Cannabis micro licensing: 5 things to know before you grow

When cannabis legalization comes into effect on October 17, it won’t just be the big fish setting up shop. In April, when Bill C-45 was passed in its second reading, special micro licensing was introduced to help small-scale cannabis producers have a voice in the soon-to-be flowering industry.

But big dreams and green thumbs aren’t all that’s required to obtain a micro licence. Prospective growers and processors can expect a labyrinth of fuzzy regulations, unexpected expenses and lots of red tape.

To give hopeful entrepreneurs a place to start, we’ve assembled this list of five big considerations for anyone acquiring a micro licence. While it certainly doesn’t cover all the nuts and bolts, it provides a great introduction to some of the bigger twists and turns encountered on this wild journey.

1. There is more than one cannabis licence to consider

Available for both cannabis cultivation and processing, micro licences will be one of four subclasses of cannabis licences available in October. The other three are standard, nursery and hemp.

A micro cultivation licence will permit small businesses to grow either indoor or outdoor cannabis production in an area no more than 200 square meters. While it won’t allow individuals to grow in the confines of their own home, the licence will let holders designate a portion of personal property to their business as long as it's not lived in.

In order to get cannabis to market, micro growers will either have to go through a third-party processor or obtain a micro-processing licence in order to package, transport, etc. This licence lets small-scale companies possess up to 600 kilograms of dried cannabis per year.

It’s also important to note that if one wishes to cultivate starting material such as seeds and seedlings, a nursery licence is required, which is separate and distinct from a micro cultivation licence. Moreover, nurseries must be kept on premises separate from grow operations. Therefore, those holding both a cultivation licence and a nursery licence must either subdivide their property or acquire separate land for their secondary operation.

2. None of these cannabis licences let you sell to end users

With the issuing of micro cultivation licences, many of us are hoping to see the emergence of a potent craft cannabis culture not dissimilar to that of craft beer and wine. Smaller producers can gain a competitive edge by offering greater variety and higher quality strains than their macro counterparts.

And while micro licences will certainly help pave the way for a booming craft industry, it’s still worth noting that unlike a brewery or winery, micro licensed cannabis producers will not be permitted to sell onsite. In fact, micro licensed producers will only be allowed to sell wholesale to third-party processors or, if they have a processing licence of their own, directly to provincial distributors.

This imposed middleman is a legitimate concern for small-scale producers. Farmers who wish to forge direct relationships with supporters of small, sustainable crops will be beholden (more often than not) to much larger corporations. We’re already seeing notable pushback from farmers in provinces such as BC who want a bigger say in how their products are stored and presented to the public.

3. Small-scale growing is still a big investment

Canada.ca lists initial micro-licensing fees at $9,100 and ongoing fees at $5,992. But that’s just the tip of the iceberg. If you’re starting from scratch, expect to be set back at least $100,000 for just a 100-square-meter space. Add real estate expenses, legal fees and insurance and it’s quickly evident that micro growing is by no means a small investment.

There are serious ROI considerations to take into account as well. Oversupply (a very real concern) could drive down market price enough to make profitability a much longer game than many small-scale growers are prepared for.

Yet none of this is to say that a micro licence isn’t a worthwhile endeavour (in fact, experts predict that if done right, “a micro-licensee could gross between $1.3-million and $2.4-million in revenue, enough to sustain four full-time and two part-time employees and to be profitable after expenses”); we’re simply illustrating that its not an investment to be taken lightly—very real capital and very real risks are involved.

4. Provinces and municipalities set their own rules

Just because micro licences are federally issued doesn’t mean that every small-scale grow-op is subject to the same rules. Maybe you’re sitting on a 200-square-meters of land, waiting to pounce the moment these producer licences become available. Have you asked your community if it shares your enthusiasm? If they don’t, you may be out of luck!

For instance, if you’re situated in B.C., the province, its municipalities and indigenous governments all have the right to prohibit “cement-based, industrial-style, cannabis-production bunkers on ALR land in their communities,” which, in turn, would forbid any hydroponic setups.

Currently, the uncertainty surrounding zoning bylaws is one of the most pressing issues for potential micro-licensed producers and processors. Many provinces and municipalities are still hashing out how to accommodate small-scale cannabis players. In fact, the B.C. government won’t be announcing what most of its bylaws are until October 17! Anyone taking licensing seriously needs to reach out to their local decision makers as soon as possible.

5. Black-market genetics may be easier for micro licensees to legitimize

Feeling unfairly deprived of the head-starts awarded to industry behemoths, many potential Canadian growers and processors are rightly critical of how federal and provincial governments are handling micro licensing. But getting into the game at such a late stage can also have its upside, particularly if you’re a business hoping to transition from the black market.

In 2018, the Canadian government announced that black market plants and seeds (often referred to as black market genetics) will be permitted to transition into a licensed facility. Previous regulations didn’t offer such a path to legitimization, which means that players new to the game will be awarded an opportunity that early-starters didn’t have.

Moreover, laxer security regulation for cultivators and processors with micro licences will offer more industry opportunities for those with past marijuana-related convictions. That being said, more stringent restrictions still apply to those in high-level positions.

Did we miss anything?

We’re sure we did. In fact, by the time this post is published, it’s likely new facts and figures will have come to light. This is a subject we plan on returning as the new legislation moves forward to so please, leave your questions and remarks in the comments section. Are you a small-scale producer? We’d love to hear about some of the challenges you’re facing along with the many opportunities you foresee!