Canada’s progressive federal policy has given its country’s cannabis companies a huge advantage over global competitors with access to banks, capital, customers and the ability to export. These advantages have made Canadian cannabis companies major world players around the global market. At home, there is both good news and bad news for the burgeoning industry. First the bad news: barriers to entry have stifled industry participants and bottlenecked the supply chain. And now, the good news: March saw cannabis sales hit a record high in the Great White North and those numbers should only improve as bureaucratic hangups eventually get ironed-out. March sales were CA$60.54 million ($45.08 million), up from CA$51.66 million ($38.47 million) in February and the previous record of CA$57.34 million ($42.7 million) last December.
The Motley Fool reported on the record-breaking sales and obstacles slowing down the industry, here are the three main hurdles according to their coverage:
The first problem has been caused by the regulatory agency Health Canada. Tasked with overseeing the licensing, processing, and sales application process, Health Canada has been hit with a monstrous backlog of paperwork that it’s had no effective means to work through. Marijuana Business Daily notes that the agency had a licensing backlog of almost 840 applications in January 2019, with the average cultivation application taking many months to review, and sales applications taking almost a full year to approve, as of May 2018. Without these licenses, pot companies cannot grow, harvest, process, distribute, and sell their product.
Second, this is a packaging problem. Health Canada outlined a laundry list of labeling, warning, and safety requirements in 2018 that packaging would need to follow if growers had any hope of getting their products to dispensary store shelves. Unfortunately, compliant packaging has been limited, which means that unprocessed cannabis has been stuck on the sidelines.
The third and final issue is with the growers themselves, albeit I don’t fault them one bit. Constructing greenhouses and acquiring capacity can be very expensive, and most of these pot stocks didn’t want to outlay tens or hundreds of millions of dollars without knowing for certain that the Cannabis Act would become law. It didn’t become apparent until roughly December 2017 or January 2018, when excise tax agreements were reached between Canada’s federal government and most individual provinces, that the Cannabis Act would indeed become law. But the wait amid the Canadian Senate debate has left most pot stocks still attempting to ramp up production.
We can certainly expect sales to increase over time in Canada as more growers, processors, and retailers come online, but it is definitely frustrating for industry participants to have such a slow rollout of regulated cannabis commerce. The March record sales provide a good indication that better days are ahead, but the Canadian cannabis industry and community must be vigilant to pressure regulators and elected officials to implement common-sense rules that allow businesses to flourish, including craft companies that have a long history in the medical community, paving the way for the nation’s landmark legalization regime.
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