Shortage of pot a myth, says Health Canada

Inventories 18 times greater than sales, but distribution a challenge

The amount of cannabis sitting behind the scenes in Canada far outstrips the amount being sold by retailers who complain of shortages, say federal officials.

In December, 7,252 kilograms of bud and 7,127 litres of finished and unfinished oil derivatives were sold legally across the country, according to Health Canada.

At the end of December, there was more than 128,000 kg of finished and unfinished bud in the inventories of licensed producers, retailers and provincial distributors, along with a total of 65,000 litres of oil, Health Canada said.

“As of the end of December, total inventories of cannabis … were nearly 18 times greater than monthly sales,” said Tammy Jarbeau, senior spokeswoman for Health Canada.

“There is not — as some have suggested — a national shortage of supply of cannabis,” she continued.

Federally licensed production space now has the capacity to produce 800,000 kg of pot, enough to satisfy annual demand in Canada, said Jarbeau.

She cited supply chain difficulties for “localized and product-specific shortages,” but that those will be reduced over time.

“This period of transition will likely continue in the months ahead, as the industry and provincial and territorial distributors and retailers aim to match shipment to market demand,” said Jarbeau.

While some Alberta retailers say they’ve noticed an improvement in supply in recent weeks, others, such as Chris Felgate, who operates Small Town Buds in Devon near Edmonton, say things have gotten worse.

“The last three weeks have been the worst since legalization, it’s very frustrating,” he said.

Health Canada’s inventory numbers, said Felgate, only feed his suspicions of incompetence and favouritism throughout the supply chain.

“Government officials sure like to blame producers ... I don’t believe any of them,” he said.

He echoed suspicions of other retailers that Alberta Gaming, Liquor and Cannabis, which both distributes the drug and sells it online, is favouring itself and larger stores.

“The AGLC has not been transparent with us,” said Felgate.

An AGLC spokeswoman said the agency isn’t stockpiling cannabis and is still not receiving what it expects from licensed producers.

“You can look at our (retail) website and see we’re not hoarding it,” said Heather Holmen.

“If the federal government indicates there’s enough product, we would welcome that product into Alberta.”

She said all retailers in the province have an equal chance to purchase from the AGLC through its manual order system adopted last November.

With 75 cannabis stores licensed, Alberta has nearly 40 per cent of Canada’s outlets, but a supply shortage in the province has led to a freeze on more permits being issued.

Growers have no fiscal incentive to hold back inventory but have faced a host of logistical challenges that have delayed shipments, said Allan Rewak, executive director of the Cannabis Council of Canada.

Chief among them is the ability to affix federal excise stamps onto packaging, he said.

“(The stamp) is not designed for automation, there’s no machine for it and there’s no adhesive,” said Rewak, who represents licensed producers.

He said Ottawa is now revisiting its excise stamp system.

Health Canada’s numbers are already outdated, said Rewak, and don’t take into consideration the supply stresses skewed by consumer preference, namely higher-THC pot.

“Nobody should look at this and say ‘we’ve got enough cannabis in Canada,’ we’re still scaling up and we’ll face challenges for a few more months,” said Rewak.

Some product needs to be held back for medical consumers, said Rewak, who lauded Health Canada’s efforts in approving and regulating new growers but added they need to be further sped up.

Despite Health Canada’s inventory numbers, some in the industry say the supply crunch could last as long as three years, particularly when populous Ontario opens stores beginning this April.

Health Canada said licensed square footage for grow operations has increased from two million to 14 million in the past 18 months, while 93 production sites have been added in that time, bringing the number to 145. About half are licensed to sell into the system.

It’s also committed to licensing micro or small craft growers, but out of 55 applicants has so far only sanctioned one, in B.C.