Following the legalization of recreational marijuana in Canada in 2018, the country has been experiencing significant shortages that have to lead to various provinces closing cannabis stores three days a week while other provinces have stopped issuing retail licenses. The main causes of the shortages have been caused by either licensing issues or problems associated with the economies of scale. All these issues are being faced by the growers, processors, and cannabis retailers alike, but the person feeling the effect is the customer that has waited for about 80 years for those stores to open.
Here`s a breakdown of some of the problems the cannabis market is facing;
Lack of enough licenses for retail stores and suppliers.
While the number of licensed retailers continues to increase, as of now, there are not enough licensed cannabis retailers to serve the market. There`s just one distributor per provincial area that is expected to meet the demand of every recreational user. Subsequently, unlicensed retailers and black-market suppliers continue to operate and thrive in the industry.
Shortage of the required packaging solutions.
Following the legalization of cannabis, Health Canada laid out a very specific requirement for all packaging to be used for cannabis. Some of these include; temper and child-resistant, certain specific warning labels and labels of all the ingredients’ as well as packaging that does not appeal to adolescents. This, together with all the other regulations for cannabis itself, is causing an increase in shortage as marijuana is left to sit on the shelves awaiting packaging containers.
Expected legalization of edibles later this year.
While this is incontestably a good thing for both suppliers and consumers, it is also one of the reasons for the shortage of dried cannabis. Edibles, extracts, and topicals are expected to offer higher margins to companies compared to dried marijuana. For this reason, some companies are holding their stock while awaiting the legalization of edibles.
Health Canada has been experiencing a major backlog of all the applications coming in such that on average, a cultivation application takes months to be approved while a sale application takes almost a year to be approved. This backlog is causing companies that are fully equipped and ready to go into business to hold operations while waiting for licensing approval.
There are very heavy regulations that have been put into place to ensure the purity of cannabis products, correct labeling that includes all the active ingredients` and prohibited sale to youths. Producers are also seeking rulers that protect them from completion both locally and internationally. However, this process has been highly politicized, leading to major delays that are adding to the shortages being experienced.
It is important to understand and acknowledge that every new market, such as this, is bound to face a few hiccups as the sector finds its equilibrium. However long it may take, once the cannabis market is well developed and stable there will be enough supply to meet the country`s demand, it`s just a matter of time.
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