Before the Cannabis Act and Cannabis Regulations came into play, all businesses (small or large) were required to meet the operational and security requirements of large-scale facilities. This made it extremely difficult for smaller facilities to thrive, due to the expensive start up costs and stringent application requirements. By offering the standard and micro subclasses of Cultivation and Processing licences, the Cannabis Act and Regulations now allow for businesses of all sizes an equal opportunity to start a cannabis business and work to turn a profit.
If you’re wondering where your cannabis processing business falls in all of this, and whether you should pursue a Standard or Micro Processing licence, keep reading for some points you should take into consideration.
To begin, a Processing licence is required to manufacture cannabis-based products such as edibles, topicals and extracts. Currently under the Cannabis Regulations, there are two variations of the Processing licence; Standard Processing and Micro-Processing.
The Micro-Processing Licence is generally reserved for smaller manufacturers, as it only permits up to 600 kg of dried flower (or the equivalent) to be handled each year. This option is ideal for businesses that do not intend on expanding their market reach in the near future. Keep in mind, micro-processors who also have a micro-cultivation licence are permitted to process more than the 600 kg cap, given that they are processing the cannabis cultivated from their own site.
The Standard Processing licence functions much like the Micro-Processing Licence, but there is no limit on the amount of cannabis product your business can handle each year. You can manufacture, sell, and distribute an unlimited amount of cannabis with this licence. Both Standard and Micro Processing licences allow for the sale and distribution of cannabis products to other licence holders or to provincial and territorial retailers.
Regardless of which licence you choose, Standard or Micro Processing, a prerequisite to being licensed is that a production-ready facility must be built prior to submitting a licence application to Health Canada. This requirement was announced in May 2019 and replaced the former two-step review process, which included an extensive assessment of a paper application with feedback from Health Canada, followed by submission of a site evidence package for review. The site evidence package used to be one of the final steps in proving a facility was operationally ready – but now, it is one of the first.
Micro licences are unique in their security standards, as they often operate with a minimum number of employees. With a Micro licence, cannabis storage monitoring is much less stringent than that of Standard licences. Another point to consider is that Micro licences generally have a reduced facility size and operations, which are reflected in the annual regulatory fee per licensed site.
With a Standard licence (Cultivation or Processing), the minimum regulatory fee is $23,000/yr. This fee is significantly reduced for Micro class licences, where the minimum fee is $2,500/yr. While the lower regulatory fee for micro class licences does seem attractive, the total cost required for your start up should not be underestimated. The minimum license fee is only one factor in the cost of operations for a Micro-licensed facility. Other costs include land and building costs, employee salaries, equipment, as well as property tax and municipality fees for permits and documentation. These alone can add up to well over $500,000. Therefore, the cost of even a Micro-licensed facility can reach $1 million or more!
Finally, it’s also important to consider the future of your cannabis business. If you know there is potential for growth and expansion, it may be wise to secure a Standard Processing Licence and proceed with operations in a phased approach, rather than pursuing a Micro Processing licence and then having to upgrade later to a Standard Processing licence. Expanding in a phased manner could definitely save some time and effort in the future, because the amendment that will need to be submitted to Health Canada will be a simpler application than changing licence subclasses.
Choosing between a Standard and Micro Processing licence is an important business decision that should be made by your team once you’ve considered all of the necessary factors. Contact us today to discover how we can license and legalize your cannabis business to meet federal or provincial regulations.
How we can help you
At Cannabis License Experts, we provide you with the guidance to plan your cannabis business, acquire funding, navigate the legal requirements, and acquire the appropriate licence for your operations. As the Canadian cannabis industry develops, more and more licensed producers will be needed to meet the demands of consumers.
Cannabis License Experts offers support from day one of starting your cannabis business, including strategic planning, floor plan preparation, site audits, SOPs, Preventive Control Plans (PCPs) and more.
Our Edibles Compliance division can provide you with a solid plan for your edibles business to help get your products on store shelves.
