Michelle Ferguson

Why it's great to grow cannabis in Edmonton

Michelle Ferguson
Why it's great to grow cannabis in Edmonton

EDMONTON OFFERS GROWERS A COMPETITIVE ADVANTAGE

EDMONTON ECONOMIC DEVELOPMENT

OCTOBER 19, 2018


The buzz around cannabis is in no short supply here. Cheap electricity, low tax rates and a skilled labour force have cultivators flocking to the provincial capital.

There are three licensed producers and at least eight applications for cultivation facilities in the Edmonton region, including:

  • Canopy Growth: currently the world’s largest cannabis producer, the Ontario-based company is expanding its national footprint with a 160,000-square-foot facility, called Tweed 53, in Edmonton’s Morris industrial park.

  • Aurora Cannabis: the second largest cannabis producer, the Edmonton-based company is awaiting a sales licence for its 800,000-square-foot facility near the Edmonton International Airport.

  • Atlas Growers: the Edmonton-based company recently received cultivation and production licences for its initial 38,000-square-foot facility in Lac Ste. Anne County.

  • Pebble Grass: an Edmonton-based craft grow operation, currently in the application process, that will focus on the extraction of cannabinoids.

Here’s why so many cannabis growers are choosing to set up shop in the Edmonton area.

 
 YEG Woodworks is one of the Edmonton companies making products to go alongside the city’s cannabis boom. (Photo Credit: Jess Burrell Photography)

YEG Woodworks is one of the Edmonton companies making products to go alongside the city’s cannabis boom. (Photo Credit: Jess Burrell Photography)

BUSINESS CLIMATE

Not only does Alberta have the best cannabis retail regime in the country — allowing for vertical integration opportunities — but it also enjoys some the lowest corporate tax rates in the country.

On a municipal level, the 2016 biennial KPMG Competitive Alternatives Study ranks Edmonton second in total tax burden among Western Canadian competitor cities. The city boasts the second lowest property taxes, and, unlike Calgary and Winnipeg, does not impose an additional municipal business tax.

 

ENERGY RATES

Energy is a huge input cost for licensed producers. To recreate natural growing conditions, plants are basked under the blue hue of high pressure sodium lights for 16 to 18 hours a day. Air conditioning is used to regulate the temperature emitted by the power-hungry bulbs, while a dehumidifier prevents mold.

Although it is using more energy-efficient LED lights, access to sufficient, low-cost power is one of the reasons Aurora Cannabis chose to build its 800,000-square-foot Aurora Sky facility at the Edmonton International Airport. In general, Edmonton has relatively low energy costs when it comes to large power users.

 

LEASING AND LAND COSTS

Essentially if it’s a new site it’s a new application, so developing on a large site allowed us larger expansion potential.
— Atlas Growers CEO Sheldon Croome

Edmonton’s large parcels of available land are a draw for cannabis producers looking to scale rapidly, as is the case with Atlas Growers. Given the anticipated demand for cannabis in Canada and around the world , the company is already looking at constructing a 350,000-square-foot second facility in 2019.

“It’s a lot easier to expand a licence for medical cannabis on the same site, than it is to license new sites,” said president and CEO Sheldon Croome. “Essentially if it’s a new site it’s a new application, so developing on a large site allowed us larger expansion potential.”

According to KPMG, Edmonton is ranked top three for leasing costs (No. 3), industrial land costs (No. 2) and construction costs (No. 3) when compared to other Western Canadian competitor cities.

 

MARKET ACCESS AND DISTRIBUTION

As the gateway to Canada’s north, Edmonton offered Canopy Growth a strategic advantage in terms of distribution. The licensed producer has committed to centralizing its western Canadian operations in Edmonton and intends to operate up to five facilities in the area. Setting up in Edmonton gives Canopy access to markets in the Yukon, the Northwest Territories and northern parts of B.C.

“As you start to look particularly at the northern parts of Canada and the infrastructure in place, I think [Edmonton] makes a lot of sense,” said Canopy Growth president Mark Zekulin.

Proximity to air and ground carriers, as well as immediate access to international customs, was another reason Aurora Cannabis chose to locate at EIA. Not only does the location improve access to international markets, but it will also allow the company to expand its same-day delivery service, currently available in Edmonton and Calgary.

 

CANNABIS CLUSTER

Aurora’s state-of-art facility is expected to attract additional investment to the region.

“I think we have the beginning of what could turn into a cluster, a centre of excellence with respect to cannabis,” Aurora chief operating officer Cam Battley told the Edmonton Journal last summer. “Our presence at the airport is going to draw other companies that want to partner with us and our partners.”

Our presence at the airport is going to draw other companies that want to partner with us and our partners
— Aurora chief operating officer Cam Battley

Clusters — geographic concentrations of interrelated businesses, universities and research centres — often result in supply-chain benefits, collaboration, knowledge sharing, business growth, and innovation. Edmonton’s emerging cannabis industry is already seeing some of these effects.

In December 2017, Aurora invested $6.2 million in Radient Technologies, after completing a successful research joint venture with the leading Edmonton extraction technology company. The financing was used to scale the company’s manufacturing capacity and purchase real estate for future growth.

Meanwhile, Sweetgrass, a Strathcona County-based late-stage applicant, will benefit from Canopy’s operational, distribution, marketing and sales infrastructure, after signing on to the billion-dollar giant’s CraftGrow program.

There is also talk of a local cannabis incubator that would inject $3 million to $5 million in seed money into cannabis-related startups over the next three years.

 

LABOUR FORCE

According to Area Development Magazine’s 2018 survey results, the availability of skilled labour is the most important factor in a site selection decision, followed by transportation infrastructure, available buildings and sites, and local tax structure.

Based on California’s experience, the Canadian cannabis industry could create about 50,000 jobs in the first two years. Aurora’s facility alone will require 350 employees in areas like quality assurance, growing, engineering, operations, manufacturing and research and development.

With over seven per cent of its labour force in natural and applied sciences and another 18 per cent in trades and equipment operation, Edmonton is well-positioned to serve this emerging job market.

 

ACADEMIC STRENGTH AND R&D POTENTIAL

With a network of six post-secondary institutions, including the University of Alberta — a leading institution in the areas of research, chemical engineering, pharmaceuticals and agricultural sciences — Edmonton is also poised to play a role in cannabis innovation and research.

“Our pharmacy department is well respected, world renowned. We've got world experts in dosage and controlled release,” says Pebble Grass CEO John Simon.

Our pharmacy department is well respected, world renowned. We’ve got world experts in dosage and controlled release
— Pebble Grass CEO John Simon

Currently, licensed producers are only allowed to sell dried or fresh cannabis, cannabis oil, plants and seeds. Edibles and concentrates (which can be used in vaping solutions, tinctures and other formulations) will automatically be added to the list of approved products in 2019. Simon expects users will quickly move away from smoking (as they did in the U.S.) and believes Edmonton is well suited to lead this shift.

Meanwhile, Croome formalized a partnership with Canada’s foremost plant scientist and University of Alberta graduate, Jim Hole. As Atlas Growers’ new director of cultivation, Hole is responsible for developing efficient cultivation practices. Croome is also working with PhD candidates and graduate students from the University of Alberta to understand the more than 100, largely unstudied, compounds that make up the cannabis plant.

 

CONSUMER DEMAND

Albertans are the biggest users of medical cannabis per capita. According to Health Canada’s latest market data, of the more than 330,700 clients registered to receive medical cannabis in June 2018, more than 35 per cent (117,347) live in Alberta.

Estimates of the recreational cannabis market in Alberta range from 526,000 users to over 650,000, according to Marijuana Business Daily. The Parliamentary Budget Officer estimated that Alberta would be the fourth largest potential consumer market of the drug once legalized in 2018.