This is almost a doubling of the guard, so to speak, since last October when legalization went into full effect; there were 132 license holders as of October 2018. Some might say that the increase in licenses from 132 to 246 over 12 months shows steady growth, but when you consider how many applications have been submitted since before legalization kick-off (some estimates believe there to be 500+ applications still in the que for cannabis cultivation, processing and sale licenses) the near 250 approved licensees seems very low, and slow in progress.
A trend highlighted by this steady trickle of licensed players in the cannabis game is the imbalance of supply-demand of cannabis across the country (specifically with cannabis flowers and cannabis edibles). Many Canadians turned to legal cannabis products in the months following legalization, only to find that the supply of high-priced, poor quality and lack of strain variability was very unfavorable. Many LP’s blamed the government’s restrictive Cannabis Regulations, or the lack of promotions/marketing of their cannabis, or even the slow licensing and inspection processes involved in quality assurance/quality control of legal cannabis. These continue to be legitimate concerns, and unfortunately supply shortages, quality issues and extremely inflated prices also continue to plague the cannabis flowers market in Canada. Added to these concerning trends in lower sales and an imbalanced supply-demand are the alarm bells of stock prices for cannabis LP’s plummeting in recent weeks/months. Whether you’re a casual investor, a shark swimming on the high tides of the TSX, or completely dismissive of the entire stock market, the fact that many of the largest cannabis companies like Aurora, Canopy, Tilray and Hexo are hemorrhaging investment value is not a good sign for legal cannabis as it stands today.
Just taking a glimpse at the original sales forecasts for the cannabis industry and comparing the numbers to actual sales figures today can shed some light on this “devaluation” of cannabis’ biggest players. The famous (or infamous, to some) Deloitte Cannabis Report of 2018 was considered by many to be one of the leading forecasts and industry summaries for cannabis in Canada. In this reports, Deloitte projected cannabis sales in Canada around $7 Billion for 2019. Total legal cannabis sales for the entire country reached $700 Million this past October (2019), meaning that Canada as a whole is over $6 Billion Dollars short of these estimates. Again, being fair to both Deloitte and the cannabis industry as a whole, sales projections are not an exact science but they need to have some burden of reality associated with how they’re applied to investment & development of a budding industry like legal cannabis. Of the projected $7 Billion, roughly half ($4-4.5 Billion) was expected to come from recreational sales of cannabis products (again, with the understanding that more than half the classes of cannabis products like edibles or concentrates were not going to be approved until October 2019). The vast differences between what was expected and what was actually produced and sold does not look good for either producers or retailers. Both parties, including the Federal government’s involvement with both, deserve some of the blame for not adapting to market conditions; LP’s continue to claim they’re forced to keep prices so high due to restrictive regulations, while consumers’ dissatisfaction grows by the day. No matter what side of the fence you stand on, highlighting these issues shows the “big picture” problems for the model of cannabis regulation that Canada is currently operating within: limiting producers’ abilities to meet consumers’ needs, while also ignoring consumers’ demands for change.
Many proponents of cannabis are looking to “Cannabis 2.0” (as in the second wave of The Cannabis Act & Regulations that includes edibles, concentrates and topicals) to make or break the Canadian cannabis industry, and for good reason. Statistics suggest, and so does common sense, that smoking is diminishing year-to-year (sometimes declining as much as 0.5 % of Canadians per year). These figures are typically considered for tobacco and cigarettes, but the health concerns about ingesting products through the lungs, be it tobacco or marijuana, are continuing to rise while other forms of cannabis medicine become more popular (capsules, oils, edibles, topicals). This is to say, and we haven’t even brought up the vaping health crisis that has gripped the nation’s consciousness like a vice in the past several months. We won’t get into this hot-button issue in detail, but suffice to say there is not much support for the medical efficacy of smoking cannabis flowers, vaporizing cannabis concentrates or extracts, while there is significant public outcry against vaping products as the health risks continue to surface. That being said, cannabis concentrates, extracts, oils that can be vaped or smoked have been legalized under The Cannabis Act 2.0, there just appears to be more strict regulations on the horizon for these products in the near future. Case-in-point, Quebec is the first province to officially ban public vaporizing in Canada, with many other provinces & territories expected to follow suit. Coupled with a restriction on personal cultivation (4-plant rule) and the increased minimum age of consumption from 18 to 21 (January 2020), and Quebec has suddenly gone from one of the leading authors of the Canadian cannabis story to one of its harshest critics.