The Hon.

Kathleen Ganley
Minister of Justice & Solicitor General
#130, 1177 - 11 Avenue SW
Calgary, AB T2R 1K9

cc: Briegh-Anne Albert of the Alberta Cannabis Secretariat

To the Hon. Kathleen Ganley,

Re: Support for Private Cannabis Retail

Thank you for the opportunity to present our position in support of private cannabis retail. This
document has been drafted with a view to addressing the four Policy Objectives (defined below)
through independent retail.

Position: The Alberta Cannabis Stakeholders Group (the ACSG) supports a private retail model
st
for the sale of Cannabis via stand-alone stores, commencing on July 1 , 2018. Our stakeholders
also support the Alberta Gaming and Liquor Commission (the AGLC) as the cannabis retail
oversight and administrative body as it effectively does over the sale of alcohol.

Private cannabis retail would provide Alberta with robust job creation and bolster its tax base with
funds to pay the overhead cost of Albertas enforcement, public health education and, as is the
case in Washington and Colorado, support for social policy initiatives (e.g. new schools, mental
health initiatives or, preventative measures against the opioid crisis).

A review of empirical and statistical data indicates that a private retail model would best accomplish
the goals to protect minors, protect the safety of communities, protect the public health and limit the
illegal market (the Policy Objectives). There is strong support that a private retail model better
addresses the concerns of the Policy Objectives than a public model built on a non-existent,
inefficient system.

Albertas private liquor model is the safest in Canada and private cannabis retail would also
be. Like alcohol, the success of the cannabis industry should be built on the back of Alberta-based
entrepreneurs. We note that the AGLC reports 98% compliance in carrying out its mandate to
safely regulate the sale and distribution of alcohol in Alberta.

Role/Mandate of the AGLC: The role of the AGLC should include the oversight of the policy
framework established for licensing, distribution, operating criteria, identification, and age
requirements. The ACS has set out its mandate through the Policy Objectives. A significant
concern surrounding the retail of Cannabis is keeping it out of the hands of children and youth.
Accordingly, we support the creation of a similar program to AGLCs Drinksense and its
supporting structure.
PUBLIC POLICY

1
Private retail has proven to have no link to an increase in unacceptable social costs. The common
rational for monopolistic retail is that private retail operated by small business owners would lead
unacceptable social costs. This is a familiar justification for monopolistic markets, and in the case
of alcohol it has been proven that the predication of large social costs seems largely to rest on
historical fears rather than evidence.

A 2009 Frontier Centre study found that, in Saskatchewan, which has a plethora of
government-run liquor stores and comparatively low overall sales and alcohol
consumption rates, that province still showed the highest, second-highest or third-highest
rates of alcohol-related harm with respect to friendships, marriage, work, studies,
2
employment, finances, legal problems and physical violence.

That same study found two things: (1) no link between private retail stores and an
3
increase in crime, based on reports from Calgary Police Services, and (2) that from 1994
to 2004 the number of drinkers in Saskatchewan and Quebec increased faster (up 5.2%
and ~10% respectively) than Alberta (up by 3.1%).

Scalability to Wipe out the Black Market: The private model will facilitate quicker
scaling to capacity and therefore requiring a substantial number of workers and a larger
pool of ancillary services provided directly to producers, retailers and processors. Each
private retail store alone will provide 10 to 15 affordable jobs that would be most
beneficial in smaller cities and towns.

Support from Albertas Largest Municipalities: The use of private-retail model has
4
been specifically requested by both the City of Calgary (Calgary) and the City of
5
Edmonton (Edmonton). These two municipalities represent over 60% of Albertas
population and their input warrants serious consideration.

Put differently, it is not clear that the ownership structure and regulations related to the production
6
and distribution of alcohol are important determinants of alcohol abuse.

COST OF IMPLEMENTATION

There will be significant costs associated in the creation, implementation and management of a
government-owned cannabis retail network. Accordingly, there will also be significant costs and
risks associated with the development of the retail networks infrastructure.

1
See Douglas S. West, The Privatization of Liquor Retailing in Alberta, Simon Fraser University, (Department of Economics,
University of Alberta; 2003).
2
Ibid. at pg. 63.
3
Ibid. at pg. 65.
4
See City of Calgary, Submission to Alberta Cannabis Secretariat, dated September 14, 2017.
5
See page 4 of the City of Edmonton, Submission to Alberta Cannabis Secretariat, dated July 31, 2017. See also the City of
Edmonton, Submission to Alberta Cannabis Secretariat, dated July 31, 2017 at pg. 4.
6
Ibid.

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 Cost: The Alberta government would likely spend close to $1.5 billion in setting up a
public retail operation for cannabis while only generating ~$635 million in tax revenue.
using a crude comparison of profits generated in Ontario from Alcohol in 2016, the $3.7
billion in operating costs resulted in a mere $1.7 Billion in profit or 47.22% return on its
annual investment. Comparatively, in 2016 the AGLC spent a mere $36 million in
operating costs to generate $855 million in profit or a 2375% return on its annual
investment.

Divide and Conquer: The Province can provide a strict regulatory framework and allow
private industry to establish a turn-key, revenue-generating industry ready for July 1,
2018

Time is of the Essence: With less than one provincial budgetary cycle before July 1,
2018, there will be considerable time and effort required to design, staff, and create an
administrative, oversight, and operational government-run retail operation. The effective
implementation of a government-run retail operation will require the dedication of
significant resources which is not reasonable given the time frame.

Forward Supply Agreements: To successfully operate government-run retail, the

Province must negotiate, procure, and secure significant product inventory. New
Brunswick has entered into two forward supply agreements with licensed producers that
7
had operations within the Province for a total cost of $100 million.

These $100 million forward supply agreements will be equivalent to approximately of

the estimated annual demand of that province. New Brunswick has a population that is
approximately 1/6 of the population of Alberta. Accordingly, Alberta would require
execution of at least $600 million of forward supply agreements for 2017 delivery (6-
months) and agreements valued at approximately $1.2 billion for 2018 (12-months) to
meet upcoming demand. This would require an investment of $1.2 billion of working
capital in 18 months.

Process Design & Construction: The initial process design, construction and workflow
operation of 50-60 retail stores throughout Alberta to meet July 1, 2017, would be a
substantial task that any private operator would likely deem to be impossible.
Accordingly, under a government-run model, we will likely experience a significant time
delay in meeting the date of legalization with merely an adequate system.

Privatization equates to a new tax revenue stream to the provincial government without the cost of
setting up the infrastructure to operate in the industry. The above figures indicate that at least $1.2
8
billion of working capital would need to be invested by the Alberta government within 18 months.

JOBS, TAX REVENUE & ECONOMIC DIVERSIFICATION

There exists an underlying mandate throughout the provincial Government to diversify the
9
economy and create/support jobs. The diversification of Albertas economy is the NDPs stated

7
See Canopy Growth and New Brunswick Sign Historic Supply MOU, dated September 15, 2017
8
See Alberta Gaming and Liquor Commission, 2016 Annual Report. See also Liquor Control Board of Ontario, 2016 Annual
Report at pg. 10.
9
See Alberta Budget, 2017, Working to Make Life Better, dated March 16, 2017.

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objective (see the Jobs Plan and Albertas three-year Strategic Business, 2017). That said, the
federal government has given the Provinces an aggressive timeline to determine and implement
the framework.

15,000 Full-Time Jobs: Since 2014, Colorado has created approximate 15,000 full-time
jobs spanning the cannabis industry. With respect to ALCB employment and wages,
1,394 people were employed in ALCB stores at the time of privatization, or about 950 full
time equivalents. By creating jobs and supporting small business owners the NDP can
replicate Colorados success and create an exceptional number of jobs in a short time-
period.

Tax Revenue: Washington State imposes a 37% tax at each of the levels of its
distribution. In Colorado, a 15% tax is applied at the first level which is then earmarked to
build schools.

Since 2014, Colorado has collected over $500 million in State tax, through a 15% State
11
excise tax applied on the sale price of retail cannabis. Washington State has collected
12
over 650 million of tax revenue within this same period.

Existing Efficiencies of Liquor Model: Alberta has the tools to capitalize on the
opportunity through its existing oversight and administration over liquor. Given the proven
efficiency, successful execution and best-in-class compliance record of the AGLC,
Alberta is likely best positioned of all the Canadian provinces use this policy shift to
diversify and broaden the provincial economy.

The opportunity of a private retail model lies in the Provinces ability to focus the
exceptionally large cost of a public model to areas of greater importance throughout the
Province. For example, the City of Red Deer needs a new hospital, Albertas senior and
geriatric population need new long-term care beds, and Alberta is approaching an
estimated $30 Billion deficit.

Licensing Fees: To operate a medical marijuana-related retail business or compassion

club in the City of Vancouver, you need a development permit and business license. The
13
annual cost of a retail cannabis business license in Vancouver is $30,000. If this same
licensing fee is applied on Albertas approximate 310 required store fronts, municipalities
across the province would collect an additional $9.3 million in licensing fees.

Ancillary Industries: Many ancillary industries will see growth from a private retail
model. For example, through legislated minimum training requirements there would be
exceptional growth in employee training and public education provided to each level of
the supply chain. As with the health-care profession, continuing education professionals
would likely see extreme growth in their services.

10
See Government of Alberta, Three-Year Strategic Business Plan, August 23, 2017.
11
See State of Colorado, Marijuana Tax Revenue. Retrieved from https://www.colorado.gov/pacific/revenue/colorado-
marijuana-tax-data
12
See Department of Revenue, Washington State, dated 2017. Retrieved from https://502data.com/
13
See City of Vancouver, Regulations for medical marijuana-related businesses, dated 2017

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 Attract Significant Investment: The ability to open independent retail stores in Alberta
would attract significant investment into the Province. Many LPs would consider moving
head offices to the Province if a residency requirement was in place for these groups to
be allowed to participate in the private retail market while having a financial interest in a
licensed producer. For example, see section 81 of the Gaming and Liquor Act (Alberta),
which would prevent producers from operating retail. We suggest this provision could be
modified to include a residency requirement.

The indirect jobs created from a private retail model would range from agricultural to
white collar. Private retail may indirectly facilitate growth of middle-class jobs and attract
investment to Alberta through (1) the increased requirement for ancillary service
providers, (2) LPs that may decide to relocate head offices, and (3) spin-off subsectors
that support the industry as the market matures.

The points listed above are salient considerations that support a private retail model being
implemented by Alberta to successfully achieve its Policy Objectives. In our view, the private retail
model will efficiently capitalize on the Provinces existing administrative infrastructure used
throughout the liquor model. Accordingly, given that the private retail model has dispelled the myth
of a link to an increase in unacceptable social costs, the NDP government has the rare opportunity
to create a large number of jobs and support entrepreneurs through a best-in-class regulatory
model.

Thank you for your review of this submission and for providing the opportunity to be heard
by the provincial government. If you have any questions or would like to arrange a meeting,
please do not hesitate to contact us at the details provided on our cover letter.

About the Alberta Cannabis Stakeholders Group: The members of the ACSG are a diverse
group of small business owners who include licensed producers & applicants, lawyers, test facility
owners, a marketing business owner, a former compassion club owner, human resources
professionals, cannabis patient advocates, a garden and glass shop owner, a cannabis clinic
owner, and chief scientist/registered nurse. Our diverse group brings wide-ranging insight and
perspective on the prospective cannabis retail marketplace through the lens of Alberta-based small-
business owners.

14
Alberta Cannabis Stakeholders Group

October 26, 2017

Stephanie Ostrander
Chair Person

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Members of the Alberta Cannabis Stakeholders Group: Chair Person Stephanie Ostrander
Cannabis At Work; Vice Chair Jodie McDonald Keystone Labs; Rod Szarka Keystone Labs; Jason
st
Kujath 51 Parallel; Tim Baxter Marijuana For Trauma; John Vidmar NGK; Irene Donahue MCCS;
Wendy Konshuk MedCann Solutions; Melissa Finlay Cannabiz Social; Alison McMahon Cannabis
At Work; Tyler Davies Sundance Prairie Products; Steve Hanson Theracann Corp; Riley McGee
Marijuana For Trauma; Nick Whitehead Aurora Cannabis; Mervin Grandbois NICA; Kelsey Jacko
NICA; Dan Barsotti Hydro-Lite; Alvin Manitopyes NICA; Brent McNiven Theracann Corp; Nathan
Mison Mison Associates

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