Canada’s legal weed scene: What could go wrong?

Canada’s legal weed scene: What could go wrong?

Canada’s legalization of recreational weed for adult use is a groundbreaking law that basically sets the groundwork on how the cannabis industry could dominate the market in the next couple of years. As the first G7 nation to legalize weed, Canada set a precedent of how other major countries, like the U.S., could follow. This

Canada’s legalization of recreational weed for adult use is a groundbreaking law that basically sets the groundwork on how the cannabis industry could dominate the market in the next couple of years. As the first G7 nation to legalize weed, Canada set a precedent of how other major countries, like the U.S., could follow. This makes it easier to perceive that the cannabis market is gearing for a billion-dollar payout in less than five years.

Of course, there’s a visible expectation of success. Forbes projected that the global cannabis industry could reach a staggering $57 billion by the year 2027. However, some analysts are not blind to the fact that it’s not going to be as easy as it sounds. There’s bound to be a problem in fully implementing cannabis as a fully legal substance.

But where could it all go wrong? Here, we try to zero in on the possible problems and see how Canada can get through its first few years of legalizing weed:

Compliance issues

It’s been four months since the signing of Canada’s Bill C-45, with government officials citing that the country needed time to stock on the products and help key areas build or set up infrastructure that could help drive the nation’s cannabis industry.

But the problem could be bigger than that. CBC News calls the application process “not for the faint of heart.” This is because the process to get the necessary license to grow or sell cannabis is not just rigorous—it’s almost downright impossible to have.

In the field of medical cannabis, for example, Health Canada has already received 1,630 applications but so far, less than 50 have actually been approved. That’s 2.6 percent of total applications.

Out of the 1,630 applications, 841 were returned for being incomplete while 265 were directly denied. The same problem is seen now with recreational cannabis. There’s a rigorous seven-stage application process to go through, and these are seen as a major obstacle for cannabis operators.

“These are very difficult regulatory submissions. Lots of complexity, lots of information required, and you could see how easy it would be to get it wrong,” said Eileen McMahon, chair of the food and drug regulatory practice at Torys LLP.

The case of Canada is being compared to the cannabis scene of California where cannabis growers are reluctant to navigate and get into the process of license applications and conforming to government regulations.

Aside from the complicated process, there’s also the concern of high compliance costs. And if Canada would be anything like California, the country would also have a problem when it comes to cannabis flowers since the difficult licensing process could mean that there will be very few growers that can supply different brands.

Additionally, the New York Times said that regulated marijuana (subject to testing and taxes) could drive-up market prices compared to those that are still expected to be sold in the black market.  

And then there’s the issue of access. If Canada is anything like California, it might be difficult to access legal cannabis. In the U.S., even if legalization of weed was pushed, some still have a problem with setting up dispensaries within the community. The same problem could be experienced in Canada, so this aspect should be considered.  

Canada cannabis supply

The cannabis supply shortage could last a full year. (Source)

Supply concerns

Even with companies preparing for the Oct. 17 implementation of legalizing cannabis, some industry insiders are saying the first few weeks from the day of implementation could be a challenge in supplies for some marijuana players.

According to a report from CNBC, the shortage could last a full year, even with companies scrambling to get an immediate share of the market.

“There are different groups with different levels of preparedness in parts of Canada, especially at retail. We’ll probably see empty shelves and lack of products in the first year, as we often see in countries that legalize marijuana,” said Chuck Rifici, CEO of Auxly Cannabis Group.

Some analysts are saying that supplies will be limited because the first products would only be flowers, seeds, oils, and edibles.

Believe it or not, cannabis supply could actually be a big problem for the Canadian legal weed industry. And despite the legalization and support for cannabis, there was actually no guarantees months before the actual approval, which meant that most companies are not ready to supply a possible demand because most did not take the chance to go through and approve projects that might not have been approved in the end.

In the end, the hesitation of approving such projects directly affects the current demands of Canada’s legal weed industry.

There’s still a silver lining. Apart from the major players, there are also brands that are ready to rise to the call of addressing Canada’s possible supply problems. Companies like FSD Pharma (CNSX: HUGE, OTCMKTS: FSDDF) are also working hard to produce and market top-quality marijuana products. The brand is a publicly traded company on the Canadian Securities Exchange that holds an ACMPR license to cultivate cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR).

FSD Pharma targets all aspects that could help raise the supply of cannabis in Canada. This includes cultivation, processing, manufacturing, extracting, and research and development of current and future products. It has a 3,800,000 sq. ft. of space that can be used for cultivation and processing of marijuana. The facility is found in Cobourg, Ontario.  

FSD owns 25 percent of Canarra Biotech, which aims to be the largest indoor cultivation facility in Quebec. It purchased a modern 625,000-sq.-ft. facility on 27 acres of land, located less than one hour drive from Montreal. It will also lease over 105,000 square feet of Cannara’s facility for the purpose of cultivating and/or selling cannabis and cannabis-derived products.

There could be further problems arising in the next few days upon implementation of legal cannabis, despite this, analysts remain optimistic that it’ll be one of the most successful industries in the market.

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