In the rush to serve the previously illegal Canadian cannabis market, many links in the supply chain have failed to consider inventory. This simple business concept has been negatively implemented by Government and Private institutions alike. This has resulted in economic losses for all sectors involved.
In fact, public companies are publicly selling their grow and warehouses in favor of retooling for distribution. What’s changed so drastically? The Second Quarter Fiscal 2021 Canopy Growth report states distribution and covid 19 as uncertainties. In this article, we dig into the details of the Canadian cannabis industry going into 2021
Lack of Dispensaries
We have talked about the issues dispensaries have had in previous articles on Vancouver and Prince George. We have also talked about how easy it is to get your ACMPR license to grow weed. We have a situation where is easy to produce cannabis but very difficult to legally distribute it
In our article about buying Cannabis from the government, we uncovered that the rules of selling online are different from province to province. In short, its highly unlikely that your favorite online dispensary isn’t operating legally. In fact, the police still rain these types of businesses to this day. However, we will let you onto a little secret. According to our visitor stats, online dispensaries are as popular as ever and growing. With that said, if you are curious. we created an article detailing exactly wich companies are actually licensed to distribute cannabis in Canada
The fact is, for most of Canada’s rural areas (most of the country), the most convenient method for obtaining cannabis is through the mail. For some, even this is difficult, since the cannabis has to sometimes go through US states where it’s still illegal. Yes, Canadian mail, sometimes gets routed through the US for all types of reasons, and even Canadian government shipments are intercepted and destroyed.
Issues Storing Cannabis
Remember the story of CannTrurst being fined by the Canadian government for having an extra grow room? How about the more recent story of Hexo reporting themselves for having too many grow rooms? It makes you wonder what the Mexican drug cartels, as the gold standard of profitability, would do if they found an extra grow room.
Regulation plagues the distribution of liquor across Canada. Many are fined for illegally importing alcohol from Quebec to New Brunswick. Each province has its own rules and borders. Regulation is a point of difficulty for alcohol distribution across the country. Logic dictates that Cannabis being brought under a similar system should anticipate a similar journey.
At one point Ontario lost $42M selling cannabis within a year of operations. With that said, in 2020 NB Cannabis is enjoying 12 months of non-stop profits outperforming commercial operations. This has delayed the New Brunswick government’s goals of re-structuring to be a private company. Covid 19 has definitely changed the situation for governments in 2020.
The issues around inventory management are being handled differently throughout the country. Cannabis-related stocks have been down and we believe the inventory puzzle is a major factor in that trend. Investors are betting for or against the industry’s capability to fix these cannabis inventory issues.
Cannabis Product Options
It isn’t all bad. We have talked about buying weed from the Canadian government. They provide products not easily found in local dispensaries e.g. aerosols. With the recent second wave of legalization, we can expect a range of new products to become available like topicals and edibles.
Our Instagram feed is full of negative submitted comments regarding government purchased cannabis. The early days of long shipping times are the past, now the quality of the cannabis bud is the issue.
The early stages of legalization in Canada have not turned out as profitable as our neighbors to the south. Maybe federal legalization just isn’t as profitable as legalization in individual districts like we see in other NAFTA members. Whatever the reasons, the Canadian cannabis market is off to a slow start in 2019
What we have seen in 2020 is that those companies tooled to focus on distribution are making strong profits in the days of Covid 19. Our team will continue to monitor the industry and keep you posted in 2021