When marijuana is legal in Canada, there may not be enough to go around

Angela Mulholland,

By this time next year, when marijuana becomes legal in Canada, people looking to get high could be facing the oldest problem in business: not enough supply to meet demand.

The licensed marijuana producers in Canada who already grow weed for the medical marijuana market are trying to expand as quickly as possible to meet the increased demand of recreational pot legalization.

But they say they can only expand so quickly and new producers are not getting into the business fast enough.

A report last fall from Canaccord Genuity Group predicted the combined annual demand for recreational and medical marijuana would reach 575,000 kilograms by 2021. That’s a lot more than current producers are growing, says Greg Engel, chief executive officer of Organigram Holdings Inc.

He told CTV’s Your Morning that his Moncton-based company is one of a handful of big licensed marijuana producers in Canada, and while they are working hard to expand, there are limits to what they can do.

“Companies like Organigram are rapidly expanding our production but it’s difficult for us to anticipate that growth. We’re moving as quickly as we can to meet demand but we’re not quite there yet,” he said.

The medical marijuana market alone is already expanding quickly, in part because more insurance companies are starting to cover the drug, Engel says.

The number of Canadians registered to use medical marijuana soared to nearly 130,000 in March of this this year, according to Health Canada – double what it was a year ago. And that number continues to increase every month.

“We’re seeing month-over-month growth of about 10 per cent in terms of the patients who are accessing medical cannabis,” Engel said.

Organigram can currently produce about 6,000 kilograms of cannabis a year, and hopes to push that to 26,000 kilograms annually by the end of 2018. Engel knows demand will spike next summer, but he doesn’t expect producers to be ready.

“We’re anticipating that demand next year. But certainly, when the adult recreational market starts, we’ll not be in a position to fully service that,” he said.

The federal government is already taking steps to tackle the problem, including removing some of the barriers to production expansion. They also announced in May they would be accelerating the process for new companies to become licensed producers, or LP’s.

There are currently 45 licensed producers in Canada, and more than 400 others in line hoping to join the market. But, even if more producers are approved, it still takes up to a year for a new producer to get up and running and create a product that is ready for market, Engel says.

“There are the top six or seven companies, that we’re one of, that are doubling, tripling, if not quadrupling production. But there’s new companies coming into the space as well, in anticipation.

The challenge is they may not be ready when the market starts,” he said.

Engel points out that marijuana is “not that easy to grow at scale”; the plant takes months to grow and there’s not much that can accelerate that process while also making a consistent and safe product.

Canada is not the only place with a marijuana shortage. Colorado has had legal marijuana for three years and is only now getting up to speed to meet demand,” Engel says.

He says there will likely be shortages of legal marijuana at first, but he’s confident that eventually, the illegal market will be pushed out.

“There’s an existing marijuana black market in Canada and that market is going to continue for years,” he said. “We’re not going to be able to displace it on Day 1, and that’s not the goal of the federal government. It’s to push it out over time.”