The Government of Newfoundland and Labrador has signed a deal to lock in a supply of cannabis and cannabis products from Canadian company Canopy Growth, ahead of the legalization of marijuana for recreational use in July 2018.
The deal announced this morning at Confederation Building includes a commitment for a new marijuana production facility in the province — providing as estimated 145 jobs by the time it is up and running in 2019.
A location for the facility has yet to be decided, but it is expected to have the capacity to produce 12,000 kilograms of cannabis products annually.
“I think you’ll be astounded at how quickly and effectively we can build things,” chairman and CEO Bruce Linton told reporters at Confederation Building in St. John’s, adding he also sees Newfoundland and Labrador as a place to develop new product.
“Our intent is to produce far more than we’re actually going to be able to sell here because I think branded product coming from Newfoundland is going to be a very successful commercial enterprise,” he said.
On supply through NLC
The agreement on supply — two years, with a one-year renewal option — sees marijuana available from Canopy Growth’s existing production facilities in Canada for the start of legalization in 2018, but does not legally require the Newfoundland and Labrador Liquor Corp. (NLC) to source from the company.
There is no minimum purchase requirement, only agreed availability.
That said, demand will assure purchase.
As announced, the NLC is covering the business and logistics of sourcing marijuana to meet demands on an ongoing basis. The NLC will also operate the initial, legal sales platform online for the province and will be licensing the province’s front-end retail stores for marijuana (Canopy Growth gets four brand stores in-province as a part of its deal).
The agreement announced today fundamentally assures the province — with no existing, licensed growers — will have a secure supply in time for legalization.
Canopy Growth is being described as an anchor company, and Minister of Tourism, Culture, Industry and Innovation Chris Mitchelmore told reporters the government remains open for business — open to hearing from companies interested in supplying through the NLC, alongside Canopy Growth products.
Further details of the deal
The company is required to spend at least $40 million to build its new production facility in Newfoundland and Labrador. Linton said the expectation, based on past experience, is it will cost more than that.
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But the $40-million amount is the cap set for an incentive offered by the Government of Newfoundland and Labrador as part of its deal with the company, whereby a particular amount of every sale (10 per cent at a company store; five per cent of an online sale; three per cent of another store certified as a seller by the NLC) will stay with Canopy Growth instead of the NLC, to contribute to the construction costs of the new production facility.
The company expects to be able to recoup up to $40 million of its construction costs over time, by getting a discount on the amount it is required to pay to government on each sale. Once those costs are recovered, the company will return to full remittance.
$1 million in new R&D
The province has announced Canopy Growth will also spend $100,000 a year over five years on new research and development in the province.
Another $100,000 a year over five years will be spent by the provincial government on the same, but Mitchelmore said that government spending will be to research efforts apart from the company, for a total $1 million of new spending in-province.
Canopy Growth is required to have a cannabis education program for its staff, assure its corporate responsibility plan applies in-province and have a gender diversity and equity plan for its production facility.
The agreement with Canopy Growth comes the morning after the close of the House of Assembly for the holiday season.
NDP leader says 'major giveaway'
NDP leader Lorraine Michael said the government was disingenuous in responses to questions this week in the House of Assembly, saying it supports local business.
“Giving away agricultural production to an international corporation is a missed opportunity for community economic development,” said Michael, in a statement.
“Government promised benefits to Newfoundland and Labrador private businesses, yet are giving this giant external corporation what amounts to a retail monopoly. As we in this province know well, such arrangements will see the bulk of cannabis profits removed from our provincial economy.”
(NOTE: Edited at 12:55 p.m. December 8, to clarify coverage of production facility costs and incentive of government. Comments from provincial NDP added 4:10 p.m. NLT.)