Recreational marijuana usage will be fully legal in Canada on October 17, and cannabis retailers across the country are getting concerned that their inventory will be insufficient to meet the demands of consumers.
Canada’s fourth-largest producer of cannabis, Aphria Inc.(APH), is one of the many companies concerned with potential supply shortages. Aphria’s chief executive officer expects “sold out signs” at cannabis retail shops across Canada, following the legalization of Cannabis, next week, Yahoo Finance reports.
“There will be supply shortages in the early stages of adult use, including from Aphria, as the industry crosses a major inflation point. There will not be complete satisfaction by any of the provincial regulators out of the box. The pipeline fill is not going to be there.”
–Vic Neufeld, CEO Aphria, Inc.
Neufeld expressed total confident that Aphria’s (APH) inventory will satisfy the consumer demand for both recreational and medical marijuana “over the medium and longer term,” but shared the concern that the legalization of cannabis will not bode well unless supply-chain issues are fixed.
Aphria (APH) currently produces a maximum of 35,000 kilograms annually, according to production capacity reports, but expects to reach nearly 260,000 kilograms by November once facility expansion projects are completed.
According to recent studies released by the University of Waterloo, the current inventory of legal cannabis in Canada is set to meet only 30% to 60% of consumer demand. Research released from the C.D. Howe Institute, a Toronto-based think-tank, estimates that “legal supply will rise from about 146.13 tones (146,000 kg) to roughly 210 tonnes (210,000 kg) per year, after legalization, while demand is expected to hover around 610.6 tonnes (610,000 kg).”
Some industry experts are predicting that a shortfall of legal pot producers will be met with demand support from the illegal market. Essentially, while Canada’s legalization of cannabis offers consumers with regulated quality products with no concern of lacing or tampering, the lack of ample supply may lead consumers to get their pot the old fashioned way. Authors of the C.D. Howe report say that their results “show that both pricing and supply shortages will contribute to maintaining the black market. Resulting in lost tax revenues and a continued need to spend significant resources on law enforcement activities related to the market.”
Despite cannabis producer concerns, the Canadian government remains confident that there will be plenty to puff, puff, then pass. Mathieu Filion, a spokesperson for Health Minister Ginette Petitpas Taylor, had this to say:
“Based on current inventory levels and growth in production capacity, the industry is well-positioned to supply product as consumers transition to the legal market”
Mathieu Filion, Spokesperson for Health Minister Ginette Petitpas Taylor
Filion insisted that (Canadian) Parliament provided ample time for federally-related producers to “harvest, package, and ship cannabis products to authorized distributors and retailers.” Bloomberg reports that very few brick-and-mortar retailers will even be up and running by Oct. 17, with none in Ontario, Canada’s densely populated province. Market analysts are distressed that limited availability will negatively affect pot stocks that have “soared in anticipation of Canada becoming the first Group of Seven nation to legalize marijuana.”
According to Deloitte, Canada’s makes is expected to climb to C$4.3 billion ($3.3 billion) in the first year. While worries about producers ability to meet the demand for day one are prevalent, the only thing left to do is turn off, tune in, and drop out.