having it in an environment where it’s harder to reach, harder to get, would make more sense. Canopy has indicated — certainly, I’m sure all producers do — education, trying to make sure that the youth are protected in every manner possible.
It has been a concern. As our community rises and the economy of our community improves, I think we will see some of those challenges of mental health and addictions decline from the peak that we had a few years ago.
Senator Poirier: Is substance-abuse treatment readily available in Smiths Falls, and do you believe that the municipalities have adequate resources to manage the cases of normalization of cannabis among our youth that may rise?
Mr. Pankow: When it comes to treatment, I think it is a problem across the province of Ontario. I don’t think there are enough resources available. My understanding is that the waiting times are enormous. When an addict needs help, they don’t need to wait six months to get there. So that’s a clear problem. I have a friend who has a private-run facility on the St. Lawrence who has left the door open, on an ongoing basis, for anybody from Smiths Falls who needs help. He is willing to help. He is from the community originally. I’m sorry; your second question?
Senator Poirier: Do you feel that municipalities have the resources necessary to deal with the normalization of cannabis or the perception of normalization of cannabis among our youth? Do the municipalities have the resources to actually deal with it?
Mr. Pankow: I don’t think we do at this stage. A lot of education is going to be required, and our police service has been involved in managing this for a long time. It’s going to change their roles and responsibilities, but I think we still have to get our head around it.
I think it goes back to my previous answer. If cannabis is restricted in how it is available and we can eliminate the black market, we have a better opportunity to protect our youth.
Senator Poirier: I am still along the lines of my two colleagues. That is where my questioning was going, so I will continue to expand on that.
A few weeks ago when we had the Minister of Health from New Brunswick, Minister Benoît Bourque here, I questioned him about the amount of money they were investing in education, specifically directed toward our youth, schools and training parents so they know the risk of marijuana for people under age 25. He mentioned at the time that they were going to start investment but they were just starting it in April. I thought he told me, if I am not mistaken, that industry would also help out financially with the education, which is what we are talking about.
When we are talking about industry, are we talking about the industry that is growing the product, which is what your companies are doing, or are we talking about industry that will be selling the product, which is in the stores? If it is the industry on the growing product, when you get a licence to be in a province like New Brunswick or wherever you are working, is there any negotiation at that point to get the licence that is made between the province to invest a certain percentage of your profits into education specifically for the youth and the risk for those under age 25?
Dr. Lake: I can speak to the situation in Quebec where their legislation, Bill 157, explicitly sets up the cannabis research and education fund, which will be a minimum of $25 million a year.
Also, as you know, the SAQ has Éduc’alcool, which is a tolling process on alcohol producers that goes into an education program. We have yet to hear if a similar program will be developed for cannabis, but it would not surprise me if that happened, in which case all of the producers will help to pay for that program.
I want to remind you that recreational cannabis will be subject to an excise tax and to sales taxes that will generate significant resources for all levels of government to deal with this issue. I think we are all in this together. It is a shared responsibility between industry and governments.
In Colorado, in the last two years, over $230 million went toward education either constructing schools or education programs. In fact, the revenue from taxes from cannabis in Colorado now exceeds that from alcohol. So it does fund a lot of important social programs. I suspect that we will find, when the market matures, that will happen in Canada after a number of years.
Mr. Linton: I don’t have the precise details for each province, but each of them has included in the wholesale transfer price to some extent a contemplated single digit portion, which would be at their discretion, to my knowledge.
Senator Poirier: And that will only come into play once the legislation becomes legal?
Mr. Linton: Right.
Senator Poirier: Thank you.
Senator Poirier: Thank you all for being here.
My question is for Mr. Stewart. I want to quote a passage from a news release your company published last January:
Hiku is focused on handcrafted cannabis production, immersive retail experiences, and building a portfolio of iconic, engaging cannabis lifestyle brands.
You also mentioned a while ago, and I saw on your website, that you talked about the product Van der Pop. It describes itself as “one of North America’s most recognized female-focused cannabis brands” with online content on your website. I also saw that it said it was designed to resemble a sleek women’s magazine. I found articles that suggested that breastfeeding while using cannabis is safe and another about how cannabis can boost your beauty routine. Another suggested that cannabis can cure a hangover.
Mr. Stewart, how does your focus of an engaging cannabis lifestyle brand fall within the purview of what is permitted in Bill C-45, specifically for the lifestyle advertising? Also, are you concerned that this adult-oriented content on the Internet could be seen by young persons?
Mr. Stewart: Thank you very much for your question. First, the press release and those passages are written and publicized outside of a legal, recreational cannabis regime, which we are here to discuss. Once we get to a point where legalization has taken place and regulations are passed, we will live by both the spirit and letter of all of those laws and policies created by the government. I think that goes without saying.
Van der Pop is a female-centric cannabis brand started by a 40-year-old mother of two who was a cannabis consumer. She felt that nothing in the cannabis industry spoke to her as a consumer. She sought an educational platform to educate other women in situations similar to hers on how to consume cannabis in a responsible way while still being a good parent. It comes out of the U.S., and there is a lot of concern in the U.S. about admitting illegal activities when it comes to child custody cases and the like. What Van der Pop seeks to produce is a safe space for women to learn a bit more about cannabis and how it can be included in their life.
Sitting here as a 40-something-year-old White male, I am not the expert on the content of the female side of the space. That would be disingenuous to me as to whether it is effective, but by every social media metric, it is a responsible way to communicate about cannabis.
To your question about whether children could see this, I suppose children could see anything from pornography to violence to extreme cases of cannabis, alcohol and cigarette consumption on the Internet. If you were to look at our website and our properties, you would see that it is not marketed to children whatsoever. It is marketed toward women in a responsible and educational platform.
Senator Poirier: Do you think it is appropriate for a licenced cannabis producer to publish content that makes unproven health claims about cannabis? Either of you can answer.
Mr. Stewart: I will be quick, because I notice the clock as well. We should put an emphasis around your question on health claims. There is a difference between health claims and effects of cannabis on the human body, as well as effects you can expect from consumption.
I don’t think any company would be supportive of making unfounded health claims. That is simply not the Canadian way. However, there is a vast body of evidence supported by numerous consumers, as well as other institutions, on the effects of different types of cannabis on the body. Whether that is as simple as what you can expect from a sativa or indica, what you can expect in terms of time of onset between edibles versus combustibles, there is a lot of information out there to talk about what to expect in terms of effects without making health claims.
One of the failures of Bill C-45 is that it will not allow us to discuss effects with potential consumers. When you couple that with plain packaging, we really have a situation where were are handcuffing our legal regime to not be able to discuss effects and not be able to show differences between brands and products. That hurts us to compete with the black market. Some discussion about effects should be allowed, stopping short of unproven health claims.
Ms. Mondin: I wanted to quickly mentioned that on the branding side of it, if we look at — and I hate making the comparisons to alcohol — but we are looking at people who will be accessing this product through regulated retail outlets. First of all, we will be stopping youth from going in. So on the concern about the branding, labelling and package, parental guardianship will be important, just like prescription drugs with them telling you where to keep it, store it and throw it away. The same should be done with cannabis.
But we enter this with such fear because of the unknowns around this product. Coming from B.C., it has been around for decades, and a lot of this fear has dissipated.
As a woman, too, when you go into the store to purchase something, you tend to gravitate toward a brand. You do so because you know that when you open, say, that bottle of wine, it will give you a consistent product each time, so you venture to that brand. How that product came to be, whether that grower cultivates his own product or knows how to get excellent product to create that brand, it doesn’t matter to the consumer. They just want consistency; they open it and know it is good.
We can have that with cannabis. We can still have branding that is not attractive to children but is still something you recognize. I like J. Lohr, and I know I can buy it and it will give me the wine that I expect each and every time. I know the brand and the consistency. The same can be said with cannabis. I do not know if having overly restrictive branding serves the purpose to stop that use, because people will be going to these retail outlets to consume. They need to know what they are getting, the compounds of that product and how it might affect them when they take it.
Again, it is more than just THC. There are terpene profiles, other cannabinoids. Growing will change. It will not stay indoors in the bunker style as it has been in the past. It has been done that way because it has been illegal. There has been a rush to cultivate a plant to the highest THC content possible, but I think as we move forward we will start looking at robust genetics, starting at the nursery level where they are now cultivating plants with a multitude of cannabinoids.
If you think about the perfume industry, you start with botanicals and you start by pulling all the different compounds, blend them together and formulate. You can reformulate for medicinal purposes or for the intoxicating effects that you want. That will be driven by that brand and what they are able to create and develop under that brand.