Tilray CEO ‘impressed’ at how ready provinces are for legal pot
The CEO of the world’s third largest cannabis company by market value is unfazed by minor supply-chain glitches that have cropped up ahead of legalization, saying he’s “impressed” with how prepared the provinces are in getting cannabis out to consumers.
“This is the sixth time I’ve gone through this process of adult-use legalization. Most recreational cannabis markets are typically supply-constrained at the onset, but ramp up quickly and reach an equilibrium within six to 12 months,” Brendan Kennedy, CEO of Tilray, told the Financial Post.
Kennedy says he was in five U.S. states, including Colorado, Washington, Nevada, and most recently California, when each one transitioned from a medical market to a recreational one. “What we saw in Nevada, and in California on day one, was a mess,” Kennedy said.
Nevada’s recreational legalization process was particularly cumbersome, because weed sales began without any distributors licensed to transport cannabis from growers to retailers. Just 10 days after Nevada legalized cannabis last July, most dispensaries had run out of product. In California, the recreational rollout was met by a number of obstacles because municipalities were slow to issue retail licences to shops. On day one of legalization in California earlier this year, long line-ups started building before dawn.
“It’ll be much better here, although there is no question that day one demand has exceeded supply, based on everything we’re hearing from the provinces,” said Kennedy.
He added that what made Canada’s legalization model unique compared to California, Nevada, Colorado, Oregon and Washington, is the government-controlled online retail option in most provinces.
“It’s actually a pressure relief valve. Part of what will happen over the next week and two weeks, which will be fun, is a lot of the wholesale buyers made some guesses about what they thought would sell. They are going to learn really quickly what will sell. And obviously as buyers, even if they are government-run, they are going to listen to the market.”
Tilray has supply agreements with multiple provinces, including Ontario and Quebec. It is the only Canadian-based cannabis company listed solely on an American stock exchange — in mid-September, the company made headlines across the world as its stock soared up to 350 per cent in a week, and was halted four times.
Last week, Aphria CEO Vic Neufeld admitted his company would not be able to fulfil total demand for cannabis requested by the provinces until at least next spring. Canopy Growth CEO Bruce Linton has also said there is “no chance” licensed producers will be able to meet demand on day one of legalization.
Kennedy would not say if his company had completely fulfilled total demand requested by the provinces, but said Tilray was “on track” to meet those annual supply agreements. Kennedy added that his company was not facing any capacity of harvest issues, or any major bottlenecks in the supply chain.
There has been, however, a particularly strange surge in demand from the medical market, which Kennedy calls “counter-intuitive. … It was a bit surprising and in many ways opposite of what everyone was expecting. It has been difficult forecasting adult-use demand and medical demand,” he said.
Kennedy was quick to point out that the company’s medical production facility is separate from its adult-use facility, so a shortage of recreational inventory, for example, wouldn’t be supplemented by inventory dedicated to medical patients.
“One does not have an impact on another,” Kennedy said.