Smoked Out: How Canada’s Pot Producers Could Overshoot Demand

Article by Kieran Delamont, Ottawa Citizen

Smoked out: How Canada's pot producers could overshoot demand KIERAN DELAMONT As legalization draws nearer, Tweed and other marijuana producers are pushing to meet demand, but will they end up with far more pot than they know what to do with? SEAN KILPATRICK / THE CANADIAN PRESS SHARE

In all the great songs written about pot, from Bob Marley’s Kaya to John Prine’s Illegal Smile, none have ever dealt with the problem of there being too much weed.

As legalization looms on the Canadian horizon, suppliers concerned about not being able to meet initial demand are ramping up production capacity ahead of Oct. 17. (On a corporate earnings call this spring, Aphria CEO Vic Neufeld noted that “unless someone’s out there hiding 100,000 kilograms, we’re looking at a real shortfall.”)

But with that push to produce more pot — fuelled by a desire to capture as much of the market as possible, along with piles of investor cash — comes a real possibility that the industry will produce far more marijuana than it knows what to do with. It’s a situation that has been common in U.S. states where cannabis is legalized.

Though precise figures are hard to come by, calculations based on corporate statements, production estimates and financial filings suggest that even just 10 of the largest cannabis producers in Canada will be able to churn out around 1.8 million kilograms of cannabis annually by 2020 or so, assuming their construction projects all go to plan. The Parliamentary Budget Office figures that, by 2021, demand will only be as high as 734,000 kilograms.

But Michael Garbuz, who works in corporate strategy and legal counsel with Ottawa-based cannabis investment firm CannaRoyalty, says oversupply could prove beneficial for consumers as it will push companies to focus on producing higher-quality cannabis and effectively branding those products in order to compete.

Read the full article here.

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