Rick Redekop is bullish on pot potential as Canada draws closer to finalizing legal recreational distribution; local upside seen in demand for skilled workers
BY JOHN SWART VOICE Correspondent
Obtaining a license to grow cannabis commercially is not quick or inexpensive. First you fill out reams of paper applications to Health Canada, the Federal government department responsible for medical cannabis licensing and regulation. You'll then be in contact with Health Canada numerous times to answer questions or provide more information. There will be detailed facility plans to submit. You'll be subject to intensive and extensive character background checks and security checks, which can take six to eight months. Financial checks and qualifications will be reviewed, and then if everything goes well, you'll get a license to grow. The process takes about a year, and is expensive.
Rick Redekop, President of Redecan Pharm in Pelham, suggests the process is "made difficult to weed people out." He can't resist the pun.
As a licensed grower, you'll have to build your facility, then apply for a license to sell. That's correct. You build a new facility, or retro-fit an existing greenhouse, so that it can be inspected by Health Canada to ensure everything's in compliance, with no guarantee you will get a license to sell your cannabis.
For this stage of the application process, Redekop was fortunate. His local, family-owned farming business already had an existing greenhouse operation growing strawberries, cucumbers, and other familiar crops. Still, he had to risk $1 million dollars to retrofit and upgrade their existing facility before he could apply for a license to sell medicinal cannabis.
Prior to applying to be a commercial grower, Redecop was a regulated "designated grower" of medicinal cannabis, one of thousands in Canada. A designated grower produces strictly controlled small amounts of cannabis for individuals who are approved to use medicinal cannabis, but are unable to grow it themselves. This practice, which allowed the government to begin regulating and taxing cannabis many years ago, was the norm before medicinal cannabis distribution was sanctioned on the large commercial scale it is today.
Because of his experience as a designated grower, Redecop saw the financial potential in cultivating medicinal cannabis early. Redecan Pharm was established when he received his license to grow in June 2014, and a license to sell, applying only to his original 15,000 sq ft facility on Effingham Road, was granted in March 2015. This was prior to the election of Justin Trudeau on October 19, 2015, and well before any certainty there would be a recreational cannabis market in Canada.
Redecan was the 14th licensed grower in Canada. There are now 89 across the country, with 48 in Ontario. Their Effingham Road operation includes all aspects of production: germination by cloning, growing, packaging, and retail shipping to customers throughout Canada. The only function they don't do in-house is laboratory work, because all testing must be done by federally approved and regulated labs.
When questioned about government-mandated membership in cannabis organizations, Redekop said there were none. Redecan is however, one of a dozen professional growers who have voluntarily formed the Canadian Medical Cannabis Council. They have their own code of ethics, are in regular communication with Health Canada to stay abreast of legislative changes, and share best practices.
"Health Canada used to be here every 3 or 4 weeks, checking our records, inspecting, making sure everything was in compliance. Now we only see them every couple months," states Redekop. One has the sense Redekop is trying to follow all the rules, and working diligently to correct problems as they arise.
Redecan's Foss Road facility is an immense 130,000 sq. ft., and cost $12 million dollars to construct, including land, building, and major equipment.
Add another million for small equipment and incidentals, and you have a significant investment in Pelham. When questioned about how much of that amount was spent in locally, Redekop was quick to reply, "All of it."
He reminds me that Redecan is locally financed, his family has an agricultural farming history in Pelham, and roots to the local community.
"The cement all came from DM Concrete in Fenwick, the electrical contractor was from Pelham," he continues. "We had to go to Vineland for the plumbing contractor," Redekop says, almost apologetically.
Redekop, in his 30s, is a graduate of Guelph University, where he began in engineering, then switched to general sciences with a horticultural major. Tim D'Amico, in his late 20s, is Project and Site Manager. He was part of the second-ever graduating class in biotechnology from McMaster University.
Redekop designed the Foss Road facility himself, reducing costs and keeping expenditures local. D'Amico, who had previously worked for Tweed, a large Ontario cannabis producer, joined Redecan in 2016 as Project Manager for Foss Road, bringing his industry experience to overseeing the facility's construction. He is now managing an expansion which will triple the facility's size.
"When it is finished, Redecan will be one of the top five in Canada for production footprint [capacity]," says Redekop.
Redekop and D'Amico shared drawings of their new office building which will be constructed at the Foss Road location, in front of the greenhouses, and mentioned that fees and development charges would contribute approximately $150,000 to Town of Pelham coffers.
Redecan currently employs 40 people, and is adding staff monthly. When the greenhouse expansion is completed, and their license to sell is approved this spring, they will have more than 100 employees. Many are skilled positions, and Redekop confirms that wages in cannabis production are generally higher than in other facets of agriculture.
"All staff must go through a federal government security check, which takes months," says Redekop. "Having certified staff is critical. No one is allowed in any room containing cannabis, during any phase of the operation, without a certified employee present."
Redekop and D'Amico prioritize employing locally. More than half of Redecan's staff live in Pelham, and it's a trend they want to continue. All their employees come from Niagara and the area, which provides benefits for Redecan.
"If there's problems to address, extra staffing needed, whatever, employees are right around the corner. Makes life easier, but also improves customer service and product quality," states Redekop.
Niagara College has announced that it will offer a post-graduate program in cannabis industry disciplines, in part at the suggestion of local producers eager to ensure a knowledgeable workforce.
"Redecan expects to be involved as a facility that provides co-op experience to the students," claims D'Amico. "One of the professors is already a regular visitor."
From the gated entrance and barbed-wire perimeter fencing to the countless outdoor cameras, it's clear security is a significant part of any cannabis facility operation. A tour inside confirms the impression. It feels like entering a maximum security prison.
To venture anywhere beyond the offices, the facility must be entered through secure locker rooms, where employees must change to clean clothes that have not been worn outside the facility, and everyone else dons coveralls, booties, hairnets, beardnets, and gloves. No biological invaders or contaminants of any kind are welcome.
This regimen is Health Canada-mandated through Access to Cannabis for Medical Purposes Regulations ( ACMPR), and D'Amico supports it. Product quality is paramount at Redecan, and any contaminants that can affect purity and control, or interrupt the production process, are protected against. Once inside, experiencing the facility's scrub protocol is eye-opening. There's less dust in this operation than in a hospital.
There are 176 cameras on the premises, all high definition, and Redecan must archive every image for two years.
"If you walk up to the property, even before you get near the compound fencing, we know you're here, 24/7," says D'Amico.
At every door, you must scan a control panel with the chip in your identification badge and enter your individual PIN code. Once you're in, you must close the door and repeat. An alarm screams if you don't accomplish all this in 30 seconds.
The facility's vault is over-the-top. It is for storing processed product before shipping, and securing 50-gram samples of all crops, which ACMPR demands be retained for two years for testing and inspection purposes. The vault cost half a million dollars, and is a patented design made of pre-cast concrete. The floor is 45 centimetres thick, reinforced with re-bar, and the concrete walls contain twelve seismic sensors wired to sirens.
The first step of entry into the vault is via a locked, electronically-encoded steel door, which allows you into a narrow chamber facing a woven steel wire cage. This cage has a traditional key lock, which only Redekop has access to at this time. Next is another electronic lock, which, when opened, allows you access to a safe-like tumbler lock, mounted in another six foot steel door. If you get through this, you've made it into the vault, where you are watched by eight more cameras, and monitored by motion sensors.
As we're exiting the vault, Redekop remarks, "We're glad we've got it, but if you're building a new facility now, you don't need a vault."
Incredulous, I ask for clarification, and he replies that Health Canada regulations are changing, and the mandate for a vault has been removed. I suggest that regulations and compliance in this new industry must be a moving target, and he just smiles. Being one of the first to build a facility has cost him $500,000 that his late-arriving competitors won't have to spend.
"The regulations on the number of cameras has been significantly reduced too," Redekop says with a shrug.
Next stop is a growing room, which is totally computerized using a system designed in-house. Computers monitor natural light and add artificial lighting for intensity only as required. Blackout screens cover the sides and ceiling of the greenhouses, controlled by computers that monitor outside light and temperature. The screens can be closed to retain heat or reduce any artificial light escaping into the neighbourhood. Irrigation water and fertilizer application is computer controlled specifically for each plant type, and the floor is heated to reduce temperature fluctuations.
D'Amico tags each plant, and identifies each batch of cannabis, so that every plant's history is tracked for reference. The vegetation phase, during which foliage and plant size grow rapidly, lasts approximately four weeks. During this cycle the plants receive 18 hours of light each day.
The flowering stage follows, during which the plants are trimmed and growth is focused on the buds. This phase lasts eight to 10 weeks, and the plants receive 12 hours of light.
Upon entering the flowering room, I receive an education on the importance of controlling the tetrahydrocannabinol (THC) and cannabidiol (CBD) levels in the product, and learned that the stereotypical image associated with cannabis use, getting stoned or wasted, is not necessarily accurate.
All medicinal cannabis now sold displays THC and CBD content on the label and in marketing material, something that will continue in the recreational market. THC is the psychoactive chemical compound that produces a euphoric high, while CBD does not produce a similar sensation.
Redekop points to various plants, shows me small differences in appearance and aroma, and begins, "Those will make you want to jump up and do the dishes and mop the floor."
Pointing to a different area in the greenhouse, he says, "Those will make you want to eat potato chips all day, and those over there are a perfect replacement for a glass of wine."
The next room was for harvesting and processing, a facet of the operation without activity during my visit. On Redecan's website, the company claims it has a unique method of production that reduces costs and improves quality. When questioned for details about this, D'Amico said, "We can't tell you about it." Well, Colonel Sanders never gave up his secret Kentucky Fried Chicken recipe either.
This led to a discussion of marketing, and where Redekop and D'Amico predict the cannabis market is headed. I suggest that with so many producers building facilities there might be an oversupply in the future, and that prices will become very competitive, making turning a profit difficult. Redekop and D'Amico do see a potential profit squeeze coming, but have a different perspective.
They believe the market for recreational cannabis will eventually be as big as alcohol, so don't see lack of demand as being a problem anytime soon. They believe the medicinal market will stay strong too.
"Insurance companies are starting to cover the cost of medicinal marijuana now," states Redekop, "so it's less out-of-pocket money for the consumer. Veterans' medicinal cannabis, if they qualify, is 100 percent paid by the government."
The recreational market is where they think profits will be squeezed, and Redekop says Redecan is well poised to endure lower recreational pricing, in large part because of their unique growing system. Using broad-brush estimates, Redekop and D'Amico say that the average medicinal cannabis sale today earns the producer $9.00 to $10.00 per gram.
The government's two main arguments for recreational cannabis sales through government licensed channels are: enhanced consumer safety because of better quality control; and a reduction in black-market sales and organized crime involvement. In order to achieve this, government will keep prices low. Yet growers have no doubt that various levels of government will work to extract as much tax revenue as possible from sales as the market grows, a move Redekop thinks will drive producers' prices as low as $4.00 to $6.00 per gram.
"Because of our growing system and rigorous cost controls, Redecan can still be profitable at these lower prices," says Redekop. In fact, Redecan markets itself as a high-quality, low-price producer already, and has had to stop accepting new customers until the Foss Road facility is licensed for sales and comes on-stream because of product shortages.
At present, the legal cannabis trade in Canada is relatively protected from international competition. Canada is a known leader in the industry, and for prepared medicinal products Canada is increasing its export market agreements to include Australia, Germany, Denmark, Brazil and Uruguay. When asked about trading with the United States, the reply was quick.
"Not while Trump's there."
In Ontario, cannabis for recreational use will be sold through the Cannabis Control Board of Ontario (CCBO), managed by the LCBO, in stand-alone stores designed for the purpose. While speculating how shipments from producers to the CCBO in Ontario might be handled, Redekop expects a system similar to the way spirits are sold to the LCBO. Each cannabis package will have a seal much like you see on liquor bottles, proving taxes have been paid. Redecan, and other operators, will have to buy the seals before any product can be shipped, ensuring taxes have been paid by producers well before the product is retailed.
Speculation within the industry sees the product being merchandised like cigarettes in Ontario. Recreational consumers will not be able to view any product in the CCBO, which will be behind screens, and purchasers will be served by a "bud-tender,” a CCBO employee.
Redekop envisions consumers that know their products and strains making purchases within the store on a tablet-like device.
There’s little doubt that the agribusiness of cannabis in Niagara, and Pelham, is an important, and rapidly growing sector with professional operators contributing multi-millions of dollars, and hundreds of new jobs, to our local economy.
