The road to cannabis legalization

Navigating risks on the road to cannabis legalization

A new landscape

The legislation for the legalization of recreational cannabis is set to be enacted in 2018. The federal Cannabis Act comes with a host of new challenges that will impact stakeholders across the ecosystem. Are you ready to navigate the risks on the road to cannabis legalization?

With parliamentary decisions moving quickly, there are a number of implementation considerations that need to be addressed

  • Challenging timelines. The expected date of July 1, 2018, for legalization leaves regulators, retailers and producers with a very tight agenda. Achieving this aggressive timeline will require all parties to prioritize efforts and may put some key areas of the recreational cannabis policy objectives—such as curbing the black market—in jeopardy.
  • Assurance from seed to sale. Having assurance over the seed-to-sale process, including inventory management, product testing, physical access and product shrinkage/security, is essential. Being able to trace product back to the source at each licensed producer is the key to guarantee the safety of the product and the legality of its source.
  • Supply and demand gap. It is anticipated that a significant gap will exist between the demand and supply for recreational cannabis, allowing licensed producers to be selective in the markets they enter. The demand gap may also require sourcing product from new or foreign suppliers. This will require enhanced due diligence and product testing to ensure the quality and integrity of both product and suppliers.

How to design and implement an effective and responsible plan to market, distribute and sell cannabis
  • Prepare for restrictions. The federal government will place restrictions on how cannabis can be marketed and advertised in an effort to curb underage consumption. On the other hand, allowing some form of marketing provides product awareness and education, while allowing consumers to distinguish between legal and illegal products. A balanced approach is a likely outcome.
  • Determine the distribution channel. There’s much debate on different retail models—from government controlled to privately run, vertically integrated operations. While each model has its supporters and detractors, all stakeholders will benefit from clear decisions and direction in the near term.
  • The price must be right. The economics of the distribution model and related consumption taxes will need to be determined to arrive at a price that makes economic sense to both commercial organizations and consumers. Uncompetitive margins could lead to undersupplied markets or commercial failures. Pricing cannabis too high will allow the black market to continue to operate.
Building the right channels to promote public health and safety

  • Consumer education. Being able to fulfill the mandate of effective law enforcement is imperative. This includes providing training to make sure skill requirements are met, while using dependable methods to identify cannabis impairment. Aligning the various levels of federal, provincial and municipal law enforcement will help define specific responsibilities for public health and safety.
  • Long-term effects. There are many questions concerning the long-term effects of cannabis use, as well as expectations that the appropriate testing, tracking and education will be in place prior to legalization. It’s important to establish a research infrastructure as part of the legalization process and develop public education efforts to share key messages around cannabis use.

Contact us

We help you navigate the challenges of the industry and drive your growth agenda, PwC Canada