Canada’s Marijuana Industry is Coming

Will Edmonton Take Advantage?

With the Government of Canada having put forward its framework for the legalization of recreational cannabis, cities across the country will be looking to capitalize on the marijuana economy and its associated jobs, investment, and tax revenue. Edmonton will be no different, and it’s about time we started thinking strategically about how to make our mark in this new industry.

When legalized, the Office of the Parliamentary Budget Officer (PBO), projects 4.6 million individuals aged 15 and over will use cannabis at least once in 2018 – according to their report Legalize Cannabis: Fiscal Considerations. This number could rise to 5.2 million consumers by 2021.

The PBO estimates that approximately 11.7 percent of cannabis consumption in 2018 will be in Alberta, making the province the fourth largest potential consumer market of the drug in Canada.

Parliamentary Budget Officer, Legalize Cannabis: Fiscal Considerations, 2016

This will mean big business for both Alberta and Canada in all areas of the cannabis value chain – whether it’s in the cultivation, harvest and preparation; the manufacturing of products using cannabis as a raw material; and the distribution and sale of cannabis products. In addition, there will be a multitude of spin-off industries created around the production and sale of cannabis, from tourism to finance to technology.

But, where does Edmonton fit into the equation? It would be foolish to think we can fully take advantage of every part of the value chain and every possible spin-off industry, so we should be thinking strategically and with respect to Edmonton’s existing competitive advantages. Better to focus on our own corner of the cannabis industry, where we can truly excel.

So, what are our competitive advantages? As a prairie province, the cultivation and harvest of cannabis has potential in Alberta. We are already starting to see this with Aurora Cannabis Inc. planning to build their 800,000sq. ft. production facility in Leduc County – which will be the world’s largest legal cannabis grow operation.

This will also mean a large, local supply of cannabis for those who want to create edibles. Considering Edmonton already has expertise in food processing, being a hub of food manufacturing activity for the province, claiming the edibles market is a no brainer. And make no mistake – the edibles market has the potential to be huge business. How edibles will fit into the Government of Canada’s legalization framework is currently unclear: the government has said that it will bring edibles into the legal market once regulations for more straightforward production and sale are developed.

When cannabis was legalized in Colorado the edibles market became much larger and much more successful than the state originally anticipated. According to the Colorado Cannabis Chamber of Commerce, edibles make up roughly 45 percent of the billion-dollar legal cannabis marketplace in Colorado.  The popularity of edibles in Colorado could be due to a variety of reasons, although many sources believe the number one reason is the desire to consume cannabis without the harmful effects of smoking. Another reason is that edibles are much easier to consume for those who are new to cannabis consumption. Regardless of the exact cause of their popularity, it stands to reason that edible products, if and when they become legal, will be just as popular in Canada.

Until concrete regulations are released relating to the production of edibles, it is hard to make definitive assumptions on Edmonton’s ability to make a name for itself in this market. Assuming legislation makes edibles open for business it could become a great opportunity for the city. However, this will require a concerted effort on the part of the regional business community to make sure that the Edmonton region is ready by anticipating and addressing potential barriers to our future success in the industry.

 

How Does this Recession Compare to the Last?

A Look at Employment in Edmonton and Calgary

Despite recent drops in the price of oil to back below $50 per barrel, most analysts and forecasters are expecting that 2017 will be the year Alberta climbs out of recession. Indeed, several of the province’s economic indicators began to climb back towards pre-recession levels late last year – this doesn’t mean Alberta is back to where it was before oil prices started dropping in summer 2014, but things are no longer getting worse.

How have Edmonton and Calgary fared during this downturn? In terms of the number of people employed, both cities have performed better than during the previous recession in 2008, but in very separate ways.

In Calgary, while employment dropped at a similar rate in 2015 and 2008, it has begun recovering much earlier this time around and is nearly at pre-recession level. In contrast, the story in Edmonton is quite different from 2008: although during that recession employment in both cities began to fall at roughly the same time, in 2015 employment in Edmonton grew for a year beyond when employment in Calgary started falling. In fact, while Edmonton has recently seen several consecutive months of year-over-year employment declines, total employment barely dipped below its pre-recession level and in the past two months has risen above it.

There are several possible explanations for both the contrast between Edmonton and Calgary and between Edmonton’s experience in the 2008 and 2015 recessions, the most prominent of which is the downtown real estate development boom spurred by the construction of Rogers Place. The arena effect is somewhat supported by the employment data – Edmonton’s twelve months of growth while Calgary was experiencing shrinking employment coincides with a substantial increase in Edmonton’s construction sector employment. However, Rogers Place was not the only major construction project underway during this time, and other factors such as growing public sector employment also contributed to Edmonton’s strong labour market performance.

The marked difference in how Edmonton’s employment situation has evolved in this recession compared to both Calgary and the previous recession begs the question – did the current Alberta recession miss Edmonton completely? The answer is no. While the employment data, from Statistic’s Canada’s Labour Force Survey, show surprising resilience to Alberta’s economic conditions, others such as the unemployment rate, the number of Employment Insurance recipients and economic growth estimates from the Conference Board of Canada paint a bleaker picture.

Finally, although Edmonton’s labour market is not dramatically worse off than it was before the recession began, it’s important to remember that the recession has not necessarily ended either. The end of the 2008 recession came along with a large increase in commodity prices that helped Edmonton’s labour market recover strongly. With the chance of a commodity boom happening anytime soon looking slim, policymakers will be watching how employment in Edmonton and Calgary evolve for months to come.