As we pass the one-month milestone of cannabis legalization in Canada, Canadian dispensaries have struggled to keep products on their shelves as shortages nationwide continue to take their toll.
Although supply problems were to be expected going forward, the situation for retailers has been particularly difficult as many provinces and companies are growing frustrated with the problem.
According to The National Post, some companies have devoted employees to monitor the markets 24/7 for new suppliers. National Access Cannabis Corp., one of Canada’s largest private marijuana dealers, has five full-time employees watching for new inventory from provincial regulators, which regulate wholesale pot distribution. “At 3:30 in the morning all of a sudden $4,000 worth of inventory is made available yet in seven minutes it’s drawn down, meaning that other big competitors are doing the same,” said CEO Mark Goliger.
He added that paying for these employees means less capital for opening new retail stores, further hurting their bottom line. “We have employees that were set to open those stores, so we have HR costs, and then carrying costs of leases, where stores are going to be sitting dark although the construction is complete and they could be making revenue.”
Canada’s western province of Alberta announced a few days ago that the cannabis shortage was so severe that they suspended issuing any new retail licenses until further notice. Although the Alberta Gaming, Liquor, and Cannabis commission stated that it ordered enough supply for 250 stores to last six months, the reality has been far from the case, with only 20 percent of the orders have come in so far.
Another province, British Columbia, went on to say that their supply issues were so severe that even at accelerated production rates supply issues wouldn’t be resolved for up to 18 months, a figure they reached based on discussions with licensed producers.
After the country’s largest cannabis companies reported their earnings – Aurora Cannabis (TSE: ACB)(NYSE: ACB), Tilray Inc (NASDAQ: TLRY), Canopy Growth Corp (TSE: WEED), and Cronos Group Inc (TSE: CRON) – investors later found out that during the last two weeks of September, the industry had shipped less than 1% of the expected $750 million in recreational demand forecasted by Statistics Canada, according to MarketWatch.
At the same time, those in the private sector have been quick to cast blame on government regulators for partially causing the supply problem. Canopy CEO Bruce Linton attributed their poor September sales to the fact that provinces only bought enough marijuana to test their infrastructure as opposed to ramping up sales as much as they could.
Aurora CEO Terry Booth added to this premise, saying that both Ontario and British Columbia failed in rolling out their retail operations effectively as well as that Aurora had met all of its supply agreements within every province that it’s doing business in. At the moment, the company provides over 30% of Ontario’s cannabis, a figure that they expect will rise in the coming years.
As companies strive to increase production as quickly as they can, the supply shortage in Canada is unlikely to be resolved any time soon.