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HIGHLIGHTS
  1. Smaller operators across Canada still struggling to keep their shelves stocked.
  2. Size and scale also appears to offer little if any advantage for retailers’ ability to access wholesale cannabis
  3. Retailers and cultivators appear to have different timelines as to when supply shortage will end

As Canada’s largest cannabis retailers urge Ontario to speed up its rollout of legal pot shops, smaller marijuana sellers across the country are hoping the province will heed the advice often given to new cannabis consumers: start low and go slow.

Nationwide supply shortfalls in the early weeks following legalization forced the Ontario government to reverse earlier plans to issue limitless cannabis retail permits, instead authorizing just 25 stores to begin sales on April 1. Private retail chains already selling legal pot in other provinces – most of them with big ambitions for the Ontario market – insist enough legal marijuana has since become available for Ontario to support a much larger number of stores.

Smaller pot retail operators across Canada, however, say they are still struggling to keep their own shelves stocked and when they are able to resupply, options are extremely limited.

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“We actually sold out again today, to be honest,” Nicole Blanchard, an employee at High North in Labrador City, Newfoundland, told Cannabis Professional when reached by phone early Tuesday afternoon.

The store did not receive its first shipment of 2019 until January 12, Ms. Blanchard said. “And that has sold out again [Tuesday Jan 15] this morning, so it is just a constant issue again and even before, when we did have product, we would get the same kinds over and over.”

“Right now we don’t even get to choose what we want to order, we are sent a list and told this is the maximum amount that we can give you at this time and we say okay we will take it all,” Ms. Blanchard said, “because what else do you say?”

It is a very similar story across the country in Alberta, where Rob Katzman, owner of Green Town Cannabis in Red Deer, says he tried to order $185,000 worth of cannabis products on Monday, “and I am going to be able to secure, maybe $25,000 worth of that product, but I need at least $80,000 worth to run my business this week.”

Mr. Katzman says it is “such a falsehood” for some retailers to claim they are well supplied in hopes of winning access to the country’s single largest market.

“They are trying to make the case that Ontario should open up, that these product problems are getting corrected, but these problems are far from getting corrected, these supply issues,” said Mr. Katzman. “To suggest that Ontario should behave in a different manner because they are supplied… it is a false representation.”

Size and scale also appears to offer little if any advantage for retailers’ ability to access wholesale cannabis. James Burns, CEO of Alcanna, which owns five NOVA Cannabis stores in Alberta, says the market right now is just “grabbing anything you can get” and then “what you get, you sell out right away.”

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The variety of different cannabis products up for grabs at any given time also remains low. David Thomas, co-owner of three Jimmy’s Cannabis locations in Saskatchewan, said CBD oil in particular is “extremely hard to come by” in his province.

“None of the [licensed producers] that we talk with have a full product mix,” Mr. Thomas said. “[Supply] has certainly been challenging.”

Jesse Robichaud, spokesperson for Ontario Attorney General Caroline Mulroney, said via e-mail the province “remains committed to moving to an open allocation of [cannabis] store licenses… once we have clarity that there is a sufficient federally-regulated supply of cannabis.”

While some retailing executives, such as National Access Cannabis CEO Mark Goliger, expect supplies to rise closer to demand in a manner of months, some cultivation executives are still counting in years.

“I still think it is a couple of years before we start to come to that equilibrium point,” Greg Engel, CEO of New Brunswick-based producer Organigram, told investors gathered in Toronto for an AltaCorp Capital conference last week.

“We are building up extract and I know a few other companies are building up extract for the launch of the derivatives market this fall,” Mr. Engel said, referring to when cannabis vape pen cartridges and pot-infused edibles become authorized for legal sales, which the federal government is targeting for October, 2019.

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The cannabis market has not necessarily been supply constrained, Ben Ward told the AltaCorp conference, it has been “packaging constrained.” The CEO of Maricann parent company Wayland Group told investors an anecdote similar to those shared by other cultivation company executives, of excise stamps arriving without adhesive and the need to go buy glue sticks to affix each stamp manually.

“Imagine arts and crafts time on a very large scale,” Mr. Ward said, noting the company expects to have an automated system in place next month.

Organigram has also moved to a fully automated packaging system, Mr. Engel said, though he cautioned investors such a system “doesn’t work at 100 per cent capacity on day one, so it is going to take some time to get through that.”

Until those and any other supply-related issues get resolved, both Mr. Thomas in Saskatchewan and Ms. Blanchard in Newfoundland say Ontario scaling back from what industry observers had initially expected to be upwards of 1,000 cannabis stores opening on April 1 to just 25 locations until at least December, 2019 is an understandable approach.

“If [Ontario] did have an extreme amount of stores like they had originally planned [supply] would be a big issue,” said High North’s Ms. Blanchard.

“Supply is increasing as more producers come online and they get their bugs ironed out,” said Mr. Thomas of Jimmy’s Cannabis, “but at that same time, there are more stores coming online as well.”

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- With a file from reporter Marcy Nicholson in Calgary

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