Toronto, ON --
October 30, 2018 -- InvestorsHub
NewsWire
Marijuana Shortages Abound
in Canada Amid Application Flood
By Kristine Owram,
Bloomberg
The Canadian cannabis
industry is still reeling from sky-high demand in the second week
of legalization, with growers expressing frustration at the length
of time it’s taking to get licensed as shelves sit
empty.
“We’re biting our nails and
I think our shareholders are biting their nails too,” said
Anthony Durkacz, director at FSD Pharma
Inc., an Ontario-based producer that received its
cultivation license a year ago and is still waiting for its sales
license. “We want to be supplying.”
The process of getting a sales license from Health Canada is
onerous, according to Durkacz. After receiving a cultivation
license, a grower must produce two full crops, send them off for
testing, get its sales software audited, and then submit a
completed application for the sales license, which can take up to
341 days to process, he said.
“So even after you’ve done
everything and done everything right you could be waiting up to a
year to get the license,” he said.
Canada became the first
major economy to legalize recreational cannabis on Oct. 17, taking
the lead in a global market that’s expected to reach $32 billion in
consumer spending by 2022, according to Arcview Market Research and
BDS Analytics. The euphoria that sent pot stocks soaring in the
lead-up to legalization has faded, with the BI Canada Cannabis
Competitive Peers index losing 26 percent over seven sessions
before rebounding on Thursday.
While some growers wait for
their licenses, others are struggling to keep up with demand. The
government-run Ontario Cannabis Store received 100,000 orders in
its first 24 hours, more than all other provinces combined and is
receiving new supplies on a regular basis, it said. In Quebec,
online and in-store orders totaled nearly 140,000 in the first week
of legalization, and the provincial-owned retailer indicated
Wednesday it may have to close some locations as producers couldn’t
meet demand. Producers will have a “colossal” amount of work to do
to ensure supply, the Societe Quebecoise du Cannabis said in a
statement.
The problem is that no one
knew what the demand curve would look like after a century of
prohibition, said Bruce Linton, chief executive officer
of Canopy Growth Corp., which
has secured more than a third of total Canadian supply committed to
date.
Canopy shipped
approximately 1 million orders of medical cannabis in its first
four years of operations. It expects to ship more than 1 million
units of recreational pot in the first four weeks after
legalization, Linton said.
‘Just
Outstanding’
“The response has been
pretty unbelievable,” Linton said. “I don’t think everything will
run out but you might not be able to get the identical stuff you
got last time.”
He added that Canopy is
sending out orders as fast as it can pack and ship them, but there
have been delays in getting new product up on the provincial
websites. It will start shipping out new products, including
Tweed-brand gel caps and pre-rolled joints, over the next week and
a half.
Initial demand at Alberta
Gaming, Liquor and Cannabis was “just outstanding,” said Chara
Goodings, a spokeswoman for the government regulator that’s
overseeing sales in the western province. “But it has created some
struggles with our supply level.” Very few producers have been able
to deliver what was agreed upon, she said.
Dried
Bud
The situation is similar in
Manitoba, where Winnipeg-based Delta 9 Cannabis Inc. only
has dried bud on its store shelves as it has been unable to get any
shipments of cannabis oils or gel caps, said spokesman Gary Symons.
In the first seven days, Delta 9 saw close to 9,600 transactions
totaling C$736,124 ($562,830) in revenues. The company is now
selling about C$50,000 worth of product a day.
“Every province, not just
Manitoba, is receiving less cannabis than originally requested,”
Susan Harrison, spokeswoman for Manitoba Liquor & Lotteries,
said in an email.
Aphria Inc. CEO Vic Neufeld
predicted the supply shortages on the company’s earnings
call five days before legalization. Citing supply-chain
issues, labor shortages and delays in getting licenses and excise
stamps from the government, Neufeld said Aphria would be unable to
meet demand in the first two to three months after legalization.
The company was forced to destroy almost 14,000 plants worth
C$979,000 in the last quarter due to a lack of qualified greenhouse
workers.
Extra
Staff
There are currently 132
licensed producers in Canada and 78 with a license for sales,
according to Health Canada spokeswoman Maryse Durette. The ministry
has more than 600 licensed-producer applications at various stages
of review.
Health Canada has hired 300
additional staff to evaluate applications, said Canadian Health
Minister Ginette Petitpas Taylor. But the process, which includes
background checks, is time-consuming and it’s important to not cut
corners, she said.
“There’s not a mass
shortage of cannabis around the country right now,” only certain
strains that have sold out, Petitpas Taylor said. “We really have
all hands on deck, we want to do what we can, but in no way am I
going to compromise this new regime.”
The challenge for the
government is balancing quality and public safety with a desire to
eradicate the illicit market, said Deepak Anand, vice
president of business development and government relations
at Cannabis Compliance Inc., a consulting firm for pot
companies which is currently working on “hundreds” of licensing
applications.
“Sometimes these goals
conflict and compete with each other,” Anand
said.
The only near-term solution
to the supply shortage, according to Durkacz at FSD Pharma, is to allow
retailers to sell product sourced from the black
market.
“You would instantaneously
have a supply-demand balance and then you could try to convert
people from the black market to the legalized market,” he said.
“That’s probably the only way to solve this in the short term.”
Source - Bloomberg
— With assistance by Jen Skerritt, Sandrine Rastello, Kevin
Orland, and Josh Wingrove
