It was to no-one’s surprise that when Canada legalized cannabis back in October 2018 that there would be drastic marijuana supply shortages. For the weeks that followed, both provincial authorities as well as private companies struggled to supply the sheer quantity of demand, with each often planning the other for falling short. However, despite numerous consolidations in the space as well as increases to overall cannabis production, cannabis shortages are still a reality in Canada.
A survey of five provinces online cannabis availability conducted back in January showed that almost half of all products were out-of-stock. Although the country’s most populated province, Ontario, was slightly better with only 39 percent of products being out of stock, this was juxtaposed with other areas like New Brunswick, which saw much of their products being out of stock.
“While it is difficult to assess how much of the change is demand versus supply driven,” wrote Cowen & Co analyst Vivien Azer in the note, “our view is that demand remains strong with an improving supply chain.” The analyst surveyed online shops in Ontario, British Columbia, Alberta, New Brunswick, and Newfoundland & Labrador. “We continue to believe that the category will look very different in late 2019,” she wrote, “when vapor, beverages, edibles, and other form factors become available.”
Cowen & Co was the first financial company to launch dedicated research on the cannabis industry, evaluating specific company stocks in the sector. To this date, Cowen & Co remains one of the most watched authorities when it comes to analysis regarding the marijuana industry at large.
Additionally, data from Cowen showed that prices for dry cannabis flower remained the same in January, sitting at C$10.22 per gram, while pre-roll products ended up dipping 4 percent in December down to C$12.22 per gram.
While October’s national legalization of cannabis last year kick started the Canadian cannabis industry at large, most analysts expect that the next round of federal legalization in October this year to open up even more of the cannabis industry to consumers. CBD-edibles and beverages are still off the Canadian market as Health Canada works on regulations for these more specialized types of products.
Some reports have shown that marijuana-infused beverages could be worth $600 million by 2022 alone, while the overall CBD market including all products in markets such as health, beauty, consumption and more would reach $22 billion in the same time period. As such, it’s not surprising to see why some industry experts expect a second cannabis gold rush later in 2019, at least in Canada.
Overall, most expect that Canadian cannabis shortages will last throughout most of 2019, before equalizing in 2020 as the explosion in cultivation production capacity catches up to demand.
When this happens, some worry that this could lead to an oversupply of marijuana, pushing prices back down and hurting the very same companies that expanded so aggressively just a couple of years prior. Time will tell whether or not this will actually happen, as much can change in that time period, especially with such a young industry as the Canadian marijuana sector.
