Canada kicks off muted pot party as first G7 nation to OK recreational cannabis

[October 17, 2018]  By Chris Wattie and Nichola Saminather

ST JOHN'S, Newfoundland/TORONTO (Reuters) - Canada became the first industrialized nation to legalize recreational cannabis on Wednesday but a legal buzz will be hard to come by in its biggest cities as some, including Toronto and Vancouver, will have no stores open.

It marks an historic day as adult Canadians will be able to legally smoke recreational marijuana after nearly a century-long ban.

However, provincial governments' approval of only a small number of shops so far, and a shortage of weed supplied to these stores means most Canadians' first toke on Wednesday will likely be of black-market pot.

"There will be a lot of celebrations on the day, and it will almost all be with illegal cannabis" in some of Canada's biggest cities, said Brad Poulos, an instructor and cannabis business expert at Ryerson University in Toronto. "Recreational cannabis users in Canada ... will just continue with their (existing) sources of supply until the legal system catches up."

Despite the dearth of stores in Canada's biggest cities, consumers around the country will be able to buy legal marijuana online, either through websites run by provincial governments or licensed retailers, although delivery will take a few days.

Newfoundland and Labrador, Canada's easternmost province, was the first to kick off legal sales at the stroke of midnight. Pot enthusiasts in the province will have the biggest choice of shops, with 22 outlets expected to be operating between 9 a.m. local time to 2 a.m., and at least some that opened at midnight on Wednesday.

Countries around the globe, many of whom are just approving medical marijuana, are watching Canada's recreational legalization, which combines federal rules with varying provincial regulations.

The move is a political win for Canadian Prime Minister Justin Trudeau, who vowed to legalize cannabis in his 2015 election campaign to take profits away from organized crime and to regulate the production, distribution and consumption of a product that millions of Canadians have been consuming illegally.

Provinces and businesses have been struggling to prepare, and legalization was pushed back from original expectations of a July start to enable setting up distribution and sales networks.

In the run-up to legalization, cannabis companies have been on a tear, as companies struck corporate deals while others went public creating an investor frenzy.

The Canadian federal government as well as many provinces have been cautious, starting with limited stores and products, including no edibles for a year, and tight control over supply.

WEED SHORTAGE

Ontario, home to Canada's most populous city, Toronto, will have no stores until April 2019, with online sales the only avenue to get legal product due to a change to the province's retail model by a new provincial government.

British Columbia, which plans both province-run and private outlets, will have only one government store open in Kamloops, 350 kilometers (220 miles) from its biggest city Vancouver. Private store licenses will only be issued after legalization, the province's Minister of Public Safety Mike Farnworth said.

Canopy Growth CEO Bruce Linton hands Ian Power, who is first in line to purchase the first legal recreational marijuana after midnight, his purchases at a Tweed retail store in St John's, Newfoundland and Labrador, Canada October 17, 2018. REUTERS/Chris Wattie

"October 18th is going to look very much like October 16th, in many ways," Farnworth said.

Even in provinces with more shops, empty shelves are likely due to a shortage of product. A study by the University of Waterloo and economic policy think tank C.D. Howe Institute found legal supply will satisfy under 60 percent of demand in early months, although that will change as production increases.

"Oct. 17 will ... probably be the least elegant day," Bruce Linton, chief executive of Canopy Growth Corp, the world's most valuable weed producer, said. "But the key message is not how it works on the first day but that there is a first day."

Law enforcement could also be patchy. Canada in August approved a device to detect levels of tetrahydrocannabinol (THC), cannabis's psychoactive element, in drivers' oral fluids.

But many large police departments will forego the C$5,000 device, Adam Palmer, president of the Canadian Association of Chiefs of Police, told reporters on Monday.

Draeger Safety Canada, which makes the device, has shipped some units, but a two-week federal funding delay has put further orders on hold, although it expects demand for between 300 and 500 units through March, Managing Director Rob Clark said. Each test costs another C$28.

While some provinces have allocated funding to enforce cannabis regulations, Palmer said police will not crack down on illegal stores right away.

"When the law changes on the 17th, we're not going to see a big change overnight," Palmer said. "Police aren’t ... chomping at the bit to go out and start raiding stores."

($1 = 1.2934 Canadian dollars)

(Reporting By Nichola Saminather; additional reporting by Julie Gordon and Rod Nickel; Editing by Denny Thomas and Chris Reese)

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