2018 was a momentous year for cannabis advocates as Canada became the second country (after Uruguay) to legalize recreational marijuana use. Canadians and cannabis companies alike eagerly awaited legalization, but the rollout hasn’t been as smooth as they would have liked.
The most pressing problem facing the country’s legal weed market is the fact that, in the majority of provinces, suppliers are unable to meet demand. According to MarketWatch, the complexity of scaling up a national legal cannabis supply chain has left many retailers with just a fraction of the promised products. In many areas, the supply shortage may last well into 2019.
Some experts say the bottleneck exists in the regulatory approval by Health Canada of Licensed Processors and Cultivators. “The cultivation and processing capacity exists, but the lack of licensing is keeping that production off the shelves,” Rob McIntyre, CFO of Salvation Botanicals Ltd., told me. His Canadian extraction and formulation company recently agreed to produce cannabis products for U.S.-based Medical Marijuana, Inc. for the Canadian market.
“Health Canada has added significant resources to attempt to shorten the approval process, but the backlog is significant,” McIntyre explained. “In the coming months, we expect to see this supply shortage ease.”
On the opposite end of a product shortage is strong product pricing for cannabis producers and retailers. A gram of high-quality cannabis in Vancouver, Canada, for example, sold for $189.69 an ounce as of the date of this article. Meanwhile, in Portland, Oregon, where an overabundance of marijuana is begging to cross state lines, you could buy an entire ounce of similar high-quality cannabis for around $100.
These initial gains, however short-term they may be, will help Canadian cannabis companies offset their startup costs. “This will quickly help companies recoup the costs of building expensive cultivation facilities,” said Debra Borchardt, CEO of Green Market Report, and Canadian cannabis industry expert. “Once production begins to meet demand, then the prices will fall, which is great for consumers, but will come at a cost to the producers.”
Another less obvious issue is the diversity of cannabis regulations from province-to-province. Though weed is legal everywhere in Canada, for smokers and businesses, where you are in the country will have a huge impact.
Currently, the only constants from province-to-province under the federal Cannabis Act are a possession limit of up to 30g of dried flower (or an equivalent) and a ban on consumption in vehicles. Beyond that, everything from the legal age to the rules on public consumption can be different—though the provinces all share a common goal in discouraging underage use and exposure.
Nationwide, the biggest change in 2019 is the legalization of edible sales, which will occur no later than October 17, 2019—one year after marijuana legalization. Since edibles are more appealing to children, Canadian officials are being much more circumspect about rolling these products out. As Vice points out, it is unclear how the regulations around edibles will play out, since the government hasn’t ruled exactly what it means for a product not to “appeal” to a young person.
Here’s a quick breakdown of the current laws in each province, plus news on any upcoming changes in 2019:
You must be 18 years old to consume, buy, possess, and grow. Public consumption laws are the same as tobacco, though you can’t smoke near children. Home cultivation is allowed (up to four plants).
Though the province originally planned for 250 licensed retail stores managed by Alberta Gaming, Liquor, and Cannabis, supply constraints mean it will be 6-18 months before the next stores open after the first 65 opened. The province also allows online sales controlled by the government.
You must be 19 years old to consume, buy, possess, and grow. Public consumption laws are the same as tobacco, though you can’t smoke near children. Home cultivation is allowed (up to four plants), though they must be hidden from street view.
British Columbia has not put a cap on the number of retail locations, but the licensing process has been slow. The first store opened up in December in Vancouver. Like Alberta, British Columbia allows online sales controlled by the government.
You must be 19 years old consume, buy, and possess. Public consumption is almost completely restricted. Unlike other provinces, you won’t be able to grow your own weed at home.
By the end of November 2018, only fourteen retailers had been granted licenses. The province will allow for private online and retail stores.
In 2019, the Safe and Responsible Retailing of Cannabis Act will take effect, adding on a 6 percent tax on revenues of licensed cannabis retailers as a “Social Responsibility Fee.”
You must be 19 to consume, buy, possess, and grow. You will only be allowed to consume it in a private residence. Up to four household plants are allowed, as long as they are locked and secured.
The province will have 20 government-run locations and permit government-controlled online sales. Like many other provinces, New Brunswick has seen a spate of store shutdowns due to a lack of supply.
Newfoundland and Labrador:
You must be 19 to consume, buy, possess, and grow. You will only be allowed to consume it in a private residence. You can grow up to four plants per household.
Newfoundland and Labrador have a hybrid retail model, with private retailers receiving licenses to sell products controlled by the Newfoundland and Labrador Liquor Corporation. Online sales will go through the government-controlled NLC as well.
You must be 19 to consume, buy, possess, and grow. You will only be allowed to consume it in designated public places. You can grow up to four plants per household, as long as they’re inside.
Nova Scotia Liquor Corporation, a government-run entity, will control online and retail stores, with 12 physical locations available at launch. Similar to other provinces, Nova Scotia faced shortages throughout 2018.
You must be 19 years old to consume to buy, use, possess, and grow. Public consumption laws are the same as tobacco in the province, meaning many public areas—especially ones where children may be—are off limits. There’s a four plant limit per household.
On April 1, 2019, Ontario will begin allowing private retail stores, but for now, the only place to get it is through retail and online stores—the aptly named Ontario Cannabis Store—controlled by the Ontario LCBO. Thus far, the rollout has been…buggy. A questionable supply chain has been plagued by mold, mislabeled products, and mites, leading many to return to the black market in the region.
Prince Edward Island:
You must be 19 to consume, buy, possess, and grow. You will only be allowed to consume it in private residences at present. You can grow up to four plants per household, as long as they’re inside and not in reach of children.
Like many other provinces, a government-run entity, the Prince Edward Island Cannabis Management Corporation, will operate retail locations and online sales. At launch, there were four licensed retail locations. Compared to other areas, PEI’s rollout has been relatively smooth.
You must be 18 years old to consume, buy, and possess. Public consumption follows the same rules as tobacco, with smoking at schools and universities expressly prohibited. That may all change if newly proposed laws pass in 2019 which would raise the legal age to 21 and prohibit any smoking in public. Regardless, you cannot grow plants at home.
All online and retail sales are controlled by the Société Québécoise du Cannabis (SQDC). Since pot was legalized in October, retail locations have been closed several days of the week because of the lack of supply.
You must be 19 years old to consume, buy, possess, and grow. Public consumption is prohibited. Four household plants are allowed per household.
Unlike many other provinces, Saskatchewan will have a private distribution system. The province handed out 51 licenses prior to Oct. 17, the day sales became legal, but as of December, only a handful of those stores have opened because of supply issues. Online sales are allowed through private retailers.
5 Burning Questions for 2019
2019 marks the first full year of legal cannabis in Canada. 2018 was full of excitement for legalization, plus a whole bunch of disappointment as supply issues affected many parts of the country.
As we head into the new year, these are the biggest questions Canada’s cannabis industry will need to answer.
It would be an understatement to say that cannabis consumers were not best of buds with the country’s suppliers.
For consumers, the biggest trends for the upcoming year will be the emergence of the edibles market and the expansion of CBD products.
Look for even more U.S.-based companies to offer IPOs in Canada’s markets—and vice versa.
In December 2018, the U.S. Congress passed the Farm Bill, an omnibus bill that, among other things, legalized the cultivation of industrial hemp and allows for interstate commerce of hemp-based products for the first time in decades. Though this brings competition to hemp production in North America for the first time, Canada has decades of research and growing experience under its belt already.
As the second country to legalize recreational cannabis-use, Canadians are reveling in their newfound freedom. But it’s unclear how cannabis use will affect international relations.
For better or worse, 2019 will be a telling year for the Canadian cannabis market. Let me know what you think’s going to happen on Twitter (@SocialMktgFella).
Original article: Forbes, Andre Bourque