Cannabis Supply, Demand & Distribution

Canada will be the first G20 country to legalize cannabis and a lot needs to happen before that becomes a reality in July 2018. The senate will be sitting to discuss the legislation in September after their summer break.

Supply & Demand

As of June 20th, 2017 there were only 50 licensed producers (LPs) in Canada and according to Anne McLellan, Chair of the Task Force on Cannabis Legalization and Regulation, the federal government is approving 3-4 LPs per month and has increased staffing for approvals. At a recent seminar, Ranjeev Dhillon, Partner with Bennett Jones, states, “There were 1700 applicants and 265 of those have been rejected,” so that leaves a lot of work to be done. Dhillon explained that there are currently 170,000 medical cannabis patients going through 40-45 million grams of marijuana a year and the legal LPs can’t possibly supply the current market, let alone the new recreational market. A recent study estimated there will be 14.6 million users in Canada over the age of 15 in 2018 and that will grow to 5.2 million by 2021. It is estimated that it will be 8-10 years before supply meets demand.

The largest user group in Canada, according to McLellan, is youth/young adults aged 15-25.

Distribution

In order for provinces to meet the July 2018 deadline to have cannabis available for sale, Darrell Dexter, Vice Chair of Global Public Affairs and former NDP Premier of Nova Scotia, believes there will be an online sales component in each province, as it will be easy to implement in the initial stage of distribution. However, he hopes “provinces will look at innovation in the supply chain.” Online sales have proven technology such as that used by the gambling industry, which includes age checking and geo-fencing.

According to Dexter, many provincial governments are considering a liquor board style of distribution, which would be run by a new agency. Liquor stores already have HR practices and training in place and he states, “It’s difficult for organized crime to get into a liquor store model.”

There is nothing in the Cannabis Act preventing vertical integration in the industry, however, the provinces would have to approve that.

Community Support

Communities will have to be accepting and supportive of allowing cannabis stores in their municipalities. Some regulations will likely be similar to those in the liquor industry, such as disallowing proximity to schools, however, signage may need to be more discreet than for alcohol.

It is important for everyone who wants to be involved in the cannabis industry to talk to policy-makers at federal, provincial and municipal levels, before the regulations are created. Now is the time to build on the liquor industry’s reputation as a responsible retailer of a controlled substance.