Wednesday, 17 Jul 2024

Why is Canada running out of marijuana?

Cannabis retailers in Canada began to run low on supplies from the very first day of legalisation a month ago. How long are shortages expected to continue as the new market for recreational cannabis finds its feet?

In the early days of legalisation, James Burns was confident his company had enough product on the shelves of its five new cannabis retail stores, even though they only received half of their order from the provincial supplier.

Now, he has had staff refreshing the government supply website in the early hours to snap up scarce new stock as soon as it’s available, and is considering restricting store hours.

“While there was product to order we were very comfortably getting a large amount of it,” says Burns, the CEO of Alcanna, a company that owns a chain of private liquor stores in Canada and the US and, now, cannabis stores in the province of Alberta.

“But obviously, when there’s literally none there, it doesn’t matter how big you are, there’s just none there. If the government warehouse is empty, it’s empty. There’s nothing you can do.”

Since the first day recreational cannabis was legalised in Canada, there have been shortages.

Newfoundland’s Thomas Clarke was one of the very first retailers to sell the drug legally in Canada at the stroke of midnight on 17 October.

He says he sold out that day and was out-of-stock for nearly a week.

Clarke has since been able to get product onto shelves but says he can’t order exactly what he needs from the provincial supplier.

“They’re dictating to me numbers and quantities and products that they have to send me, so I definitely don’t get to get everything I want,” he says.

“But I’ve had just enough to not run out.”

In Quebec, the provincially run Société québécoise du cannabis stores are currently only open Thursday to Sunday due to supply issues.

“We think that our suppliers will be able to respond to the demand easily next spring, but until then, we could still have shortages,” says spokeswoman Linda Bouchard.

New Brunswick briefly closed 12 of its 20 stores because of a lack of supply.

In a statement, the provincial agency responsible for cannabis sales said that while it had ordered a full supply to stock its stores it received just 20% to 30% of that original order.

“Retailers across the country are experiencing a similar situation,” it said.

In Ontario, the online retail store has seen certain products sell out quickly followed by lengthy wait times for resupply.

The Ontario Cannabis Store says it’s working to expand the assortment of products available and to ensure product availability.

The cannabis shortages aren’t a complete surprise.

A report released in early October by the CD Howe Institute, a Toronto-based economic think tank, estimates that the current legal supply will meet about 30% to 60% of total demand in the first months of legalisation.

But people in the industry say the scarcity is worse than expected.

“Everybody knew this was going to happen,” says Burns. “Probably, frankly, not this quick and this starkly.”

Patrick Wallace, owner of Waldo 420 in Medicine Hat, Alberta, predicts it will be a year to 18 months before supply matches demand.

“We’re riding on our initial investment of stock from a few weeks back,” he says. “So we’re OK now but it’s not sustainable.”

Health Canada, which grants licenses to cannabis producers, says it worked hard in the months prior to legalisation to increase the number of legal suppliers, and is urging patience.

“It is important to note that October 17 marked the end of nearly a century of criminal prohibition of cannabis and the launch of an entirely new regulated industry in our country,” it said in a statement.

“As with any new industry where there is considerable consumer demand, we expect there may be periods where inventories of some products run low or, in some cases, run out.”

On concerns the shortages will push consumers back to the black market, the federal government says that, going by experience from US states that have legalised the product, displacing the illegal suppliers will take time.

There have also been reports of shortages of medical cannabis, which has been legal in Canada since 2001.

Health Canada says it is working with both patient groups and industry to discuss the reports of shortages of certain products or strains.

It added that it “expects licensed sellers to take reasonable steps to ensure that registered patients continue to have access to the products they need for medical purposes”.

The Angus Reid Institute, a non-profit research foundation, released a poll indicating that one in eight Canadians has used cannabis since legalisation

Health Canada says producers have shipped more than 14,500kg (32,000 lbs) of dried cannabis and 370 litres (81 gallons) of cannabis oil to date and have a reported inventory of more than 90,000kg of dried product and 41,000 litres of oil.

Vic Neufeld, CEO of Aphria, one of Canada’s biggest licensed producers, told the BBC’s World Business Report that they have faced supply chain problems getting out of the gate.

“It’s like a five-lane highway all merging into a one lane, [there are] a lot of issues when you try to push so much through the system in a very short period of time,” he said.

Neufeld said the company faced delays getting its excise tax stamps and there were other hurdles caused by a last-minute change to labelling requirements. And there was greater than expected demand.

But he also said they are waiting on Health Canada for various approvals that would allow them to “move faster, be more nimble, more efficient”.

Neufeld expects problems to be worked out by early 2019.

While Burns concedes the current situation is not ideal for retailers, he predicts only temporary frustration.

“This is long-term thing,” he says of his company’s foray into the cannabis market.

“At the end of the day it’ll be fine. A little speed bump. Everyone will forget all about it.”

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