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Canada’s Cannabis Crunch

Dave Jackson Dave Jackson, Stockhouse
2 Comments| December 7, 2018


As consumer frustration mounts over supply shortages, Canadian cannabis consumers look to old and new solutions to fix the problem.


Click to enlarge
(File photo)

As most Canadians know by now, the country’s licensed cannabis producers and distributors are scrambling to keep up with the demand for commercial cannabis. And, as both recreational and medical marijuana consumers know all too well by now, they’re not keeping up.
 
Canada’s cannabis shortage is so severe at present that it has drastically impacted the way cannabis retailers operate. Retailers must now watch their provincial cannabis inventory sites 24/7 before stock dries up. So what were the regulatory powers planning, or not planning, prior to October 17th?
 
As a majority of Canadian provinces continue to report cannabis supply shortages, the simple question of ‘How did this happen?’ needs to be answered.

Here are two obvious facts:
  1. Demand for recreational cannabis comes from customers that were already acquiring cannabis from the illicit market.
  2. The second source of demand has come from new customers who have never used cannabis, but are now willing to give it a try.

Several warnings about potential shortages were circulating in the media prior to the run-up to legalization, but the powers that be weren’t exactly sure how the problem would manifest itself.
 
Now, industry insiders have dropped the bomb that these cannabis shortages could last for years, causing the government to potentially lose out on hundreds of millions of dollars in taxation revenue if the current level of demand continues and no immediate action is taken – StatsCan recently reported that Canadian spending on cannabis rose 1.1% in the wake of legalization.
 
So what are the alternatives and answers to the current failed policies?
 
Recently, the provinces have begun curtailing retail store hours, while some stores are completely shuttered. Online ordering menus appear anemic. Ontario not only experienced a surge of online orders leading to a diminishing supply, but the rotating strikes by Canada Post employees in several Canadian cities meant that even if an order was filled, it was potentially late on arrival. Consumers who were already buying from the black market will likely return to those sources to supplement their legal purchases or to get access to edibles and concentrates – two forms of cannabis that have not yet been legalized in Canada.
 
While customers were shocked to see dispensaries temporarily shuttered so soon, the country's licensed growers weren't surprised, according to Terry Booth, CEO of Aurora Cannabis. Booth, in a profanity-laced tirade at the 2018 MJBizCon in Las Vegas, said that he and the other heads of Canada's cannabis producers saw this problem coming:
 
"It's a sh*t show, and we knew it'd be a sh*t show," Booth said at a discussion panel held at the conference last month. And by “we”, Booth meant his colleagues as well as the federal government.
 
Although Prime Minister Justin Trudeau announced his plan to legalize cannabis back in 2015, the government decided to slow down the process by assembling a task force to compile recommendations for what became The Cannabis Act. That bill had to pass through the House of Commons twice before the Senate approved it last June, giving each province and territory just under four months to establish regulations for a massive new retail market.

Click to enlarge
(File photo)

In British Columbia, the BC Liquor Distribution Branch (LDB), which oversees the BC Cannabis Store, received over 10,000 online orders in their first 48 hours of operation – which paled in comparison to Ontario’s over 150,000.
 
Orders went unfilled. Complaints flooded in. As a result, the LDB says it is now making wholesale changes to their online sales portal to make it more efficient for customers. But rather than fixing the root of the problem, the LBD leveraged the shortage by offering its customers a reduction in shipping charges. On October 31st their website posted the following:

To support the best possible customer experience, the LDB has reduced the cost of shipping and now provides a shorter delivery period for orders. Effective immediately, customers of the online store will pay a reduced shipping fee of $8.00, down from $10.00, and the LDB has committed to delivering online orders within one to four business days. There may be delivery delays in the areas affected by the ongoing Canada Post rotating strikes.”

The LDB has also committed to reducing the size and formatting of packing materials in an effort to support social and environmental responsibility. Can you say 'carrot and stick'?
 
Unlike the Great White North, lessons were learned quickly south of the border. In July 2017, Nevada sold so much product in its first weekend that Governor Brian Sandoval declared a ‘statement’ of emergency after locals and tourists waited hours in line in triple-digit temperatures to become the first in the state to purchase legal recreational marijuana. Within a week, and in a unanimous vote, the state’s regulatory body passed a new regulation to address the shortage.
 
The commission found that the then pool of stores licensed to distribute marijuana was “insufficient to support the market”. It went ahead and reopened applications and allowed dispensaries previously operating in the medical marijuana program to vie for a spot in the recreational market.
 
The result of the emergency moves in the U.S. retail cannabis space could provide guidance. The regulations in Nevada allowed more registrants to apply for distribution licenses, plus cannabis transportation licenses, which helped to free up their supply chain.
 
Could this new American approach lead to updated plans and policies here in Canada? And could it also lead to the possible reopening of grey market dispensaries that are currently shuttered? With supply and patience now in short supply, cannabis consumers now hope it’s only a matter of time.



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Comments

ZincMan1
What license are they waiting for?? Their cultivation license. they're not even listed on HC LP producer list?
(0)
December 7, 2018

dutchjovan
The government has to let more lp's sell their product. I am invested in Eve and Co. They can't sell due to waiting on a licence from Health Canada. They have product ready, just can't release it due to a paperwork issue.
(0)
December 7, 2018

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