Is Canada experiencing a shortage of cannabis? Depending where you look in the media, that is either a myth, or worse than we think.
One retailer with an aim to be the next destination for Canadian consumers is looking at the issue broadly and is not only seeing supply rise in their province, but the number of licenses as well.
Theo Zunich, the President, Chief Executive Officer and Director of Alberta-based cannabis retailer YSS Corp. (formerly Solo Growth Corp. (TSX:V. SOLO, FSE:2LK, Forum) is seeing something different in its home province. As stated at its latest AGM and true to its name, things are growing in Alberta.
It was at the May 29th AGM where CEO Zunich highlighted improving supply indicators from Health Canada, the Alberta Gaming, Liquor & Cannabis Commission (AGLC), and street research – which can be seen in the Company’s updated presentation. Less than 24 hours later, the AGLC announced that it was lifting the previously imposed moratorium on granting new licenses and accepting applications due to a steady increase in cannabis supply. AGLC is now planning to issue five licenses a week to maintain an orderly process. This is designed to ensure that the province’s existing and new retailers are able to receive adequate inventory on an ongoing basis.
CEO Zunich noted that AGLC recorded dried flower inventories rose to $13.1 million at the end of May, from $9 million the week prior. This is far above the $5- $6 million range seen in March to April of this year and even above the figures from earlier in May at around $8 million. Others in the industry have indicated that even more continuous supply is on the way in the next few weeks, as well.
Now doing business as YSS, the Company saw this increase coming and has been preparing for it in the background. Immediately upon release of the AGLC announcement YSS press released the acceleration of construction plans on five new stores in Calgary, Grand Prairie and Edmonton, to bring their near-term constructed store portfolio from eight to 13
What has this meant for Ontario’s cannabis retail regime?
Reduced hours: Hobo Cannabis in Ottawa reported the shortage has become so serious it needs to close-up shop early several days and can only order 25 kilograms a week. That retailer makes an average of 1,400 transactions a day, usually selling out quickly.
Lower quality product: As producers race to meet demand, some are pushing as much product as possible, not all of it is premium quality, or even medium grade.
While not resorting to reduced hours, Ganjika House is one retailer in Ontario dealing with supply shortage. That company told the Globe that quality was clearly its problem over quantity and the most popular products are high THC, low-price, but not nearly enough of that is finding its way onto shelves.
The initial product Ganjika House received after opening on April 1st, 2019 was particularly low quality, but it is improving. New supply is coming in on a weekly basis and the company stated that it is getting better. Ganjika admitted that it was selling product in April that was packaged in August 2018, but that product is now out of the system and has been replaced with more recent packages.
The regulatory aim was intended to prevent a flood of product in the virgin market, while Alberta, a more mature region for cannabis retail, seems to be working out its growing pains.
Inside the YSS operations, CEO Zunich told the Globe that its inventory is looking healthy. The weekly allocation to the Company’s Red Deer business, where YSS owns one licensed cannabis store, has been unchanged in the $60,000-$65,000 per store range, even despite the new licenses.
He added that with six inspected stores and one more to be added soon and five in the construction horizon, the timeline while waiting on licenses remains a challenge, but there is comfort in knowing the licenses are coming and the indications remain clear that supply is looming on the horizon.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.