Canada marijuana firms say illegal rivals costing them customers

By Leah Schnurr
OTTAWA, March 2 (Reuters) - Canada's medical marijuana
growers say a jump in the number of illegal marijuana
dispensaries as the federal government decides how to regulate
the drug is costing them customers.
Prime Minister Justin Trudeau promised during last year's
election campaign that his Liberals would legalize recreational
marijuana, following Washington and Colorado in the United
States.
While there are no official figures, industry experts say
the pledge has encouraged illegal store fronts that compete with
licensed producers to provide marijuana to Canadians with a
medical prescription.
"They've definitely been emboldened with the election and
you've seen a huge growth," said Aaron Salz, analyst at Dundee
Capital Markets who follows licensed producers including Mettrum
Health MT.V and Aphria Inc APH.V
Licensed producers, who distribute marijuana by mail, note
they must comply with rules set by the former Conservative
government, increasing their relative costs.
"We're basically competing against a store that buys their
product from whoever is growing it in their basement," said
Denis Arsenault, CEO of producer OrganiGram OGI.V .
Former Toronto police chief Bill Blair, the government's
point man on legalization, emphasized the current laws remain in
effect, but dispensaries have multiplied.
A Canadian court decision that medical marijuana patients
have the right to grow their own cannabis is seen further
encouraging dispensaries, which often buy their product from
such growers.
Also called compassion clubs, dispensaries have long served
patients with illnesses such as cancer. Proponents say they have
the advantage of immediate convenience and Canadians also do not
always know they are illegal.
"Because of this confusion, they are a source of
competition," said Greg Engel, CEO of producer Tilray.
OrganiGram's Arsenault estimates that about 30 percent of
new patients in the industry every month are going to
dispensaries. He said he is not against dispensaries if the
government forces them to buy from legal sources, but expects
they will be shut down quickly if they are not included in the
government's new framework.
At the Ottawa Medical Dispensary, members with the required
documentation can view products laid out beneath a glass case
and discuss their needs one-on-one with a "budtender".
The dispensary, which opened last November, has more than
500 members, said co-founder Shady Abboud. He said its mission
is to provide pain relief and clients are encouraged to use the
licensed producers as well.
"I'm not here to become a millionaire or anything. In the
end, it's everyone's personal choice," said Abboud.