JuicyLesson 234: Med-Pot and All Thought … The Business End of Legalized Weed …

Featured today is a short clip showing the production/consumption of a couple of doses of life-saving weed oil which I inject slowly onto a sugar cube and then I eat it. You can hear me going “Crunch. Crunch. Crunch.”

Please ensure that you pull the plunger back quickly after infusing the weed oil onto the above-mentioned sugar cube.

The pot-oil is a life-saver I’ll tell you, and I don’t mind saying that I would be whittling down to nothing without its appetite nurturing qualities. I knew that Scleroderma could play havoc with our digestive systems for physical reasons as well as for those more psychological.

For one thing, Scleroderma – literally thick skin – causes the esophagus to tighten which (a) makes swallowing difficult at all times (not at all times actually, but on more than a few occasions), and (b) which, in addition, has contributed to the development of a lower esophogal ulcer, caused by what Scleroderma is doing to my skin, my body and its organs.

I ended up eating like a real pig yesterday knocking off at least as much food and drink as I had consumed over the previous three days at least.

Amazing! Must have gained at least two, and probably three, pounds.

The rest of today’s lesson presents a reprint of an article about grass which has been extracted from the Business Section of Saturday’s Gazette.

When Cannabis Goes Corporate
By Ian Austen, NY Times
Courtesy: The Gazette, Saturday, 07 June, 2014

Hershey stopped producing chocolate in Smiths Falls, Ontario, six years ago. The work went to Mexico, but the factory remains, along with reminders of the glory days: A sign that once directed school buses delivering children for tours. A fading, theme-park-style entrance that marks what used to be the big attraction — a “Chocolate Shoppe” that sold about $4 million of broken candy and bulk bars a year.

The once ever-present sweet smell of chocolate is gone, too. In the high-ceilinged warehouse, where stacks of Hershey’s bars and Reese’s Peanut Butter Cups once awaited shipment, the nose now picks up a different odor: the woody, herbal aroma of 50,000 marijuana plants.

Clinical, climate-controlled rooms with artificial sunlight house rows upon rows of plants at various stages of growth. In the “mother room,” horticulturalists use cuttings to start new plants. The “flowering rooms” are flooded with intense light 12 hours a day to nurture nearly grown plants in strains with vaguely aristocratic names like Argyle, Houndstooth and Twilling.

The new owner of this factory, at 1 Hershey Drive, is Tweed Marijuana. It is one of about 20 companies officially licensed to grow medical marijuana in Canada.

Marijuana plants grow under artificial sunlight in one of the many climate-controlled rooms at Tweed Marijuana in Smiths Falls, Ontario. Tweed is one of about 20 companies that are licensed to grow medical marijuana in Canada.

A court ordered the government to make marijuana available for medicinal purposes in 2000, but the first system for doing so created havoc. The government sold directly to approved consumers, but individuals were also permitted to grow for their own purposes or to turn over their growing to small operations. The free-for-all approach prompted a flood of complaints from police and local governments.

So the Canadian government decided to create an extensive, heavily regulated system for growing and selling marijuana. The new rules allow users with prescriptions to buy only from one of the approved, large-scale, profit-seeking producers like Tweed, a move intended to shut down the thousands of informal growing operations scattered across the country.

The requirements, which went into effect in April, are giving rise to what many are betting will be a lucrative new industry of legitimate producers. The government, which will collect taxes on the sales, estimates that the business could generate more than 3.1 billion Canadian dollars a year in sales within the next decade.

“It’s just so rare that you have an industry that’s growing but which has a huge established market,” said Chuck Rifici, Tweed’s chief executive. “A year ago, if you asked me if I’d be working while looking at thousands of pot plants, I would never have thought that would be the case.” Before deciding to focus on the marijuana business, he worked as a financial consultant to technology start-up companies in Ottawa, less than an hour’s drive to the north.

Tweed Marijuana moved into a former Hershey’s chocolate plant which closed six years ago.

Canada is not unique in transforming once-forbidden cannabis into a legal, or at least tolerated, proposition. The Netherlands has long allowed personal possession and cultivation of small quantities while allowing commercial sales through licensed cafes. Spain permits growing for personal use. Portugal has decriminalized possession of small quantities of all drugs.

In the United States, 20 states and the District of Columbia have legalized medical marijuana; both Washington State and Colorado have legalized recreational use with conditions.

But marijuana remains illegal under federal law, creating uncertainty; the federal government, for example, recently banned state-legal marijuana growers from using federal water on their crops.

Canada’s across-the-board law, by contrast, provides a cohesive set of regulations, laying the groundwork for a group of companies to set up operations.

When Hershey departed, hundreds of jobs were lost, a major blow to the town of Smiths Falls, which has a population of about 9,000.

“That was really important for us as investors,” said Brendan Kennedy, chief executive of Privateer Holdings, a marijuana private equity fund based in Seattle that started Tilray, one of Canada’s new legal growers. “People talk about the Colorado model; people talk about the Washington model. I think someday they’ll talk about the Canada model. By creating a tightly regulated federal system, by creating a federal license, by making it difficult to navigate in and capital-intensive, Canada has attracted a different kind of player into this industry.”

‘Why Not Smiths Falls?’

For most of its recent history, Smiths Falls (population 9,000) was defined by two things: the 19th-century canal that passes through its center and the chocolate-
scented air. The Hershey plant, which had about 800 employees at its peak, was a vital part of the economy. Until a recent repainting, the town’s water tower featured the Hershey’s logo and declared Smiths Falls “the Chocolate Capital of Ontario.”

“It was a huge tourist attraction for the town,” Dennis W. Staples, the town’s mayor, said of the Hershey’s factory, which lured about 400,000 visitors a year. “They were without a doubt an excellent corporate citizen.” The company sponsored sports teams and hockey tournaments and helped underwrite a “chocolate and railway” festival each summer.

Chuck Rifici, chief executive of Tweed, at a vault where marijuana is stored after it is harvested and while it is waiting to be packaged and shipped to clients.

The relationship seemed so fixed — the factory had been there for more than 40 years — that Mr. Staples was a bit puzzled in February 2007 when reporters called asking for comment on Hershey’s plan to leave town. No one had told Mr. Staples. “Probably not the best way to communicate to the mayor,” he said.

Hershey shut down its conveyor belts in 2008. But that was just the beginning of the bad news for Smiths Falls. A year later, the province of Ontario closed a nearby home for up to 2,650 developmentally disabled adults. Stanley Tools, an industrial company, left, as did two other American manufacturers. And a portion of the Canadian Pacific Railway’s old transcontinental line, for which Smiths Falls was a regional hub, was ripped up. In all, about 1,700 jobs vanished, according to Mr. Staples.

At first, Hershey promised to help the town find a new business to take over the plant. A flavored-water company expressed interest but couldn’t get the money together. In 2012, Hershey sold the plant to a holding company controlled by the Omnicom Group, the ad-agency giant. The new owner inquired about demolition permits last summer.

Around the same time, Mr. Rifici, who lives in Ottawa, showed up in Smiths Falls.

Mayor Dennis W. Staples and the town council were happy to have Tweed move in.
Mr. Staples and the town council were supportive. They believed that Tweed would help stem, even if just a little, the outflow of jobs and investment.

“If it’s going to happen somewhere in Canada, why not Smiths Falls?” Mr. Staples said. “It’s an opportunity to be part of an industry that’s sanctioned by the federal government,” he said. “It’s going to create 100 jobs.”

The mayor also had a personal reason. When his younger brother was dying from colon cancer 11 years ago, marijuana was the only way he found relief from his pain.

Despite the warm welcome, Tweed has had to overcome the stigma of a once-illicit business. Mr. Rifici said the factory owner wouldn’t lease the plant to a start-up focused on marijuana. So Mr. Rifici and his business partner Bruce Linton had to form a small investment pool to buy the plant for an undisclosed amount.

Even once in the building, Mr. Rifici said it was impossible to get a bank loan to buy equipment. Initially, Tweed raised money from private investors. More recently, the company has tapped the public markets for 15 million Canadian dollars by issuing stock.

Other licensed marijuana-growing operations have faced similar impediments. When Privateer decided to start Tilray, for example, Mr. Kennedy crisscrossed Canada to find the right spot. It was apparent, he said, that Privateer would hit resistance in many areas. Illegal growing operations had attracted widespread negative publicity for destroying rental houses with mold and creating fire hazards with their lighting systems.

In Nanaimo, British Columbia, Mr. Kennedy found economic development officials who eagerly courted Tilray. The city was looking for new businesses to offset a gradual decline of the forestry and fishing industries, the region’s historical economic base. The officials introduced local zoning bylaws that made it easier for the medical marijuana industry to operate.

Tilray has since bought a building for $3.5 million and spent $17 million to renovate it. The company employs 65 people, with plans to increase that number to 100. “One hundred new jobs in a community of less than 100,000, that’s a big deal,” Mr. Kennedy said.

Still, he said it took a while to find a bank that would deal with a marijuana grower. The Royal Bank of Canada eventually agreed to take Tilray’s account and to process its credit card transactions.

Nor has Tweed won over everyone in Smiths Falls. Like many small, blue-collar towns in rural North America, it has an illegal-drug problem, mainly crack cocaine and marijuana.

Darlene Kantor, 50, works as a building manager, and she says she is thrilled that Tweed came to town with its jobs and millions of dollars of investment. “But my main concern is: Is it going to make the illegal drugs more rampant?” she said.

Some are more skeptical about whether Tweed will be able to provide many jobs. “They were talking about creating jobs and such, and it’s not going to, it’s not going to do anything,” said Andrew Brinkworth, 18, outside the downtown Tim Hortons. “A lot of people here have criminal records, and they’re not going to be able to get a job at the plant if they have a record.”

A 300-Page Application

Dressed in a casual shirt and slacks, Mr. Rifici, 39, is built from an entrepreneurial mold. His fast speech and seemingly inexhaustible enthusiasm appear to be byproducts of pitching start-up ideas to investors, or anyone who will listen, for two decades.

His early interest in the Internet came from playing simple, text-based games. “Slaying virtual dragons with someone from Australia from my computer in my parents’ basement in 1991-92 was eye-opening to how the Internet would fundamentally alter how we lived,” he said. “So I had to get involved in some way.”

In 1995, during his third year of computer engineering studies at the University of Ottawa, he decided to start an Internet service provider. He sold the business in 2003 for 1.1 million Canadian dollars ($1 million) to a larger competitor, Cybersurf, where he became chief financial officer. Over the next two decades, he helped start a dozen tech companies.

His interest in politics indirectly inspired his marijuana business. Mr. Rifici, who volunteers as chief financial officer of the Liberal Party of Canada, one of the three main national parties, closely tracked the evolution of marijuana laws.

In October 2012, Health Canada, the federal agency responsible for drug controls, published a long, technical list of proposed reforms. One thing caught his eye: Under the new approach, customers could buy only online or through call centers, types of systems that his Internet businesses had operated.

But his background didn’t prepare him for the regulatory strictures of the medical marijuana business. Accustomed to developing start-ups on the fly with little capital, Mr. Rifici and Mr. Linton, another Ottawa entrepreneur who is Tweed’s chairman, underestimated the money they would need by a factor of three, largely because of the government’s regulatory demands. The application ran 300 pages, not including attachments. And before they could even submit applications, Tweed and other growers had to secure sites for their operations and obtain all local permissions. Applicants who passed the initial vetting then had to pass a final, two-day inspection.

The requirements are significant. Growers must have sophisticated carbon filtration systems to prevent the smell of marijuana from wafting outside. They must maintain high-security measures like biometric thumbprint readers. Employees need to pass rigorous security checks, conducted by the Royal Canadian Mounted Police, which take four to six months.

“If I knew how much regulatory overhead there would be from the beginning, I would have probably been just as excited about the industry,” Mr. Rifici said. “But I might have thought that I might not be able to get there.

“Nothing like a bit of ignorance to allow you to move ahead.”

The red tape was part of an effort to reform Canada’s initial approach to medical marijuana. In court filings, the government suggested that the old system had become little more than a legal veneer for recreational growers, with a significant amount of marijuana making its way to illegal operations. Health Canada said users, on average, grew enough marijuana to roll 54 to 90 cigarettes a day, far beyond what they needed for personal use.

“There was big, big diversion going on,” Brent Zettl, the chief executive of Prairie Plant Systems, the company that grew and distributed the government-supplied marijuana under the old system. The company is now among the newly approved growers. “They ducked behind legitimate patients and used them,” he said.

Trying to Convince Doctors

Walking the vast, 425,000-square-foot factory, Mr. Rifici talks animatedly about Tweed’s next steps. Just behind the new entrance of glass and shiny stainless steel, he has carved out space for a gift shop. He also hopes to lure a craft brewer into the unused portion of the factory. He wants to make 1 Hershey Drive a destination for tourists again.

Tweed is taking a subdued, almost artisanal, approach to its branding, avoiding the Cheech-and-Chong vibe of some rivals. Many of its marijuana strains are named after fusty fabrics like tweed, as well as people and places associated with such clothes. The Herringbone strain is supposed to help with depression. Bakerstreet is used to treat anxiety. Donegal is promoted as a pain reliever.

But the industry faces an uphill battle, as prominent doctors, researchers and even the Canadian Medical Association are advising against prescribing marijuana at all. Marijuana, they say, has not been through the testing and approval process required for other pharmaceuticals.

Dr. Mary-Ann Fitzcharles, a rheumatologist and professor of medicine at McGill University in Montreal, was the lead author of a widely publicized paper recommending that, without clinical evidence, marijuana should not be prescribed for rheumatoid arthritis. About 65 percent of users in Canada under the old system said they suffered from that condition. She compares the medical claims for marijuana to those once made for tobacco.

“I don’t think any physician today would say: ‘I suggest you take up smoking cigarettes to deal with your anxiety,’ ” Dr. Fitzcharles said.

So Tilray, Prairie Plant and Tweed are creating sales teams to persuade doctors to prescribe marijuana. Tweed’s chief medical adviser, Dr. John Gillis, an emergency-room and chronic-pain doctor in Dartmouth, Nova Scotia, is working to develop best practices for prescribing marijuana. Christopher Murray, who worked with a Canadian agency that evaluates new drugs and medical technology, leads a “medical education and outreach” group for Tweed.

A Fine Legal Line

When Tweed shipped its first two orders directly to customers on May 5, about half of the company’s management watched, partly for ceremonial reasons but mostly to make sure that its elaborate, government-mandated inventory-tracking system worked. Employees weighed the total inventory before doling out the shipments onto smaller scales calibrated to 0.01 gram. The marijuana was dropped into boxes bearing Tweed’s logo and then, to meet government requirements, vacuum-packed into odor-blocking bags. Then came a final check on the scales before the two parcels left in standard courier pouches that did not bear Tweed’s name.

As with many in the new industry, Tweed repeatedly cites a Health Canada forecast suggesting that the user base will grow to more than 400,000 from about 40,000. But some analysts wonder how the industry will reach such levels. Mr. Zettl is one of the few players who acknowledges that many buyers will probably be recreational users with sham prescriptions.

Like most people in the medical marijuana trade, Mr. Rifici rejected suggestions that the industry was ultimately counting on the introduction of an open, legalized market. But there is such a possibility. Justin Trudeau, the leader of the Liberal Party, has vowed to legalize marijuana if he takes power in elections scheduled for next year, and polls suggest that the idea has widespread support.

Mr. Rifici, speaking over the drone of dehumidifiers in the production facility, said that “the difference between medical marijuana and nonmedical marijuana is one of legislation.”

“And at the end of the day,” he added, “our product is essentially high-quality marijuana under a medical platform.”

It’s off to NYC. Have a ticket for Monday’s game at MSG. Remember when P.K. Subban made the remark prior to Game 7 against Boo-ston that he wanted to win Game 7 so badly so as to be able “to take it all away from Boston and their fans”? Well I am going to NYC to fairly quietly pull for the Kings to win Game 3 at the Gardens and thereby take a 3-0 stranglehold on the Stanley Cup Final … thereby also taking it all away from the Rangers and their ignorant jerk-off fans.

Stop press. Lee’s mother is on her last legs, resting comfortably in hospital. Trip to New York cancelled.

Peace out.

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