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Path to profit: It’s not just government and major corporations looking to make a buck off bud

Jon Keefe shows off one of the squish presses and other cannabis consumption paraphernalia he sells at the Dabber Hashery, a specialty shop in downtown St. John’s, N.L. Keefe had initially planned to obtain a licence to sell cannabis products, but abandoned that enterprise when it became clear the eight-per-cent margin paid to cannabis retailers in Newfoundland and Labrador didn’t make for a strong business case for him and his partners.
Jon Keefe shows off one of the squish presses and other cannabis consumption paraphernalia he sells at the Dabber Hashery, a specialty shop in downtown St. John’s, N.L. - Kenn Oliver

ST. JOHN’S, N.L. - Nova Scotia businessman Bill Sanford, very comfortably situated in the later years of his professional life, never envisioned being involved in the cannabis industry at 65.

But here he is, days from selling the first grams of recreational pot in Canada and playing an active part in the whole process.

“I'm on the production floor with people every day, so I've done every job and do every job that they do,” says Sanford, CEO of Wentworth Valley, Nova Scotia-based Breathing Green Solutions, the province’s first licenced medical cannabis producer.

“It builds a much better production team when they see the old man sweeping and cleaning, planting and trimming plants, harvesting bud and everything else.”

Sanford came to the budding industry through his youngest son Joe and a business partner who came to him seeking backing. He put his own expertise in the investment world to use, studied the prospect, visited a licenced operation and opted to dive in.

A shade under a year later, Breathing Green is through its fifth harvest, focusing on perfecting four strains to start with: high THC varieties cleverly named Lemon Dory, Mirage, and Nor’Easter, and a mid-range CBD strain dubbed Shelter.

“We've got lots of finished product in storage that's been approved by external labs and the quality is as we hoped it would be, and we're really just awaiting our licence to sell from Health Canada now,” says Sanford “We've gone through all of those hoops, so it's really just a waiting game now.”

Joe Sanford, operations manager at the Breathing Green Solutions cannabis grow facility in Wentworth checks over some marijuana plants that are at the point of being ready to be transferred to another room. There, they will be subjected to different lighting and grow conditions and will proceed to the finished stage. Joe’s father Bill is CEO of the operation. - Harry Sullivan
Joe Sanford, operations manager at the Breathing Green Solutions cannabis grow facility in Wentworth checks over some marijuana plants that are at the point of being ready to be transferred to another room. There, they will be subjected to different lighting and grow conditions and will proceed to the finished stage. Joe’s father Bill is CEO of the operation. - Harry Sullivan

The waiting game

Sanford is just one of countless entrepreneurs looking to join governments and the major cannabis producers in making a buck off bud.

At the water’s edge in Clarenville, N.L., Ralph Duffit is also awaiting approval from Health Canada for CK Farmaceutical, the modest growing facility he’s building in what used to be Thirsty’s Banquet Room and My Rec Room, a banquet room and pool hall he took over from his father.

“I have one room that's done, about 900 square feet and it's all wired and it's only a matter of putting the pots in and starting the growing. The basement is almost done, it just needs the wiring,” says Duffit, who just finished installing a $20,000 vault to store his merchandise.

“If I got a letter tomorrow that I can start, I could be growing in a month or two.”

But Duffit hasn’t been sitting idly by waiting for Health Canada’s approval. He’s also getting into the retail side of the industry and is one of the first 29 independent cannabis retailers conditionally licensed by the Newfoundland and Labrador Liquor Corporation.

His shop, Puff Puff Pass, will be located in the same building as the growing operation.

“My thought was if I'm going to get an LP licence, I may as well grow it in the back of the building and upstairs and sell it out through the front,” he explains.

Duffit also recognized an opportunity to offer a one-stop-shop for his customers, so he’s carrying a full line of growing supplies as well as a wide variety of cannabis consumption products and paraphernalia.

“Everything that you can think about, that you need for pot – and a lot of stuff that you would never think about – we have it. From seed to when you butt it out in the ashtray… and we've even got the ashtrays.”

While he’s been able to eliminate a lot of costs for consultants and construction by doing much of the work himself or hiring local tradespeople, Duffit is still in it for over a million dollars.

Marijuana plants at the Breathing Green Solutions grow facility in Wentworth that are almost at the stage of production. - Harry Sullivan
Marijuana plants at the Breathing Green Solutions grow facility in Wentworth that are almost at the stage of production. - Harry Sullivan

Make a squish

Further east, nestled among banks, unsold condos and law offices in downtown St. John’s, N.L., Jon Keefe and his business partners haven’t invested nearly as much into their cannabis-related business. It’s a shop that specializes in the sale of equipment and supplies for creating and consuming all-natural concentrates and extracts, colloquially known in the community as rosin or squish.

“When I discovered concentrates and extracts and these purer forms of cannabis, where you don't have to light things on fire and breathe in the smoke, that ended up being more up my alley,” says Keefe. “I was instantly drawn to it because after having quit smoking a few years earlier and now being able to give up smoking weed, for me, I felt like it was a health benefit not to have to deal with the stink of the smoke, the tar, the chlorophyll, the wax… everything that comes with taking a big piece of plant matter and throwing it on a fire and breathing it all in.”

The Dabber Hashery started out as a consignment sales operation inside another business set up in hopes of becoming a licensed cannabis retailer. But when the NLC released its request for proposal, he was instantly turned off and plans for High Street were abandoned.

“My first reaction was, 'They don't want people like me selling cannabis.' My second reaction was, 'There's no way I'm going to give them all this information that they're looking for.' Complete financial disclosure from everybody involved and all this kind of stuff.”

The nail in the coffin, however, was a profit margin of eight per cent. By his math, after tax, a licensed cannabis retailer would only stand to make 62 cents for every $10 of cannabis sold.

“I'll probably never know, but I suspect that what the provincial government wanted was for federally-licensed growers that have gone through this rigorous application process to be the ones selling cannabis, or major corporations like Loblaws,” he says.

“I know they did give a few licences to independent retailers, but I'm not 100 per cent convinced there's a business case there. It scared me off.”

Instead, Keefe and company are focusing on finding their own place in the cannabis market by offering expertise in a specific product line.

“For my part, the niche we're trying to find here is helping people make their own concentrates. We'll have some heat presses set up here that people can use themselves in the back room to make their own squish.”

Read the full report:  CLEARING THE AIR: Taking Atlantic Canada's pot pulse

Kenn Oliver is a journalist with The Telegram in St. John's. 

kenn.oliver@thetelegram.com

Twitter: kennoliver79

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