Canadian cannabis producers have sold less than 20% of their production since legalization

Canadian cannabis producers have sold less than 20% of their production since the country legalized cannabis in October 2018, according to an analysis by MJBizDaily.

The most recent data, running to 2020, implies that most of the cannabis produced from 2018 to last year was either stored or destroyed, and less than a fifth ended up in retail stores. Nearly 40% of production would be stockpiled and unsaleable.

This disconnect probably helps explain how Canada's largest cannabis producers, who account for the bulk of the sector's output, have together lost more than 11 billion $CA (€7.4 billion) cumulatively.

Different explanations

Some industry experts blame poor-quality cannabis for the shortfall. «Good products sell,» said Ian Dawkins, senior consultant at British Columbia-based Althing Consulting.

Av Singh, cultivation expert at Nova Scotia-based Flemming & Singh Cannabis, believes that Canada's largest cannabis producers lacked the know-how to produce cannabis on the scale promised to investors.

«Canadian licensed producers quickly tried to capture as large a share of the market as possible, often building inferior facilities that were not designed to produce quality cannabis,» said Av Singh.

He also believes that legal constraints at federal and provincial levels are partly to blame, having put up «obstacle after obstacle» as the new industry took off.

«Countries should legalize cannabis when governments have addressed their own stigma and, preferably, the systemic racism associated with criminalizing cannabis users,» he said.

A premium for quality

Some producers, smaller than the sector's behemoths, However, they have no problem selling their wares. In May, the Canadian market saw record sales of recreational cannabis.

«Successful companies in this field don't destroy excess inventory,» said Ian Dawkins, consultant at Althing Consulting, based in British Columbia. «If you're producing enough cannabis to have any residual stock, you've fundamentally misunderstood the market. Everything that's selling is coming from companies that are producing products that people want, to the point where they're out of stock as soon as they come out.»

Billions in losses

After selling less than 20% of the cannabis produced between 2018 and 2020, many of the biggest greenhouses that drove up cannabis stock prices during the 2018-2019 stock market boom have been sold for pennies.

Canopy Growth's Tweed joint venture in British Columbia is a case in point. After buying two greenhouses for over 644 million $CA, Canopy ended up selling them for just 40.6 million $CA.

The two companies that closed the most facilities, Alberta-based Aurora Cannabis and Canopy Growth, based in Ontario, also recorded the biggest losses. Canopy has lost 3.8 billion $CA since its inception. Aurora recorded a deficit 4.1 billion $CA. Neither company has ever declared a profit.