What cannabis shortage? Canada has ‘sufficient supply,’ Ottawa says

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Canada’s federal government says the country has more than enough legal cannabis to meet demand even as some provinces complain about shortages.

“The data is clear: There remains sufficient supply to meet and exceed existing demand,” Bill Blair, Canada’s minister in charge of marijuana, said Wednesday via Twitter after receiving queries from Marijuana Business Daily.

Blair suggested shortage-hit provinces still have wrinkles to iron out of their wholesale and retail systems.

Some provinces “still have much work to do (to) establish their wholesale and retail distribution systems and better protect Canadians,” Blair added.

Since Canada legalized adult-use cannabis Oct. 17, several provinces have curtailed retailers’ hours or paused licensing stores altogether, citing a shortage of legal marijuana.

Ontario, for example, blamed “severe supply shortages across the country” for its curtailed approach to cannabis retail expansion.

Cannabis NB, the only legal retailer of adult-use cannabis in New Brunswick, last week cited a “national supply shortage” as its biggest challenge.

In November, Alberta temporarily suspended accepting new applications for retailers, also citing a “national shortage.”

New data

New Health Canada data paints a more complete picture of the cannabis shortage cited by such provinces.

Cannabis that is “packaged, labeled and ready for sale” – called “finished inventory” by the federal regulator – far outstripped actual sales in the first two months of legalization, according to data released by Health Canada this week.

While provincial wholesalers cited shortages in December, “dried” cannabis held in stock by cultivators, processors, wholesalers and retailers that month outstripped actual sales by a ratio of 3-to-1.

Just over 7,000 kilograms (15,432 pounds) of medical and adult-use dried cannabis was sold to consumers in December compared with the 19,000 kilograms that were “ready for sale” in warehouses across the country, according to Health Canada.

Also in December, cannabis oil held in stock by cultivators, processors, wholesalers and retailers that was “ready for sale” outstripped actual sales 5-to-1.

Health Canada criticism

As the list of cultivation applicants continues to grow, Health Canada has faced criticism that it is not issuing licenses fast enough.

As of Dec. 31, 2018, almost 840 site applications were in the licensing pipeline, Health Canada told MJBizDaily.

However, more than half of those had failed to transition to the new licensing system as of the end of 2018, meaning their applications were effectively in regulatory limbo and not being scrutinized.

The problem is relatively complex and there are a number of factors that contribute to apparent shortages, said Matt Maurer of Toronto-based Torkin Manes cannabis law group.

“I don’t think it is fair to put the blame solely on the federal government,” he said, suggesting there could be issues getting the product from cannabis facilities onto shelves.

Quality, demand

Questions over quality and demand for certain products are also contributing to the apparent shortages.

Dan Sutton, CEO of British Columbia-based Tantalus Labs, suggested quality could be a concern for consumers.

“One explanation might be that the quality of that cannabis is so low that it is only suitable for extraction into commodity cannabinoids come October 2019,” he said. “I’m sure the firms holding inventory would prefer to sell it now all the same.”

The Nova Scotia Liquor Corp. – which oversees cannabis sales in the province – said customers are looking for particular products, causing shortages of some items.

“Our customers are looking for particular product pack sizes and THC/CBD levels, and those are the areas in which we are experiencing shortages,” spokeswoman Beverley Ware said. “For example, there is great demand for smaller package sizes of high-THC dried flower.

“In the meantime, we continue to work hard with our licensed producers to secure the products that our customers want, and these inventory issues are expected to continue for some time.”

Matt Lamers can be reached at mattl@mjbizdaily.com

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