Over ambitious production targets have contributed to the shortage of supply in the Canadian cannabis market, says a leading entrepreneur.
Jeannette VanderMarel co-CEO of 48North says it’s ‘very difficult to grow good quality to cannabis’ with many farms achieving only 30% of harvesting ambitions – and it’s contributing to the supply shortage sweeping the nation. Ms VanderMarel shot to prominence in the global industry with the success of The Green Organic Dutchman where her background on the family farm helped its cultivation capabilities.
After leaving this, last year, she established a second company – 48North – with fellow female entrepreneur Alison Gordon. The first crop at its new Ontario farm will be planted in the next few weeks, and at 3.7 million sq ft the organic facility is believed to be the largest outdoor facility in the world.
Stores Shut for Much of the Week
In an interview with CBD Testers at the Canadian Cannabis Capital Markets Conference in London earlier, she said: “There is a shortage of cannabis in the legal industry, but not in the black market. However our Government and our police are doing a better job at cracking down on that. In the legal industry there is a shortage right now, and many of our stores cannot get supplies or they are running out, quickly.”
“In Quebec the stores are only open a couple of days week. They’ve limited opening stores in Ontario, our most populous province, to 25 overall, which seems silly when there are over 1,000 liquor stores! However, I think our new farm will help address some of these issues, and as some of the other producers ramp-up their productions we will address that shortage.”
It’s Very Difficult to Grow Good Quality Cannabis
Ms VanderMarel believes that many licensed producers ‘over-estimated there ability to produce cannabis at scale’. “They may have promised 1,000 kilos but they were only able to produce 200-300. It’s very difficult to grow good quality cannabis to scale, it really is.
“This was common across the industry, many provinces did not receive the supply they were expecting and then many did not realize just how popular it would be. There are new people going into cannabis. Now it’s legal here, are a lot of older people, a lot more women and a huge demographic of people are coming into this space, people who want to use it for their ailments, and they want a legal supply, they don’t want to buy it from a drug dealer.
“We are hoping this increase in cannabis use will lead to a decrease in other substances such as opiates or excessive alcoholism,” she says.
Topicals and Edibles coming to Market
Canada’s shortage of supply is partially down to the growing popularity of cannabidiol (CBD). “There is a shortage of CBD oil in Canada, and in general that applies to all the cannabis right now. This October we are changing legislation for edibles and topicals and so on there is going to be an even greater demand,” said Ms VanderMarel.
One of the issues holding back Canadian production has been the way its growing licences have been issued. As constructing greenhouses can be expensive, growers simply weren’t willing to outlay capital on cultivation development until they received a licence.
According to Health Canada, more than 70% of applications for a cultivation facility, whose paperwork was approved by the agency over the last three years, failed to provide evidence of a compliant manufacturing facility.
New Growing Rules
However the Canadian Government has now issued new rules which requires that evidence of a growing facility has to be proved before granting a licence.
Ms VanderMarel added: “There are around 178 licensed sites owned by about 100 companies and about 1,000 applications in the queue. It’s a very lengthy process that can take up to three years and very capital intensive, with issues around quality, compliance and security.
“Canadian cannabis is also in great demand across the world with lots of supplies going to Germany, which has medical cannabis, but does not have any growers. Standards are very high in Canada where all the staff were suits, face masks and gloves, the images we see from California seem as though it’s jeans and T-shirts.”
Scarcity Dampens Sales
Earlier this year Statistics Canada reported that retail sales figures for cannabis stores in February were 13% lower than December, last year. As well as the shortage of cannabis Health Canada imposes stringent packaging requirements which have also proved to be a drag on supply and sales.
“Without ample packaging materials, raw cannabis is left sitting on the sidelines awaiting processing”, reported the Money Fool finical website earlier this month.
A Move Into Medical Cannabis
As the shortage eases 48North will look to expand into the medical cannabis market. “As a result our supply problems, many patents are finding the right strain for them, but the next month it is not available so that’s why I did not want to sell medical products until we had enough. I think it’s horrendously bad for patients.
“We have to have consistent product around the year, so patients have the same medicine, each strain of cannabis has different cannabinoid and terpene profiles.
“We know of THC and CBD but there are at least 120 other cannabinoids and if they go to another strain that does not have those minor cannabinoids their symptoms might re-emerge,” says Ms VanderMarel.