The National Post spoke to people involved in the black market — from growers and dispensaries to a pot lounge owner — to find out what they plan to do on Oct. 17

The federal government hopes that cannabis legalization will eliminate the black market, but not everyone wants to get out of the illegal pot business. The National Post spoke to people involved in the black market — from growers and dispensaries to a pot lounge owner — to find out what they plan to do when recreational marijuana becomes legal on Oct. 17.

A tale of two growers: one going legal, one not so sure

On the laid-back and picturesque Gulf Islands in B.C., cannabis has become an entrenched part of the local economy, alongside the thriving arts, organic farming and yoga industries.

For the past 13 years, Sarah (the Post agreed not to use her real name) has carved out a living as a small-scale grower of craft cannabis products. She relishes the close relationship she’s formed with local customers, who include everyone from cancer patients to recreational users and dispensaries.

“It’s kind of like how you hope business could be,” she says. “It feels like I’m providing a helpful service that I really believe in.”

But as legalization looms, Sarah is uncertain whether she’ll make the transition into the regulated market. She’s even contemplating getting out of the industry altogether.

“The stress level is almost making it not worth it for me anymore,” she says. “I’ve actually thought about – sorry I might get emotional here – I’ve thought about saying f— it and trying to do something else. But I’ve invested so much time into it and it’s so important to my family.”

At least a quarter of her current business is direct deliveries to people in her community. Under provincial rules, all her products would have to be shipped to B.C.’s Liquor Distribution Branch, meaning no opportunity for farm-to-customer relationships or online orders.

“I can no longer provide my community with the services I’ve been providing them with,” she says, adding that she’s also worried about restrictions on what she can actually sell. “I can’t make tinctures and edibles that are helping people.”

The federal government says it will open up licence applications for so-called “micro-cultivators” like Sarah after legalization comes into effect. After reviewing guidelines previously released by the government, Sarah says she’s not sure if she can afford to deal with all the red tape.

She’s already in debt after having to relocate her 300 square-foot indoor garden, which is located inside two shipping containers.

There are lots of sharks in the water

Sarah says it’s as if the small producers are “last in line” because the larger producers are already through the gate. “It’s sad because we’re the backbone of how this started. It feels like we’re being held back until everyone gets through.”

Doris (also an alias), Sarah’s friend who’s been growing on the Gulf Islands for two decades, says she intends to work within the regulatory regime, but understands the hesitation from growers like Sarah.

The cost for some growers to upgrade their facilities so they’ll be in compliance with security, quality assurance and record-keeping regulations is just too onerous, she says.

Doris currently grows cannabis out of a 1,200 square-foot wooden building next to her home. She says it makes more financial sense for her to start from scratch and she intends to spend $100,000 to $120,000 to build a “big glorious greenhouse.”

She’s confident she’s got the savings to pull it off, but knows others who are “concerned about throwing all their eggs in a basket that will leave them penniless.”

On top of that, she alleges there are consulting firms charging tens of thousands of dollars that are taking advantage of mom-and-pop growers, telling them their licence applications won’t succeed without their help.

“There are lots of sharks in the water,” Doris says.

Doug Quan, National Post

The pot lounge owner hoping to stay open

After legalization, Abi Roach isn’t sure her cannabis lounge will be allowed to operate as it has for more than 16 years. In 2003, she turned her head shop in Toronto’s Kensington Market into a place where patrons could vape indoors and smoke pot on the patio. She was inspired by a cannabis lounge in Vancouver and a trip to Jamaica, where the lax approach to public cannabis consumption made her think: “We need this.”

In nearly two decades running the Hotbox, Roach says she’s watched a major evolution in the cannabis supply chain – from dealers who famously populated the park near her store, to dispensaries on almost every street in Toronto. But, she said, the dispensaries and the dealers still have a sort of symbiotic relationship. When the dispensaries boomed roughly three years ago, the dealers disappeared from the park; but after Project Claudia, a series of police raids carried out on dispensaries around the city in May 2016, Roach said the dealers reappeared, with one returning to her store looking for dime bags.

Since 2014, Roach has been pushing Ontario legislators for looser public consumption regulations, through her organization, the Cannabis Friendly Business Association. And while Ontario’s new Cannabis regime will confine pot users to private residences, Roach is looking to a pending update to the Smoke Free Ontario Act, hoping it will provide an exemption for cannabis lounges.

Roach has plans. She is developing a Hotbox brand of cannabis. She will apply for a private retail licence. And she’s opening at least one other location, with a small “experiential space” that she says will operate as a mini-lounge. But, she says, a ban on lounges will just mean changing those plans.

“The lounge aspect isn’t the number one thing that pays the bills. But it is important to me on a social level,” she says. The Hotbox operates mainly as a retail store, though it doesn’t currently sell cannabis. The bring-your-own-pot space at the back only generates $5 per person and whatever else they spend on coffee and snacks.

“We’re ready to change our business model. We don’t want to,” she says. “Whatever they throw at me, I’ll figure it out. I’ll survive legalization. I didn’t fight for legalization to end up closing my doors.”

Jake Edmiston, National Post

The boutique dispensary that is going legal — reluctantly

On a recent weekday morning in Vancouver’s Kitsilano neighbourhood, the Village Bloomery — a chic marijuana dispensary bathed in natural light — is already buzzing with customers minutes after opening.

One young man seeking something for his anxiety walks past the topical creams and edibles toward the counter in the back, where dried flower strains are stored in opaque jars on wall-mounted shelves. A staff member recommends a product that she describes as “uplifting” and “happy.”

As he makes the purchase, he inquires about the store’s plans as legalization nears. The application to the province for a private retail licence is in, she tells him. Now, all they can do is hope for the best.

In 2015, Jeremy Jacobs, a former engineer, co-founded the dispensary along with his wife, Andrea Dobbs — spurred on, he says, by a desire for “progressive social change.”

There was never any doubt, he says, that they would transition from the grey market into the legal space.

“Civil disobedience has been a very effective tool to spread awareness and shine a lens on all the benefits cannabis has to offer,” he says. “Personally I don’t feel it’s the way to make future gains, but some people do. And if they do, I wish them all the best, but I’m not going to go that way.”

That’s not to say the move doesn’t come without some trepidation. Before Oct. 17, the day cannabis becomes legal, Jacobs will have to shut down his dispensary and wait — for how long, he doesn’t know — for the province to approve his licence application.

“It’s a real powerless situation,” he says.

If approved, the next big unknown is whether he will be able to stock his shelves with the diversity of products he currently enjoys. Under B.C. regulations, private retailers will only be able to sell cannabis purchased from B.C.’s Liquor Distribution Branch.

In the near term, that means his supply will be limited to products made by the 31 large federally licensed producers the province has agreements with — not the artisanal or “craft” micro-cultivators that he has relied on from Vancouver Island to the Kootenays. (The federal government says it will open up licensing to micro-cultivators after legalization.)

Furthermore, products will be restricted to dried flowers and cannabis oils, and the potency of those oils cannot exceed 30 milligrams of THC per millilitre. For Jacobs, that means more than 50 per cent of his current inventory will be off-limits post-legalization, including books, accessories and pain ointments.

“That’s a real unfortunate thing,” he says. “It’s an unsteady future.”

Doug Quan, National Post

Could a co-op model save the mom-and-pop growers?

Recognizing that mom-and-pop growers may face costly infrastructure upgrades and challenges getting space on the shelves next to larger producers, pot entrepreneurs in B.C.’s Kootenay region are asking the government to consider a model that would allow them to go in as a collective.

“There’s a lot of uneasiness and uncertainty and people not knowing whether they should jump on board or stay (underground),” says Todd Veri, president of the fledgling Kootenay Outdoor Producer Co-op.

Under the co-op model, cannabis would be grown on a few dozen outdoor farms of varying sizes (leased and owned) throughout the region. The co-op would handle the paperwork for licensing most or all of the farms. Plants would be sent to a central processing facility operated by the co-op for harvesting, trimming, drying and packaging. Profits would be shared among farmers and workers.

B.C.’s securities regulator allows co-ops to issue investment shares to up to 150 members, who can each invest up to $5,000 (potentially yielding $750,000). Veri says he plans to incorporate soon with about 140 founding members.

“This is real, we’ve got the lawyers, accountants… this is a real venture,” he says.

By spring next year, he hopes to raise a million dollars through investors and fundraising.

He says the co-op model is attractive because it puts small growers on a more equal footing with large producers because of the volume of output.

“Although (the government has) made it easy for anyone who wants to grow to grow, they haven’t made it easy to sell their product,” he says, using the analogy of small craft wineries that struggle for shelf space in liquor stores.

Organizing the co-op has not gone smoothly. Veri acknowledges the board of directors “imploded” earlier this year because of disagreements on their approach. Some dropped out while others were asked to leave.

But Mary Childs, a Vancouver lawyer specializing in co-op law who is advising Teri on the project, says, co-ops have been successful in other parts of the agricultural industry for years and are an attractive alternative to those worried about going into the regulated market alone.

“It’s a really good way for individuals and small businesses to pool their resources and share expertise and equipment without having to effectively sell out to a majority shareholder,” she says. “There’s a lot of membership control and accountability.”

Doug Quan, National Post

The budtender considering another line of work

Eartha Masek-Kelly works the counter at A+ Dispensary, behind a locked door in Toronto’s Kensington Market that only opens after you show a security guard an ID card.

Her profession – budtending – is more precarious now the Ontario government has publicly ordered dispensaries to close as legalization nears, leaving open the possibility that any business refusing to do so will be denied a licence when the market opens for private retailers in April. So it’s possible the owner Masek-Kelly works for could decide, at any point, that it would be best to shut down and hope to stay in the regulator’s good graces.

“It sucks,” Masek-Kelly says, “because it leaves me in super-duper limbo.”

There are also police raids in the neighbourhood – the prospect of which puts the staff at her dispensary on edge to the point that a police cruiser parked outside the Rasta Pasta restaurant across the street sends a panic through the shop.

In early September, two raids on their competitors up the street had Masek-Kelly and her colleagues certain they were next.

“Some people got really afraid one night and quit,” she says. “It’s still a scary thought.”

Masek-Kelly, a musician and student, stayed. It’s better, she believes, than the alternatives available to her.

“It was really hard for me to get a job this summer,” she says. “There’s actually just not that much. I was doing bartending and that was killing me and I wanted a day job.

“I’ve had so many creepy-a– managers in the restaurant industry – and everyone’s ripped on coke all the time. Everyone who works (at the dispensary) is a chill person.”

It’s beautiful. I do sometimes feel like a bigger part of something

If there was a raid at her shop, she’s confident her boss would guide her through the process, which she expects will end in her taking a peace bond, rather than a criminal conviction. “I’m just trying to make a living,” she says.

“I also just care about weed. I love weed. I feel like weed should be accessible. It helps me. I have been through some crazy traumatic experiences. I’ve always used weed as a way to chill out.

“It’s beautiful,” she says. “I do sometimes feel like a bigger part of something.”

Jake Edmiston, National Post

‘Risking our liberty’: The compassion club poised to stay underground

Uncertainty and fear.

Those are the prevailing emotions right now as Canada’s oldest medical cannabis dispensary — the B.C. Compassion Club Society in East Vancouver — gets ready to make a decision on whether to work within the new regulatory regime or stay underground, staff say.

Standing next to an electronic wall display and felt board featuring the dispensary’s array of products, administrator Marcel Vandebeek says ensuring an “uninterrupted flow of medicine to membership” and “consistency of product” are paramount, which is why directors of the non-profit society may be inclined to stay in the grey market.

“We’re potentially risking our liberty to provide services as is,” he says.

Unlike many dispensaries operating across Metro Vancouver, which have dropped requirements for medical notes in recent years, the compassion club still requires members to bring in a letter from a doctor confirming their medical condition.

Right now, members get access to exclusive strains from cultivators the society has relied on for years. If they were to switch to the regulatory regime, there’s no guarantee those relationships would continue, Vandebeek says, adding that there’s worry products from the large licensed producers just won’t be the same in terms of look, taste and effect.

In the first year of legalization, sales of edibles and topical creams will also be off-limits. And the government’s restrictions on potency are too restrictive for some patients, he says.

Another concern, if they go the legal route, is whether the products they order through the province’s Liquor Distribution Branch will arrive in a timely manner. Will the province’s government-run stores get first dibs?

There is, however, one big drawback to staying in the grey market that they can’t ignore: getting saddled with huge legal bills if the province’s law enforcers come down hard on them.

The province has indicated that it plans to form a team of cannabis enforcement officers to go after illegal retailers.

“There’s definite legal fears,” Vandebeek says. “We’d have to be picky over what battle to fight.”

If they were to come in and raid the store, “you can only imagine the amount of money that would cost for bail and lawyers.”

Doug Quan, National Post