Canadian cannabis producers have sold less than 20% of their production since the country legalized cannabis in October 2018, according to an analysis by MJBizDaily.
The most recent data, which runs through 2020, implies that most of the cannabis produced from 2018 to last year was either stored or destroyed, and less than a fifth ended up in retail stores. Almost 40% of production would be stored and unsaleable.
This disconnect probably helps explain how the largest Canadian cannabis producers, who account for the bulk of the sector’s output, have together lost over CA $ 11 billion (€ 7.4 billion) in aggregate.
Different explanations
Some industry experts blame the poor quality of cannabis as the source of the shortfall. “Good products sell,” said Ian Dawkins, senior consultant with British Columbia-based Althing Consulting.
Av Singh, a grow expert at Nova Scotia-based Flemming & Singh Cannabis, believes that Canada’s largest cannabis producers lacked the know-how to produce cannabis on the scale promised to investors.
“Canadian licensed producers quickly tried to capture as much of the market as possible, often building inferior facilities that were not designed to produce quality cannabis,” said Av Singh. .
He also believes that legal constraints at the federal and provincial levels are partly to blame, having raised “obstacle after obstacle” as the new industry took off.
“Countries should legalize cannabis when governments tackle their own stigma and, preferably, the systemic racism associated with the criminalization of cannabis users,” he said.
A premium on quality
Some producers, smaller than the behemoths in the sector, however, have no problem selling their goods. The Canadian market also recorded record sales of recreational cannabis in May.
“Companies that are successful in this area don’t destroy excess inventory,” said Ian Dawkins, consultant at Althing Consulting, based in British Columbia. “If you are producing enough cannabis to have any residual stock, you have fundamentally misunderstood the market. Everything that sells comes from companies that produce products that people want, so much so that they run out of stock as soon as they come out. “
Billions of losses
After selling less than 20% of the cannabis produced between 2018 and 2020, many of the larger greenhouses that drove cannabis stock prices up during the 2018-19 stock market explosion have been sold for pennies.
Canopy Growth’s Tweed joint venture in British Columbia is one example. After purchasing two greenhouses for over C $ 644 million, Canopy ended up reselling them for only C $ 40.6 million.
The two companies that closed the most facilities, Alberta-headquartered Aurora Cannabis and Ontario-headquartered Canopy Growth, also recorded the largest losses. Canopy has lost CA $ 3.8 billion since its inception. Aurora recorded a deficit of C $ 4.1 billion. Neither company has ever declared a profit.
