Calgary capitalizes on cannabis in wake of oil and gas slump

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Calgary capitalizes on cannabis in wake of oil and gas slump

CALGARY — When Mack Andrews graduated from university in 2013, oil was worth more than $100 a barrel.

Then 22, the native Calgarian immediately put his chemical engineering degree to work in the city’s anchor industry, oil and gas, enjoying what he described as a “cushy” — albeit short-lived — career.

But the economy would crash just a year later, and like many of Alberta’s oil and gas professionals, Andrews was suddenly faced with an unplanned career detour.

“Seeing the struggle of the industry (in 2014) was a bit of a wake up call for me,” he said.

“It really made me start looking at other industries that were maybe in a different part of the cycle, and more on the emerging side.”

Much of the talent from Alberta’s once-behemoth oil and gas sector needed a new home, and for those willing to make the leap, Ottawa’s promises of a legal, recreational cannabis market presented a once-in-a-lifetime opportunity.

A 2016 survey from Deloitte calculated that Canada’s base retail cannabis market alone would be worth $4.9 billion to $8.7 billion annually, and the ancillary market — growers, infused product makers, testing labs, and security, for example — would increase that to between $12.7 billion to $22.6 billion.

Including tourism revenue, business taxes, licence fees and paraphernalia sales, Deloitte estimated the market will exceed $22.6 billion — surpassing wine, beer and spirits.

By recognizing that potential, Andrews became an important voice for entrepreneurs in Alberta’s emerging cannabis industry in just a few short years.

He co-founded of the Alberta Cannabis Collective, which will represent cannabis retailers across the province once Bill C-45 is law. He also co-founded a private retail company called Aylmer & Nelson, which has already secured commercial real estate for a future store location in Calgary (the word dispensary is frowned-upon by provincial regulators, he explains), although the exact location is top-secret for now.

“It’ll be in a vibrant community,” is all he can say.

But why cannabis?

Andrews, and others forging a path through this largely unknown territory filled with regulatory gaps and steep start-up costs, argue Alberta is perfectly poised to corner the cannabis market for two reasons; its large pool of highly-skilled talent, and the province’s private-business-friendly regulatory environment.

“Just because of the privatization of the industry, we think that (Alberta) will become a real hotbed for innovation,” said Sonny Mottahed, CEO of the Calgary-based CBi2 Capital Corp., a merchant bank which began offering early-stage capital to growing businesses in the cannabis sector last year.

“The exact size of the market will ultimately be determined by the consumers themselves — but we know it’s going to be big.”

Later this month, CBi2 will launch a 16-week business accelerator program for cannabis-sector entrepreneurs that need some support in bring their products to market. The workshop, named MacaVerde, translates to green machine.

Mottahed — who spent 25 years in the oil and gas industry himself — said their focus is beyond cultivation (growing and harvesting the cannabis plant), which has been in the spotlight as heavyweight growers like Canopy Growth Corp. and Aurora Cannabis become publicly-traded companies.

“If we break the cannabis industry from the business side into two groups, there are the cultivators, but then there’s the ancillary business, so everything that surrounds the cultivation and the plant itself,” Mottahed explains.

“If you look at the total amount of dollars, it’ll end up being a lot bigger than the cultivation side because it could be anything from a greenhouse material supplier to somebody who provides specialized lighting, or a group that does specialized extraction of the cannabis flower into an oil.”

Mottahed, like many others, predicts the number of jobs created by the legalization of recreational cannabis in Canada will be “significant” — perhaps music to the ears of Alberta’s beleaguered job market, if professionals like he and Andrews can put images of “reefer madness” out of their minds.

“That’s really what it’s going to take to unleash the potential of the market here, is breaking the stigma around it,” Andrews said.

“Because we are such a professional city, the sooner we get to a point where we aren’t defining a cannabis user as the sort of typical archetypes that they are seen as right now, the sooner we’ll access a much larger clientele.”

It’s a slow shift, but one Mottahed says has been gaining momentum as more and more Albertans see the economic potential legal pot has for the province — although he admits that if legalization was a baseball game, we’d be in the first inning.

But it’s clear that companies like his are loading their bases in anticipation of the future market.

“You look at the Alberta market, which has an extreme amount of talent that are A, sitting on the bench because they’ve lost their jobs or B, coming out of the academic system looking for work — having a new industry to focus their efforts and attention on will provide a platform for them to innovate to do really interesting and neat things,” he said.

“It’s not a substitute for the oil and gas industry, but it does and will play a big role in Alberta’s diversification, and we think that’s important.”

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