Cannabis Retailers, Governments Warn of Lingering Supply Shortage

Cannabis Retailers, Governments Warn of Lingering Supply Shortage

By Armina Ligaya, The Canadian Press

Marijuana - Cannabis
Don and Aaron (last names withheld) from the United States show off their cannabis purchases outside British Columbia’s first legal B.C. cannabis store in Kamloops, B.C. Wednesday, Oct. 17, 2018. (THE CANADIAN PRESS/Jonathan Hayward)

TORONTO – Demand for newly legal pot appears to be outstripping supply on the second day of legalization as retailers ran low on some products or were cleaned out completely, manifestations of a shortfall that some provinces warned could last for months.

Manitoba Liquor & Lotteries said Thursday that it is expecting product shortages in both brick-and-mortar and online stores could last “up to at least six months.”

“Every province — not just Manitoba — is receiving substantially less cannabis than originally requested… Retailers in Manitoba will be receiving staggered shipments over the next few weeks (some daily) in an effort to meet their requests,” said a spokeswoman for the Manitoba crown corporation in an email.

A B.C. Liquor Distribution Branch spokeswoman said that “shortages are/were expected to impact all jurisdictions across Canada as some (licensed producers) look to opportunities in overseas markets.”

Four of the largest licensed producers indicated to B.C. earlier this month they would not ship their full product commitment in time for the launch of online sales and the province’s lone store, she added.

“LPs point to a number of factors in reduced product volume and assortment including issues with supply chain, lower than expected crop yields, and insufficient supply of packaging materials,” the spokeswoman said in an email.

Retailers saw long lineups and a wave of online purchases Wednesday as Canadians rushed to make their first-ever purchase of legal recreational pot and witness the historic moment.

Cannabis industry players and watchers had earlier warned that there would be product shortages amid supply chain issues, but the actual appetite of Canadian consumers for legal pot was unclear until the day it became legal.

By most accounts from provinces that did provide figures, demand was high.

On the first day of legalization in Canada, Quebec’s crown cannabis corporation had recorded more than 12,500 in-store transactions and 30,000 online orders, which “far exceeds” its expectations.

The Nova Scotia Liquor Corporation said it conducted 12,810 transactions totalling more than $660,000 in sales, of which almost $47,000 were online, a spokeswoman said. In Prince Edward Island, total sales on the first day was more than $152,000 after tax, nearly $21,000 of which was online.

In Alberta, where private retailers handle in-store sales, the government-run website processed 8,300 orders as of 3:30 p.m. local time on Wednesday, worth approximately $730,000, a spokeswoman for the province’s gaming, liquor and cannabis commission.

The online-only Ontario Cannabis Store would not release specific numbers, but spokesman Daffyd Roderick said “the response to cannabis legalization has resulted in a high volume of orders.” Online delivery will now take as long as five days, as opposed to the earlier timeline of one to three days, due to the volume of orders in the first 24 hours, he added. Ontario Premier Doug Ford had said on Wednesday morning that OCS.ca had handled 38,000 orders since its midnight launch.

A B.C. Liquor Distribution Branch spokeswoman said it handled about 9,100 orders online in the first 24 hours and 800 transactions at its brick-and-mortar store in Kamloops in the first day.

“The first day of recreational sales in Canada appears to have been a success highlighted by the long lines and enthusiasm from shoppers,” said GMP Securities analyst Martin Landry, after his research team visited retail stores in four different provinces to take the pulse of shoppers.

After surveying 100 customers, Landry and his team found that customers on average bought $80 to $90 worth of cannabis, with variations between provinces. Eastern Canada consumers had a basket size of between $60 and $70, but in Quebec and Alberta it was $90 and $100, respectively, he said in a note to clients.

“Seeing cannabis shoppers wait in lines as opposed to take the traditional easy illegal supply route is refreshing and bodes well for the recreational market in Canada,” he said.

The lines stretched into the hundreds at some retail locations across the country on Wednesday, and some provinces said they saw shorter queues on Thursday.

Still, the country-wide supply crunch continued to make it difficult for cannabis retailers to meet existing demand.

The Quebec Cannabis Corp. said Thursday that some items are unavailable on its website and it expects further product shortages — particularly oil, capsules, atomizers and pre-rolled joints — going forward.

“Given the craze created by the legalization of cannabis and the scarcity of products across Canada, the (corporation) expects significant short-term supply challenges,” it said in a statement on Thursday.

Alberta and Prince Edward Island also said Thursday certain products have sold out online, and Nova Scotia said it ran out of certain strains.

Private retailer Thomas Clarke in Newfoundland and Labrador said he is continuing to turn away customers at his store in Portugal Cove-St. Philip’s after completely selling out of product Wednesday.

Chief executive of retailer Fire and Flower, Trevor Fencott, said its five stores in Alberta and Saskatchewan are fully stocked but it won’t launch its online store for Saskatchewan until it receives more supply.

Consumers going to British Columbia’s website on Wednesday were told that several strains of marijuana were sold out and B.C.’s only retail location in Kamloops ran out of one variety of dried cannabis.

The province’s Public Safety Minister Mike Farnworth said Thursday he wasn’t concerned the province would run out of legal marijuana in the first days of legalization.

Farnworth said new supplies will arrive as other strains of pot sell out.

“This is an agriculture product, so we’ll get some varieties coming in soon and others may take a little while to put in place,” he said. “As we know the federal government has put in place additional licences, for example, and the product from those is coming on stream.”

Canopy Growth Corp. CEO Bruce Linton said the licensed producer expects by next Friday to have shipped to all provinces and territories 100 per cent of the volumes it had committed to over the next 30 days, but within 10 days of legalization.

He noted that the cannabis grower in these supply agreements signed on to deliver a certain quantity over a year, and that order specifics did not become clear until roughly two weeks ago.

Linton added that was difficult for all parties to gauge demand for a product that has been banned from recreational use for so long, he added.

“There is mega demand… This is the end of prohibition in a fashion that is absolutely, globally unequalled,” Linton said.

— with files from Michael Tutton in Halifax, Steve Lambert in Winnipeg, Laura Kane in Vancouver and Dirk Meissner in Victoria

CP - The Canadian Press

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