Weather-related cannabis supply disruptions show need for direct delivery, British Columbia retailers say

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Image of a display case with empty shelves at Downtown Cannabis in British Columbia

A cannabis display case sits almost empty at Downtown Cannabis in Salmon Arm, British Columbia, with a sign advising customers of weather-caused, supply-chain delays. (Photo courtesy of Downtown Cannabis)

Some independent British Columbia cannabis retailers are speaking out after supply delays in the wake of recent devastating weather, saying the holdups demonstrate an urgent need for a more flexible supply chain from the province-owned BC Liquor Distribution Branch (LDB).

Torrential rains caused chaos, including mudslides and severe flooding, across Canada’s westernmost province in November, with washed-out roads contributing to supply-chain disruptions for multiple industries, including cannabis.

In some cases, according to licensed retailers, cannabis consumers turned to illicit stores to buy product.

Cannabis “shortages and closed doors in legal stores will push customers back into the unregulated market, because illegal operators aren’t subject to an unnecessary and overly involved supply chain,” warned Dennis Schafer, co-founder of Fernie, B.C., retailer Stick & Stone Cannabis Co. and a director of the Association of Canadian Cannabis Retailers (ACCRES), which represents 51 independent marijuana retail brands in the province.

ACCRES has pushed for a system that allows for local deliveries directly from B.C. cannabis producers to stores, rather than the current system of shipments from the government wholesaler’s central distribution hub in Richmond, B.C., according to ACCRES Executive Director Jaclynn Pehota.

The LDB, a cannabis wholesale monopoly, has plans to launch such a direct-supply system to supplement its existing centralized distribution model – but not until next fall.

“Anytime sooner than that would be welcome from our perspective,” Pehota said.

Torrential rain leads to supply delays

Some retailers located far away from the LDB cannabis warehouse told MJBizDaily that their business suffered from supply delays after November’s calamitous weather.

In Salmon Arm, B.C., Downtown Cannabis manager Dale Wertz said the store came close to closing after going 15 days without receiving an order from the wholesaler.

Downtown Cannabis’ order was due Nov. 11 but didn’t arrive until Nov. 26, he said.

Even after receiving the shipment, Wertz said the store lost many customers to nearby unregulated cannabis stores that operate without provincial retail licenses.

“We’re fighting to try and get them back right now,” he said.

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As a small store with little storage space, Wertz added, Downtown Cannabis relies on regular deliveries.

“(After) 15 days, I think I had three (stock-keeping units) of flower and two SKUs of pre-rolls left,” he said.

“And people, they have to walk out because we have no product.

“We have somewhere between 17 and 25 (unlicensed) First Nations stores surrounding us here, so we’re in direct competition.”

Meanwhile, Wertz said, a cannabis processor sits “literally a block away from me that I can walk to, or they could just walk product over here, but they’re not allowed to.”

Direct supply from that local processor to his store could prevent the same supply delays from happening in the future, Wertz said.

Chris Messervey, owner of Quartz Creek Cannabis in Golden, B.C., said his store’s cannabis order scheduled for Nov. 17 didn’t show up until a week later.

“I think I was very lucky to get that order. I don’t know how they got it through,” he said, adding that other local stores weren’t as lucky.

While Messervey waited for the order, he said, customers noticed the difference.

“The beauty of our store is that we have tons of selection, we have everything,” he said. “And when you don’t have everything, people notice.

“People started commenting on it. I started to notice a dip in sales.”

Messervey, an ACCRES member, said direct supply from local producers could have helped.

“There’s a producer here in my town … I have his weed here in the store right now,” he said.

“During the whole supply issue, I wasn’t able to get it – he couldn’t get it to the LDB, and then they couldn’t get it back to me.”

In a statement, the LDB told MJBizDaily that recent supply-chain issues were attributable “to the disruptions to transportation routes due to the recent extreme weather conditions combined with network congestion faced by our carriers.”

“Cannabis stores in B.C.’s Interior (region) and Northern B.C. have been most impacted by delivery delays due to the locations of highway closures in the province,” LDB spokeswoman Kate Bilney said via email.

“We have been and will continue to leverage alternative shipping options until regular channels are fully operational,” she added.

“In addition to this, our distribution center team has worked seven days a week to collaborate with carriers to ensure that product is delivered, and the distribution center continues to be stocked with products to supply to our customers.”

Direct supply won’t launch until 2022

ACCRES’ Pehota said the group first recommended the direct-supply idea in 2019.

The B.C. government announced a direct-delivery program in September 2020.

The program will be available to B.C.-based cannabis cultivators that produce up to a maximum of 3,000 kilograms (6,614 pounds) per year as well as processors and nurseries.

Those suppliers will have to register products with the LDB, report sales back to the government wholesaler, and pay the appropriate markups, fees and taxes, according to details released by the LDB.

However, the direct-delivery program isn’t expected to kick off until fall 2022.

Pehota said she hopes for “some kind of accelerated launch of that program.”

“I think that the problem that we’ve seen with the supply chain has highlighted the vulnerabilities of that centralized distribution,” she said.

Direct supply could help prevent those retail disruptions from happening again, she added.

A market disruption is challenging, Pehota said, “because we’re clawing market share out of the hands of the unregulated operators.”

Asked whether the LDB had any plans to launch the direct-supply program any sooner in light of the recent supply-chain setbacks, the agency’s spokeswoman said the program was still on track to launch in fall 2022.

“At this point in time, the LDB is in the process of establishing the infrastructure to support the direct delivery program,” the agency’s Bilney wrote.

Solomon Israel can be reached at solomon.israel@mjbizdaily.com.