Wednesday, June 19, 2024

Could Canada Use Nevada’s Marijuana Shortage Protocol?

A majority of Canadian provinces are reporting cannabis supply shortages, as Canada’s licensed cannabis producers and distributors grapple to keep up with the demand for commercial cannabis. Demand for Canada’s recreational cannabis comes from customers that were already acquiring cannabis from the illicit market, and the second source of demand comes from new customers who have never used cannabis but are ready to give it a try. Several warnings about a potential shortage were circulating in the media in the run-up to legalization, but not everyone was sure the problem would manifest.

Now, industry insiders have dropped the bomb that these cannabis shortages could last for years, causing the government to lose out on hundreds of millions of dollars in potential revenue if this level of demand continues and no drastic action is taken. (Statistics Canada says Canadian spending on cannabis rose 1.1 percent in the wake of legalization.)

But what are Canada’s options?

Retail store hours are being slashed, online menus appear anemic and some stores are completely shuttered. Ontario not only experienced a surge of online orders leading to a dwindling supply, but the rotating strikes by Canada Post employees in a number of Canadian cities meant that even if an order was fulfilled, it was potentially late on arrival. Consumers who were already buying from the black market will likely return to those sources to supplement their legal purchases or to get access to edibles and concentrates, two forms of cannabis that aren’t yet legal in Canada.

Because there are no best practices for dealing with a weed shortage—yet—here’s what we can glean from how Nevada dealt with low supply when officials there underestimated the demand, causing the state to nearly ran out of cannabis by the legal market’s second week.

Nevada sold so much product in the first weekend alone that Governor Brian Sandoval decided Friday to declare a state of emergency. Luckily, we’re not there yet in Canada, but the results of the move could provide guidance. The emergency regulations allowed more applicants to apply for distribution licenses, plus cannabis transportation licenses, which helped to unclog some of what what gunking up the supply chain.

To boost legal supply, Health Canada could consider further streamlining the application and approval process for production and sales licenses. Then, to increase the legal supply even further, Health Canada could consider making cannabis edibles and other derivatives legal. With the legalization of concentrates and edibles pending in 2019, only dry cannabis flower, fresh plant material, oils, and topicals are available for legal purchase.

The Alberta Gaming Liquor and Cannabis (AGLC) is already implementing something similar by issuing more licenses through Health Canada to those involved in the retail cannabis industry to increase supply so that the province return to its intended sales model. There are no plans so far to push concentrates to the market sooner than expected, though the new rules for edibles is expected to drop in the coming weeks.

The level of cannabis scarcity in Canada may be more dramatic than industry experts expected, but as current recreational users transition themselves to the buying legal cannabis, and new consumers get a taste of what’s to come, what’s clear is that finding market equilibrium is a long-term investment.


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