Canada’s weed shortage worsens as applications rise

The Canadian cannabis industry is still reeling from sky-high demand in the second week of legalization, with growers expressing frustration at the length of time it’s taking to get licensed as shelves sit empty.

“We’re biting our nails, and I think our shareholders are biting their nails, too,” said Anthony Durkacz, director at FSD Pharma, an Ontario-based producer that received its cultivation license a year ago and is still waiting for its sales license. “We want to be supplying.”

The process of getting a sales license from Health Canada is onerous, according to Durkacz. After receiving a cultivation license, a grower must produce two full crops, send them off for testing, get its sales software audited, and then submit a completed application for the sales license, which can take up to 341 days to process, he said.

“So even after you’ve done everything and done everything right, you could be waiting up to a year to get the license,” he said.

Canada became the first major economy to legalize recreational cannabis Oct. 17, taking the lead in a global market that’s expected to reach $32 billion in consumer spending by 2022, according to Arcview Market Research and BDS Analytics. The euphoria that sent pot stocks soaring has faded, with the BI Canada Cannabis Competitive Peers index losing 26 percent over seven sessions before rebounding Thursday.

While some growers wait for their licenses, others are struggling to keep up with demand. The government-run Ontario Cannabis Store received 100,000 orders in its first 24 hours, more than all other provinces combined and is receiving new supplies on a regular basis, it said. In Quebec, online and in-store orders totaled nearly 140,000 in the first week of legalization, and the provincial-owned retailer indicated Wednesday it may have to close some locations as producers couldn’t meet demand. Producers will have a “colossal” amount of work to do to ensure supply, the Societe Quebecoise du Cannabis said in a statement.

The problem is that no one knew what the demand curve would look like after a century of prohibition, said Bruce Linton, chief executive officer of Canopy Growth Corp., which has secured more than a third of total Canadian supply committed to date.

Canopy shipped approximately 1 million orders of medical cannabis in its first four years of operations. It expects to ship more than 1 million units of recreational pot in the first four weeks after legalization, Linton said.

There are currently 132 licensed producers in Canada and 78 with a license for sales, according to Health Canada spokeswoman Maryse Durette. The ministry has more than 600 licensed-producer applications at various stages of review.

Health Canada has hired 300 additional staff to evaluate applications, said Canadian Health Minister Ginette Petitpas Taylor. But the process, which includes background checks, is time-consuming and it’s important to not cut corners, she said.