Province will face pot shortfall: Aphria
TORONTO — The CEO of one of Canada’s largest licensed cannabis producers says his company is facing “short-term supply chain issues” and will not be able to meet the full demand requested by the provinces by Oct. 17, the day cannabis becomes legal for recreational use.
“I’ve been communicating this (to the provincial regulators) for several months now leading up to Oct. 17. I’ve said all along that if you want X kilos from Aphria, I cannot make that promise until the spring of 2019, so here’s what we can deliver,” Aphria chief executive Vic Neufeld said.
Aphria has supply agreements with all 10 provinces and Yukon. In a Sept. 20 press release, the Leamington, Ont.-based producer said that it had “begun shipping initial product orders” to ensure an “extensive range of products will be available to consumers on Oct. 17.”
But Neufeld’s comments indicate that, at least for the next few months,, Aphria will struggle to meet the total amount requested by the provinces. This is in part due to “start-up-type obstacles” that Neufeld says are being encountered across the industry.
“All our products have been allocated between medical and provincial ‘rec’, but even there, we will not be able to supply in the next three months, everything that they want.”
One issue is the delay in getting government-issued excise stamps delivered to Aphria’s facilities, Neufeld said. Under the Cannabis Act, all packaged cannabis products are required to have excise stamps with specific colours, indicating the province or territory in which the product will be sold.
“It’s a real, real issue,” Neufeld said. “We’ll get a batch in, and then we’ll have to determine what products they go on, and then you’re frantically working. You can’t just bring in an army of 50 people and say, ‘OK, for the next three weeks we want you to just do this,’ ” he said, noting factors such as safety training.
Whether there will be enough recreational supply to meet projected demand on Oct. 17 has been a key question hanging over the heads of producers and policymakers for months, simply because there is no precedent.
A joint report from the C.D. Howe Institute and the University of Waterloo, set to be released Thursday, forecasts current production levels of all the licensed producers combined will meet only “30 to 60 per cent of total demand,” primarily because of Health Canada’s slow pace of licensing cannabis producers.
So far, 120 licences to cultivate have been issued by the department, but the bulk of those were issued in 2018, meaning many producers have only just started to legally grow.
“I’ve heard from some licensed producers that they have capacity of harvest issues, and they are frantically looking to buy from other licensed producers who don’t have supply agreements from other provinces. It’s a stopgap measure, not a long-term solution,” Neufeld said.
In addition to ensuring the recreational market is sufficiently served, licensed producers will also have to continue to meet demand from the medical market.
As of June, approximately 330,000 Canadians had prescriptions for medical marijuana, and there were 66,404 kg of cannabis in licensed producers’ inventories, according to Health Canada data.
That same month, roughly 4,700 kg of dried cannabis was made available for sale to medical cannabis patients.
But shortage in production levels, according to the C.D. Howe report, will be short-lived, due to the “increase in licensed producers” and the “expansion of production capacities over time.”
That’s exactly what Neufeld says Aphria is focused on — beefing up production capacity for the long term. “By the spring of 2019 we will be producing over 20,000 kilos a month. That’s enough to serve 50 per cent or 40 per cent of projected recreational use in year one in Canada,” Neufeld said.
“We believe we’ll be the first licensed producer to fully stock everyone’s demand and need by the spring of 2019. I cannot say that with confidence about my competitors,” he added.
At the end of the 2018 fiscal year, Aphria’s annual production capacity stood at 35,000 kilograms — the company sold roughly 2,700 kg in the first half of 2018.
Workers trim marijuana on a conveyor belt before being packaged at Aphria in Leamington, Ont. The cannabis company says it’s facing “shortterm supply chain issues” and won’t be able to meet Ontario’s demand for marijuana once legalization happens on Oct. 17.