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Report on Business Cannabis Professional OCS removes wholesale cap on nine cannabis products due to ‘enough inventory,’ letter says

HIGHLIGHTS
  1. Ontario Cannabis Store temporarily removes nine SKUs from weekly cap restrictions
  2. Pot shops in Ontario can now order more than 25 kg/week
  3. Products made by Canopy Growth, Organigram among temporary “cap-free stock”

The Ontario Cannabis Store (OCS) has temporarily lifted its weekly purchasing cap on nine cannabis products, allowing the province’s 24 retail outlets to order additional units without going over their buying limit, but some stores say they have no need for those items and do not plan to order them.

Ontario’s provincial cannabis wholesaler has “enough inventory” of those products, it said in a letter to retailers seen by Cannabis Professional. The move to suspend the purchasing cap suggests the OCS may be overstocked on certain items, despite an overall supply shortage at the national level.

“They’re just very heavy on those products and those are products that are not in demand," said Rob Cherry, general merchandise manager for retailer Fire and Flower.

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“We’re very unlikely to buy more of those products because they’re not their best products. What sells well is high-THC at a good price.”

Many of the products that the OCS has temporarily categorized as “cap-free stock" have low to moderate THC and CBD levels.

There are two Fire and Flower branded stores in Ontario, and several in Saskatchewan and Alberta, where the retailer is placing a discount on at least two of the products that are now “cap-free” in Ontario. The retailer has discontinued one of the other affected products in Alberta, he said.

Cannabis retailers in Ontario are able to purchase a maximum of 25 kilograms of products weekly from the OCS, but store owners there can now order an additional amount of nine specific Stock Keeping Units (SKUs) while supplies last, OCS said in a letter late Thursday.

“Over the past few weeks we’ve been carefully monitoring our warehouse stock and we’ve been able to identify some product SKUs that have enough inventory for us temporarily remove weekly cap restrictions,” the OCS said in the letter.

“You will be able to purchase as many items and units on this list as you wish (subject to availability), without them counting towards your 25 kg weekly allowance.”

An OCS spokeswoman said the wholesaler does not discuss commercial details or transactions.

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Among the affected products are some of Canopy Growth Corp.’s Tweed softgels, as well as some dried flower made by Organigram Holding’s Trailblazer and CannTrust Holding’s Synr.g.

Marcie Kiziak, managing director of cannabis for Alcanna Inc., which operates Nova Cannabis, however, does not see this as a sign of increased supply.

“I think this just happens to be a couple of products where there happens to be a lot of it. We don’t have a need for those products right now,” Ms. Kiziak said.

There is one Nova Cannabis store in Ontario and several in Alberta, where stores placed discounts as big as 80 per cent earlier this year on similar items in order to move inventory, she said.

Other retailers, however, point to positive signs that supplies are on the rise but point to the need to educate consumers on products such as softgels.

“There’s definitely more softgel products on the market than there is consumer demand. I think consumers still need to be educated on softgels and how to use them," said Darren Bondar, chief executive of Inner Spirit Holdings, which has one stores in Ontario, Saskatchewan and Alberta.

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“Consumers generally are still looking for the high-THC flower, the traditional cannabis consumer, but you do have a new consumer looking for high CBD oils and gelcaps.”

Nick Kuzyk, chief strategy officer for High Tide Inc., which owns Canna Cabana stores, views the move by OCS as a positive sign that could lead to the lifting of more buying caps.

“Typically consumers are leaning more towards higher THC-content cannabis products, so if these nine don’t satisfy that criteria, then the gesture by the OCS will be more symbolic, which is still positive, but practically speaking it may not change the situation that significantly right away,” Mr. Kuzyk said.

In Alberta, where 126 pot shops have been issued retail licences versus the 25 in Ontario, consumers have expressed a strong interest in certain products, such as high-THC dried flower and high-CBD oils, which have been in short supply. Meanwhile, some stores in Alberta accumulated products that had moderate-to-low levels of THC and CBD that were in less demand, causing some outlets to place discounts on those products in order to move their inventory while the more sought-after items sold out quickly after delivery.

“Specific to Trailblazer Glow (Hybrid Bud), that would be a low-THC product. It’s an example of a strain that hasn’t moved quite as quickly as the other ones," said Ray Gracewood, senior vice-president of Organigram’s Marketing and Communications.

This product was designed for the new consumer who is looking for a lower THC level, he said.

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“If there’s an ability to get more of that product into market, it also allows us to activate our sales team to provide education to our retail partners to get better sell through on a product like that,” Mr. Gracewood said.

CannTrust Synr.g’s Fantasy Island dried flower, which was included on the OCS’s list, is one of the brand’s most popular strains, the company said.

The increased wholesale availability of these products comes despite the national supply shortage that has raised the average online cannabis price in the country to nearly $12 per gram in some provinces while adult-use demand have kept “stockouts” high at 51 per cent, according to Cowen Equity Research data.

Sold out: Legal marijuana producers aren’t offering enough of the strains consumers want most

Online pot prices rise despite increased legal supplies: report

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