Daniel Nguyen had a lot of feelings about October 18, 2018, the day Canada became the first G-7 nation - and only the second one in the world after Uruguay - to legalize the retail sale of marijuana. Nguyen, 22, is the owner/operator of NUMO Cannabis, a single location retailer located in the Alberta Avenue area of Edmonton.
“It was a whole lot of different feelings, feelings of anxiety, feelings of excitement, just everything,” says Nguyen who graduated from the University of Alberta with a commerce degree. “We had a lot of last-minute stuff that really happened that night before opening. We just had our full showcasing and cabinets come in that night and we just finished our frosted windows. We were up until 5 a.m. that night, then we were right back up at 7 preparing for the big opening at 10.”
There was a lot of excitement for buyers as well. Like at many other cannabis retail locations that day, people were lined up outside NUMO, snaking from the door to the end of the building in a line that would turn out to be four hours long. This continued all day and into the night. “We were supposed to close at 10 p.m. but we extended that by two hours just because we wanted to serve everybody. We had people waiting that long, and we didn't want to tell them ‘Hey, we can't serve you’,” he says “So we stayed longer, we did what we could, I spent the night at the shop and we did it all over again the next day.”
Along with the challenge of serving so many customers, NUMO’s debit/credit card system broke down, a stressful moment, but one that Nguyen recalls in hindsight as a bit of a laugh.
Angus Taylor is the co-founder of NewLeaf Cannabis, a larger retail cannabis operation with 14 stores in Alberta, eight in Calgary, three in Edmonton, three in Lethbridge and one in St. Albert, with definitive plans to open two more stores in Medicine Hat and Leduc. NewLeaf employs more than 200 people and, like NUMO, experienced lineups all day outside their stores the day cannabis became legal.
“I would say it was and is a very exciting time for us. We started this company with myself and two partners 18 months ago,” says Angus. “And to go from three guys with an idea six months before there was regulatory certainty to the point where we're employing over 200 people and executing a business of this scale, it's incredible growth. It's really exciting as an entrepreneur to create this kind of company this quickly.”
In its first 50 days of operation, NewLeaf had approximately $3 million in sales, 94 percent of which were consumable marijuana. The average gross margin for each retail outlet in the NewLeaf chain was over 30 percent. The lines may have been long, but both Taylor and Nguyen were not overly surprised by this demand.
“My analysis has always supported that one in five Canadians approximately uses cannabis regularly,” says Taylor, who also worked as a management analyst before founding NewLeaf. “We are not surprised by Canadians’ desire for legal and regulated cannabis that they can feel guilt-free and confident consuming.”
But those lineups and high sales figures did have a downside. Because of many reasons, including regulatory ones such as getting licenses approved by Health Canada, many cannabis producers and growers weren’t able to get up and running in order to have enough product in time for legalization day. There plants were in the ground, so to speak, but not enough of them were mature enough to be harvested and processed.
According to a news release from AGLC, Alberta’s regulatory body overseeing cannabis sales, Alberta only got 20 per cent of the marijuana it ordered from suppliers prior to October 17. So product in the retail stores quickly dried up, forcing many outlets to close for a time in late October to early November.
NUMO had to shut its doors for two weeks in November due to the lack of product availability. It was difficult, Nguyen says, especially since his 12 employees couldn’t work and get paid. “It wasn't just the retail stores. It wasn't just the regulators. It wasn't just the licensed producers,” he says. “It was kind of everything, and the whole process of legalization. I'm not saying that anything was done wrong because who could have known what to do right? It was just a big learning curve that everybody had to go through.”
NewLeaf had similar product shortages compared to other retailers but ALGC put a moratorium on all new retail cannabis licences as a means to ensure there was enough to support the 65-plus stores that had already opened. In all, 700 applications from over 400 applicants are stuck in the licensing limbo created by the AGLC moratorium; 24 of these belong to NewLeaf. And while this slowed down the company’s expansion plans throughout the province, the shortage was not unexpected.
“I think it was really just a timing issue, and if these buildings had been commissioned a little earlier, then they would have plants in soil and those would be coming to maturity and they'd become available to the supply chain,” Taylor says. “I think that being the first country to really legalize at this scale that we have, you can't expect perfection on the first day.”
Things have now stabilized enough so that there is at least enough product for the stores to remain open. Nguyen hopes for more variety in product but he’s sure that will come and the cannabis retail industry will just get better and better.
“You just do what you can. A big part of what I have here is an amazing team. Especially through the stock-outs, when we were closed for over two weeks, they all stayed. They want to be in this industry. They understand this is a new industry. I couldn't be happier with my team. They're amazing. Whatever challenges that come my way, I'll be ready to deal with it and so will my team. So, we're excited.”