Source: NY Times, By IAN AUSTEN
Hershey stopped producing chocolate in Smiths Falls, Ontario, six years ago. The work went to Mexico, but the factory remains, along with reminders of the glory days: A sign that once directed school buses delivering children for tours. A fading, theme-park-style entrance that marks what used to be the big attraction — a “Chocolate Shoppe” that sold about $4 million of broken candy and bulk bars a year.
The once ever-present sweet smell of chocolate is gone, too. In the high-ceilinged warehouse, where stacks of Hershey’s bars and Reese’s Peanut Butter Cups once awaited shipment, the nose now picks up a different odor: the woody, herbal aroma of 50,000 marijuana plants.
Clinical, climate-controlled rooms with artificial sunlight house rows upon rows of plants at various stages of growth. In the “mother room,” horticulturalists use cuttings to start new plants. The “flowering rooms” are flooded with intense light 12 hours a day to nurture nearly grown plants in strains with vaguely aristocratic names like Argyle, Houndstooth and Twilling.
A court ordered the government to make marijuana available for medicinal purposes in 2000, but the first system for doing so created havoc. The government sold directly to approved consumers, but individuals were also permitted to grow for their own purposes or to turn over their growing to small operations. The free-for-all approach prompted a flood of complaints from police and local governments.
So the Canadian government decided to create an extensive, heavily regulated system for growing and selling marijuana. The new rules allow users with prescriptions to buy only from one of the approved, large-scale, profit-seeking producers like Tweed, a move intended to shut down the thousands of informal growing operations scattered across the country.
The requirements, which went into effect in April, are giving rise to what many are betting will be a lucrative new industry of legitimate producers. The government, which will collect taxes on the sales, estimates that the business could generate more than 3.1 billion Canadian dollars a year in sales within the next decade.
“It’s just so rare that you have an industry that’s growing but which has a huge established market,” said Chuck Rifici, Tweed’s chief executive. “A year ago, if you asked me if I’d be working while looking at thousands of pot plants, I would never have thought that would be the case.” Before deciding to focus on the marijuana business, he worked as a financial consultant to technology start-up companies in Ottawa, less than an hour’s drive to the north.
Canada is not unique in transforming once-forbidden cannabis into a legal, or at least tolerated, proposition. The Netherlands has long allowed personal possession and cultivation of small quantities while allowing commercial sales through licensed cafes. Spain permits growing for personal use. Portugal has decriminalized possession of small quantities of all drugs.
In the United States, 20 states and the District of Columbia have legalized medical marijuana; both Washington State and Colorado have legalized recreational use with conditions.
But marijuana remains illegal under federal law, creating uncertainty; the federal government, for example, recently banned state-legal marijuana growers from using federal water on their crops.
Canada’s across-the-board law, by contrast, provides a cohesive set of regulations, laying the groundwork for a group of companies to set up operations.
“That was really important for us as investors,” said Brendan Kennedy, chief executive of Privateer Holdings, a marijuana private equity fund based in Seattle that started Tilray, one of Canada’s new legal growers. “People talk about the Colorado model; people talk about the Washington model. I think someday they’ll talk about the Canada model. By creating a tightly regulated federal system, by creating a federal license, by making it difficult to navigate in and capital-intensive, Canada has attracted a different kind of player into this industry.”
‘Why Not Smiths Falls?’
For most of its recent history, Smiths Falls (population 9,000) was defined by two things: the 19th-century canal that passes through its center and the chocolate-
scented air. The Hershey plant, which had about 800 employees at its peak, was a vital part of the economy. Until a recent repainting, the town’s water tower featured the Hershey’s logo and declared Smiths Falls “the Chocolate Capital of Ontario.”
“It was a huge tourist attraction for the town,” Dennis W. Staples, the town’s mayor, said of the Hershey’s factory, which lured about 400,000 visitors a year. “They were without a doubt an excellent corporate citizen.” The company sponsored sports teams and hockey tournaments and helped underwrite a “chocolate and railway” festival each summer.
The relationship seemed so fixed — the factory had been there for more than 40 years — that Mr. Staples was a bit puzzled in February 2007 when reporters called asking for comment on Hershey’s plan to leave town. No one had told Mr. Staples. “Probably not the best way to communicate to the mayor,” he said.
Article source: http://www.nytimes.com/2014/05/25/business/international/when-cannabis-goes-corporate.html?_r=0