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MARIJUANA CHAOS IN CANADA

October 31, 2018

 

Since October 17th when recreational marijuana was legal to retail, consumer volume has exceeded expectations. As the first G-7 nation to legalize marijuana for adult recreational use, provincial sellers are experiencing strong demand but lack of quality marijuana.  Whether it’s product curiosity or brisk demand, marijuana has found a ready market.  Online orders shortcomings and backlog in federal licensing have conspired to exacerbate already inadequate logistics for crop delivery, and distribution channels.  The supply crunch is on, and buyers are not waiting, flooding the black market more than ever before.  Rumor has it their outlets frustrated by larger volumes. Propaganda cannot confirm. It is apparent; marijuana enthusiasm is real.
 Adding to the chaos, in Quebec, the country’s second most populous province, the government said, " only Thursday to Sunday stores will be open, and closed for the rest of the week because of the lack of pot to be sold.  The online store will remain open, and will continue until further notice."   
Quebec has set up agreements with only a handful of licensed producers, but even provinces with many more supply agreements are suffering. The Ontario Cannabis Store, or OCS, an online retailer operated by the country’s most populous area, Ontario, was receiving complaints online about delivery times and cancellations as well as the quality of the product. Officials said the online store made 100,000 sales within the first 24 hours and as of Tuesday afternoon had processed 150,000 orders since Oct. 17. The OCS said it has enough pot to supply all the orders and continues to receive more. Strikes have compounded shortages and delivery issues around the country by the country’s national post office -- Canada Post.
Toronto, the largest city by population in the country, is a “significant mail and processing hub” and striking workers are making the “best efforts to minimize any impact on service.”  Be as it may, marijuana shipments are not being timely delivered, and the commodity is getting stale on the dock.
Meanwhile, New Brunswick sold C$2.1 million worth of cannabis the first week with fewer issues. Buyers in Nova Scotia, which trades in government-run stores, and Alberta, which has deployed private retail stores in several cities, said that they had received about 40% of the weed they ordered from the country’s licensed pot producers. Meanwhile, pot cultivators are overstocked with inventory without an outlet.  
 The federal system with 13 jurisdictions, plus all of the municipalities, and the distribution network will need more time to adjust and ensure effective deployment. Logistics will be solved, with a more robust cohesive supply and distribution network. The main issue is more outlets, more suppliers and a more effective licensing process to accommodate more point of sale locations. At the moment, it takes 390 days to process a new cannabis sales license application. The time must be shorter if the legalized marijuana industry would be able to compete with the black market effectively.
Even our SPM algorithm is confused. Conflicting data points to black market sales increased since Canada went national on October 17th. Naturally, our findings are limited to the sources, which are questionable at best. The bottom line: Like what happened during the months after Prohibition – black markets entrepreneurs sold out their entire stock and operated at full capacity for over a year before legalized distribution found its footing. The same pattern should happen now.  The big difference back in the 1930s – obtaining a liquor permit took less than 30 days.
We are carefully observing the business model evolving in Canada to determine the best course to project logistics and market dynamics for what should happen when the U.S.A. nationalized marijuana.
 

 

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