The Agenda with Steve Paikin (Audio) - Is the Future Still Bright for Ontario's Cannabis Industry?

Episode Date: September 19, 2024

Activist, lobbyist and entrepreneur Abi Roach has been involved in the cannabis business in Ontario one way or another since 2001. Tonight on The Agenda, she discusses the evolution of province's cannabis strategy, changing attitudes toward the substance and why she thinks the future remains bright for the sector.See omnystudio.com/listener for privacy information.

Getting pot legalized took decades of activism and effort. And the business and cultural side of the story played an important role in getting it there. Abby Roach has seen it all from being an early entrepreneur to a sought-after consultant today at Dope Brands Consulting. And she joins us now. Abby, good to have you back in the studio. Thanks, Steve. Great to be here. You've been here before, right? A couple of times? Yeah, quite a few times. Yeah, okay. Very good.

Let's just, you know, put a little background in place off the top here. Your activism and how you came to this issue in the first place happened how? When I was younger, I was told to do what I loved, and I loved cannabis, and I loved consuming cannabis. And when I decided to open my first business at age 20 I went to that route and I ended up opening a head shop which is back in the day it was called head shops it was accessory shops and I ran that for 20 years and just in the process of being involved in in cannabis without being involved in cannabis I just had to be an activist in order to keep my doors open, the lights on.

Were your folks here in Canada as well? Yeah. What did they think of the business you were in? I remember when I was about 16, I went to see Pink Floyd. And my mother said, my friends went to see Pink Floyd last night. And they said that there was a lot of cannabis in the crowd. They didn't say cannabis back then.

Probably said pot or dope or something. I can't even remember what it was. It was 1990 something. And I said, well, mom, yeah, it's Pink Floyd. Of course, where is that consumed cannabis? Pink Floyd. So when I opened up, they were a little confused about what I was doing.

But I think they were proud of the fact that I was doing something that I loved. It was definitely something you loved, but it was also illegal. Did they not have a problem with that? I don't think anybody realized that selling bongs and pipes and rolling papers was actually illegal, including me. I remember the first time I ever got a hint that it was even illegal was, you know, I knew cannabis was illegal, but bongs and pipes and rolling papers.

I remember going to the GST office to get my number and I said, the fellow said, well, what's your business going to be? I said, oh, we're going to sell accessories and bongs and pipes. He said, glassware. You're going to sell glassware. And that man saved my business. So he kind of enabled you. Yeah, absolutely. Okay. Isn't that interesting? All right. How did your activism slash business slash life change after legalization six years ago?

You know, everything changed. We went from being sort of a quasi-legal business under the medical regime where we had a lounge in the back and we were allowing people to consume cannabis that they had purchased. And then once legalization came through, everything kind of changed. You know, legal private retail came into play, the Smoke Free Ontario Act changed over to include cannabis, and at that point I decided that 20 years was long enough to do what I've been doing and I had an opportunity to go work for the Ontario cannabis store in their merchandising department. They created a position for me to come and help them transition, you

know, people into the legal cannabis market. How do we make legal cannabis cool, I guess, was my job. And I worked there for four years, and it was a great experience. It was like doing an MBA in cannabis, I always say. Did you think it was kind of odd to be involved in your own thing, which was sort of illegal, and suddenly now being on the payroll

of the government of Ontario? That feel a bit weird? Ah, a little bit weird, but not really. I had been lobbying and working alongside government for so long on behalf of Normal Canada, on behalf of the CFBA, which was a lobbying group that I had founded. And I knew a lot of what was happening behind the scenes.

So coming into the government was a bit of a shocker in terms of levels of red tape that I never had to deal with before as an entrepreneur. But it was really enjoyable to work with some really interesting people that came from interesting places and taught me so much about supply chain know, supply chain and the business and just things that as an entrepreneur I would have never had the opportunity to learn.

So you know, I think the public was more shocked about me going to that side of the business than I was. Because you know, on the one hand, yes, you get to learn all this new stuff and you know, you're getting your MBA almost on the job. But on the other hand, you're a government employee, and presumably part of what made your old life fun was the subversive maverickiness of it all. Did you miss that? I went back to private, and I'm doing a little bit of maverick on my own now.

But I also had a lot of pride working for the government and seeing all the work that myself and others had put into legalization for so long, seeing it come to fruition was really magical. And watching the industry grow from where I was 25 years ago to today, it's mind-blowing that it's just magical. Did you ever get busted? Me? No. Never did. Never in the universe. ago to today, it's mind-blowing that it's just magical. Did you ever get busted? Me? No.

Never in the universe. How did you manage to not run afoul of the law? I'm really cute. You know, in my experience, the law doesn't care so much about that. No, I've always stayed close to regulations and I always said, if you run a mile in front of the law you're gonna get caught if you just inch you know what you need to do every one inch at a time eventually the law will kind of catch up to you and you'll be on a level playing field so I think all the movements that I made one inch at a time and pushing pushing that gray line of the law got

us across the line. Do you think, or I should put it this way, how much influence do you think you personally had in the ultimate decision that the federal government took to legalize cannabis? I think in federal, I would say that voting made a huge difference. I think what the hotbox did, the business that I operated for 20 years,

is we normalized cannabis. We allowed people from all walks of life to come in and see cannabis culture at its best, see that nothing was happening, you know, the chickens weren't falling out of the sky and nothing was exploding, and everything was A-OK, and they could sit down and enjoy themselves, and maybe even Woody Harrelson would be sitting there beside them, which has happened a few times.

And I think in the long scheme of things, you were asking about my family. One of the reasons my mother switched her vote was actually for legalization, because she wanted her daughter to have a legal business. To be legit. Right? So you have people who, 70% of consumers, of Canadians,

sorry, don't actually consume cannabis, but they vote. And the law has to make sense for everybody. So not just cannabis consumers, not just the industry, but Canadian society as a whole. And I think after so long of people seeing normalization come to fruition, and the hotbox being a key player, and pushing other businesses and other people to come out of the grow closet, as I like to say, and really normalize cannabis to a point where the regular voter that was not a cannabis consumer would say,

you know what, I'm pretty comfortable with cannabis being legal. In which case, why did you sell the business four years ago? 20 years is a long time to do the same thing. I was bored. You just had enough. Yeah, I just said, you know, I just didn't have any more room to grow. I was at the top, yeah.

We are going to, I'm gonna ask our director Sheldon Osmond to put up this chart here, showing the most popular cannabis formats in Canada. And I guess for those who are listening on podcast, I should just describe what we're looking at here, which is a graph going from left to right, the five most popular cannabis products in Canada,

and we're going from 2018 to 2023, and there are sort of five lines across. And I don't know, this tells us all about consumer preferences in your view you know whether it's dry cannabis edibles vape pens oil for oral use beverages these are the different kinds that are being tracked here what does this chart tell you it's telling me that the consumer has grown changed evolved and new consumers have come into play as well. So you're seeing dry flour really slope down greatly.

And it's something that everybody predicted happening. You're seeing edibles, beverages, and vapes really climb up as preferred formats. They're ready to consume formats. And you're seeing pre-rolls, which I'm a little hard of seeing. So I'm pretty sure pre-rolls were up there. But I think pre-rolls, the ease of convenience

and not having to roll your own, that whole majestic thing that people really loved about dry cannabis has really been pushed aside to ease of use. You're seeing edibles really grow as a format that people are used to. You wake up in the morning, you have a cup of coffee, you have something to eat, you go about your day, you have lunch, you have another drink.

So edibles and beverages are something that we do on a regular basis. And I think for somebody who doesn't consume and doesn't want to smoke, especially since smoking so demonized and vaping has been slightly demonized as well, eating and drinking seem perfectly natural and normal, and I think you're seeing, you're gonna see a lot more conversion

into the market coming in in those categories. Let me follow up on that. Do you have a sense about how many new people tried cannabis after it became legal, or was just making the whole thing legal just made it easier for those who were already doing it? I don't have exact data in front of me. What I do know is that we're having a harder time transitioning the legacy consumer into the legal market.

So those heavy, heavy consumers that would be purchasing a lot of flour, a lot of concentrates, they're not really transitioning with as much ease. Whereas a new consumer is more comfortable going into a legal store where there's a government stamp that says, yep, this was certified by the government, it's safe for you to consume. So I think there's two levels of entry points that we need to work on for legalization to work.

I presume you still dabble in the black market a little bit in terms of trying it? Not really. No? No, I work in cannabis, I work in legal cannabis. Okay, because the one thing I have no idea about is whether the stuff you buy at the Ontario cannabis store versus the stuff you might pick up at a party or on the street or something, what's the quality difference nowadays? You know, it really depends. With edibles, you're getting a lot more THC, which is maybe not a good thing.

You know, I think the government regulations will adjust to have legal edibles that will match. The nice thing about it is that legal is tested, you know, and then unregulated is not tested. So when they tell you that it's 300 milligrams of THC, is it? Is it really? Probably not. It's probably around 10.

And then for flour, I think the legal market has caught up. There's enough legacy growers that are switching over to the legal side that now when you're buying legal cannabis and you buy for a more premium quality, you're not just going for a value bag, you're going to get really, really nice flour and I would say even a superior quality to what is happening in the unregulated. A lot of people moved into this space when it first became legal, right? There was just a ton of activity.

And then we have seen as time has gone by, we've seen some bankruptcies, we've seen fewer people, more people getting out of the business and so on. Have you been able to make a determination as to what the difference is between those who went in and did well and are still doing well versus those who went in and it all fell apart on them? I've always said, people imagine that you say cannabis three times and click your heels and money just rains out the sky. I can definitely tell you 25 years in this business it does not. Legal or not

legal there's always problems and challenges. I think a lot of people went into it with that thought in mind, you know, that you're gonna have cannabis and people are gonna pay $10 a gram for it at wholesale. That's not what's happening. The real world cannabis wholesale is for about $1, $1.50 tops if you're looking for some really nice flower. What you're seeing is that the companies that have adjusted and have niched in on their products and they're not trying to do everything for everybody are doing really well. I think if we look at the different levels of licensing, processors have done very very well. So companies who take cannabis and make it into

other formats. So when you're buying an edible, a vape, or a beverage, or even a pre-roll, those all have to go through a processor. And most of those processors don't have direct to consumer brands. They're only dealing with B2B. So excise tax... B2B? Business, business. Business, business. So, you know, all the excise tax problems that you're seeing a lot of the companies get into, processors don't really have that issue. They're not paying excise tax.

So I think that being focused and laser focused on what your business is makes you successful. Let me get you on the excise tax issue because there's a lot of people in the business right now who are obviously very unhappy that the excise tax portion of the price is still as high as it is. Do you think that's a significant inhibition to making cannabis more popular in legal circles as opposed to on the black market? I think there's a middleman in the black market too.

It's not like when you purchase your gram from your dealer at the pool hall as we used to do back in the day, there's a middleman to it, right? There's a grower, there's a middleman. It goes through different levels until it gets your hand and same in the legal market the issue that I think we have and the reason that certain formats are are not succeeding such as concentrates and converting people over is because of the excise tax and then the markups from the provincial boards in the middle are are too high there's too much money going from the grower who's getting a dollar, right,

and then it is being sold to a brand or a different LP that goes either into a licensed producer, so it goes into your bad goods, your packaged goods, then it gets sold into the middleman, the wholesaler. Some provinces have private wholesalers, but there is a middle markup across the board, pretty much in every province. And then it goes into the retailer's hand. They have to mark it up, and then it goes into your hand. So in between that dollar, that gram cost,

to you buying it for 10, the government has taken about $4 on top. If it's a concentrate, it's 4x. So it creates an issue where the pricing of cannabis is not in line to achieve the goal of getting rid of the black market, because it's just not feasible with so much taxation in the middle. Let me ask a question a bit out of left field right now.

And that is, you and I both know people who went to jail for indulging in cannabis, either selling it or using it, whatever, over the long history of this product. And when it became legalized, there were a number of people who were, frankly, former politicians who ended up on boards of these cannabis companies who suddenly now that it was legalized, they were invited in, in part to help bring legitimacy to these cannabis companies. You were in the business well before any of that happened. ticked off people who tried to move this product forward for 20 years as you did,

how ticked off you are that some of the people who were in politics and now that it's legal and they are enjoying the fruits of their labors and that, how pissed off are you about all that? I'm not at all. You're not? I'm not at all. Good for them. A lot of those companies went bankrupt, by the way. So having a politician in your pocket did not bring you billions of dollars. It brought you legitimacy with your stockholders. And that's pretty much it. It was unnecessary to have politicians. If you have a good GR firm, a good lobbyist,

you could do exactly the same level of work. Or even just me walking into a politician's office for a much cheaper do exactly the same level of work or even just me walking into a politician's office for a much cheaper price does the same thing. But I'm happy that people came into the industry and gave it legitimacy, whether it be C suites that came from Molson's or politicians that came in as government relation people. Anything that could bring legitimacy into the cannabis industry, I think, is a great bonus. And I'm all for it. How am I doing on time, Control Room?

Have I got 10 seconds to ask her how she got a name like Abby Roach? I got 30 seconds left. Roach is not your real last name. No, neither is Abby, but. Because it just was too perfect for somebody in your line of work to have the last name Roach. Yeah, when I opened my first store, it was 1999, and there was only white pages, and my last name is very rare, so if you wanted to find me, it was very easy to find me. I was the only one in the book. And there was, in Kensington Market,

there was a band called Bunch of Effing Goofs since the 70s. And every member of that band that ever belonged to the band, their last name was Goof. So I just decided, you know, roach is a great word. And, you know, it's the end of it. It's tail end of your spliff. And I picked it as my last name.

I was going to say, perfect for your line of work. Yeah. That's Abby Roach from Dope Brands Consulting. Abby, good to see you again. Thanks for coming in. Thank you.