It was supposed to be the first cannabis processing facility located in a North American city. Now, only months before it was set to open, the Nelson Cannabis Collective says it has to back out of the industry without ever having grown a plant.
The company announced Thursday that unexpected cost increases, supply chain issues and cheap prices per gram for cannabis had forced it to cancel its plans even as construction continues on its 29,000 square foot, four-storey building in Nelson.
Despite having already raised $10 million, Mitchell Scott, one of Nelson Cannabis Collective’s founders, said it became clear the company wouldn’t be able to find further investment as costs escalated.
Instead, Scott said the company will finish construction on the building in Nelson’s Railtown district at 45 Government Rd. before leasing out the space.
“We knew we were getting into something risky,” said Scott. “It’s why we built the building where we did, and it’s why we built the building the way we did. Because we knew that we needed to have a pivot in case things didn’t work out.”
The city approved the company’s rezoning application that year and expanded its plans for a facility that would have produced 2,000 to 2,400 kilograms of cannabis annually, include a retail space and create as many as 60 jobs.
Scott said they had local support for their business model, but a price war in the Canadian cannabis industry between large companies and the black market has driven down the price per gram to a point where it isn’t profitable.
“There are some companies that are able to differentiate themselves with craft, and they’ll be able to do well and hang in there. But at this point, we don’t have a license yet. We haven’t proven ourselves yet. We can say we’re going to grow great cannabis, but we haven’t done that yet.
“So there’s very few cannabis companies in Canada turning a profit right now, and the big guys are really pushing the price of per gram down.”
The cannabis industry has a long history in Nelson, so much so that Touchstones Museum is currently featuring an exhibit on it.
But local companies have struggled to grow since cannabis was legalized in Canada in 2018, citing expensive start-up costs, overregulation and competition with the black market.
Nelson city council once debated how many cannabis retail stores it would allow within municipal limits. Three years later, four stores have opened in Nelson. Two areas that had been set aside for one store each, in Railtown and on Nelson Avenue, don’t have businesses.
Scott said he’s still optimistic about the building, which he thinks will bring life to Railtown once it has tenants.
“We wanted to do something cool for Nelson and be a part of that, and I think that vision still lives with this.”