Canada’s legal medicinal-marijuana suppliers are struggling, and part of the reason why is Vancouver’s illegal cannabis storefronts.
“There is no question it has been a challenge,” Tilray CEO Greg Engel said in a telephone interview. “The proliferation of illegal dispensaries has had a significant impact.”
In June, the Nanaimo-based company, one of the largest legitimate suppliers of cannabis in the country, revealed it was eliminating 61 of 187 staff positions. More recently, Engel told the Straight Tilray has delayed previously announced plans to expand from 60,000 square feet to an operation more than five times that size. “For now, we have ample inventory from our first facility to serve the market on a consistent basis,” he said.
According to information supplied by Health Canada, Tilray isn’t alone in failing to meet expectations for sales that were sky high when the federal government introduced its new framework for medicinal cannabis on April 1, 2014.
Since that date, companies licensed under Ottawa’s Marihuana for Medical Purposes Regulations (MMPR) have collectively experienced growth from one quarter to the next, but slowly. What’s more, authorized companies are producing and storing significantly more marijuana than they are selling.
MMPR–authorized companies (of which there are now 25) together sold 408 kilograms of marijuana during the second quarter of 2014, 596 the quarter after that, then 789, and then 979 kilograms during the first three months of 2015.
Meanwhile, the amount of marijuana stockpiled in company inventories grew from 1,134 kilograms at the end of June 2014 to 4,810 kilograms as of March 31, 2015.
Health Canada declined an interview request and would not provide the Straight with a breakdown of MMPR sales by province. However, some information is provided in an April 2015 email written by Health Canada bureaucrat Eric Costen and released in response to a freedom of information request. It states that between October 2013 and February 2015, MMPR producers sent 5,272 shipments to addresses in B.C., accounting for seven percent of the national total.
Although B.C. bought only seven percent of Canada’s legal cannabis, the province is home to almost half of all patients authorized to possess medicinal marijuana (48.7 percent, or 18,383 people as of December 2013, the last month Health Canada made province-specific information available).
According to Cam Battley, communications chair for the Canadian Medical Cannabis Industry Association, that disparity suggests British Columbians holding doctor’s notes for cannabis are finding their medicine outside of Ottawa’s mail-order system. With more than 90 marijuana dispensaries illegally selling cannabis over the counter in Vancouver, he added, it is an easy guess where that might be.
Battley, however, said those challenges are largely confined to Western Canada. “We notice the impact of B.C. dispensaries in B.C.,” he emphasized. “There is a certain culture and a certain comfort level with dispensaries, and we are not seeing that across Canada.”
There are however signs MMPR producers outside of B.C. are similarly struggling to meet expectations. For publicly traded companies, share prices have stumbled. Bedrocan Cannabis Corp., for example, saw its stock hit a high of $1.17 in September 2014 before dropping to a price of 80 cents today. In October 2014, Mettrum Health Corp. debuted on the TSX at $2 a share but, since then, has fallen steadily to a value of $1.50. And in November 2014, the price of a share of Tweed Inc. spiked at $2.88 and now its stock is currently worth about $1.85 per share.
Engel noted dispensaries aren’t the only force affecting indicators like staffing levels. He said Canada’s cannabis industry is still in its infancy, and as companies scale up operations, they learn more cost-effective production methods. Engel maintained that the layoffs announced in June were as much a result of good news as of bad.
“That was a combination of the market having not grown as we had anticipated but also some efficiencies in our facilities,” he said.
Engel cautioned, though, that he sees new challenges on the horizon—for example, a creeping acceptance of recreational marijuana.
“Go back six months ago: many of the dispensaries were looking to have some type of semilegitimate medical association,” he said. “We continue to hear that that is no longer the case, that many of the dispensaries are now simply acting as recreational distribution points.”
Battley remains optimistic. He reported that MMPR producers are collectively seeing their patient base grow at a rate of 10 percent per month, adding: “We’re quite bullish on the future.”
This article was originally published in print and online at Straight.com on August 12, 2015.