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New Weed Frontiers

After US states legalize pot, Canadian companies make their next moves

This Canadian company is looking to California after pot legalization vote

At least one Canadian pot company hopes to strike it rich in the new frontiers of recreational pot sales opened up by last week’s U.S. elections.

Maple Leaf Green World’s foray into the U.S. started about a year ago in anticipation of last week’s state ballot measures endorsing legal recreational pot in California, Nevada, Massachusetts, and Maine.

“We are the only [publicly-traded] company that operates on both sides of the border,” Raymond Lai, the company’s president and CEO, told VICE News.

The Alberta-based company has set up shop in Southern California, where it bought a 20-acre piece of land and built a greenhouse growing facility, Lai said. A non-profit medicinal pot cooperative pays Maple Leaf a consulting fee for its pot-growing expertise, on top of leasing the facility and its equipment.

The first two crops will be harvested and shipped to the cooperative’s members by December, and Lai expects the current greenhouse to generate $1 million to 1.5 million of revenue per year.

After the four ballot initiatives passed last week, Lai said the company will expand the facility tenfold and buy an expansion property in San Diego County. In Nevada, the company has just secured a medical pot cultivation license, which Lai said will put them near the front of the line for a recreational pot license.

“We expect [the US] will provide our main source of revenue,” Lai said.

The pot business is booming in the US, with sales projected to reach $22 billion by 2020. California alone could quickly become the largest commercial pot market in the world.

But some Canadian pot producers have expressed caution entering the massive markets emerging south of the border.

“The companies that really fail are the ones that try to do a little too much of everything,” Denis Arsenault, president of OrganiGram, told VICE News. “You need to temper the excitement of the potential of the market and make sure you service your customers within Canada and deliver on execution.”

The New Brunswick-based medical pot company expects to expand into recreational marijuana when the Liberal government introduces its legalization framework in the spring.

Right now, licensed marijuana companies have the capacity to produce only a fraction of the 655 metric tonnes of pot the Parliamentary Budget Office forecasts it will take to supply the Canadian market in the first year of legalization.

“Scaling up to meet the demand for our product in Canada is a full-time job,” Arsenault said.

And besides, operating in Canada has major advantages as long as marijuana remains an illegal drug under US federal laws, he said.

While states continue to legalize pot, the U.S. government still classifies marijuana as an illegal drug alongside LSD and Heroin. American pot companies can’t export their products across state or national borders and foreign producers can’t ship it in, creating an effective firewall around the budding US industry.

US producers have struggled to access banking, payment processing services and institutional investors.

And with Republicans now controlling the House, Senate and the White House, it could be years before a change to federal laws.

The longer it takes for that to happen, the bigger the advantage for Canadian companies.

“Canadians, with the way the laws and regulations are set up here, are really ahead of the rest of the world,” Jordan Sinclair, a spokesperson for Tweed Inc., Canada’s largest licensed pot producer, told VICE News.

Because of the strong regulations and clear legalization framework in Canada, companies are free to scale production, attract investors, and export to emerging markets overseas without having to worry about American competition, Sinclair said.

Tweed’s products are now sold at pharmacies across Germany, with expansion planned in Brazil and a licensing agreement bringing its technology and expertise to Australia.

While major US stock exchanges only list a few pharmaceutical companies selling niche cannabis-based epilepsy drugs and pain pills, Tweed’s parent company, Canopy Growth, is listed on the main Toronto stock exchange,

Last week, the company’s stock price pushed its valuation over $1 billion, believed to be the first company of its kind in the world to be priced so high.

Cover: Photo by Anthony Tuccitto

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