Is There Really A Cannabis Shortage in Canada?

Posted by Mark Mariotti on March 25, 2019

Since the recreational use of cannabis went into effect in Canada in October 2018, the country has encountered a severe cannabis supply shortage. Many retailers are going out of business as they don't have enough access to their main product. The question is: Is there really a marijuana shortage in Canada? Here's what the reports say.

Provinces Face Licensing Challenges

Provinces control the distribution and sales of cannabis. That said, provincial retailers claim significant shortages continue. For example, Ontario is limiting an early rollout of just 25 cannabis stores because of low supply. It plans to distribute licenses through a lottery.

Another example comes from Saskatchewan, which uses the lottery system. The province received more than 1,500 applications to sell recreational cannabis. It only has 51 licenses to hand out. A story in Marijuana Business Daily indicates some believe the lottery system isn't distributing licenses to the most qualified applicants.

Manitoba, on the other hand, avoided the lottery system. Instead, they relied on a merit-based RFP process for Phase 1. This means the government provided licenses to retailers with experience and had standards in place to minimize the supply chain shortages.

Canadian Government Response to Claim of Cannabis Shortage

The Financial Post reports Health Canada forecasts the demand for cannabis will be 926,000 kilograms a year. Bill Blair, Canada's minister in charge of cannabis, reports Canada has enough supply to exceed demand. "Building on our considerable experience with medical cannabis, and with 147 Health Canada licensed producers, the data is clear: there remains sufficient supply to meet and exceed existing demand," Blair tweets and points to the data in the Cannabis Demand and Supply bulletin.

He goes on to say that supply increased for the third month in a row and Canada has almost 18 times more supply than monthly sales report.

"While some provinces are making considerable progress in offering adults a safer alternative to the illegal market, others still have much work to do establish their wholesale and retail distribution systems and better protect Canadians," Blair tweets.

Based on the current rate of production by licensed cannabis producers, Brock University professor Michael Armstrong believes it's enough to meet projected demand by the end of 2019. Brock references data from 2017 and the current speed of production. He says producers' inventories grow exponentially each month.

Other Potential Causes for the Shortage Perception

At one point, producers ran into an excise stamp issue. This requires the Canada Revenue Agency to provide a stamp that needs gluing onto every single product. The stamps came from a single CRA supplier without glue. This required producers to manually apply the stamp. The Financial Post comments that it's no longer a problem.

One company explains they believe the shortage is the result of customers looking for specific products, and it's those products that experience shortages. Another resource points out the problem could be the low quality of the product.

So, with all that said, based on the data given, the producers create enough inventory that's triple the amount of marijuana sold in a month. Therefore, officials draw the conclusion that the cause of the cannabis shortage occurs somewhere in the middle of the supply chain.

Despite a few bumps in the road and claims of a cannabis shortage, experts predict marijuana in Canada will soar this year. Along with it comes strict cannabis security regulations. If you would like to learn about customized proactive cannabis dispensary security solutions, contact us.


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