Cannabis, did the government fail the sector?
Depending on how the years have passed, 2018 seems not so long ago. On October 17, 2018, the Cannabis Act came to be, and for the most part, the nation seemed thrilled.
One of the original listers was Canopy Growth, the first federally regulated, licensed, publicly traded cannabis producer in North America, trading on the TSX. Another big name that had even bigger hopes was Aurora Cannabis. The Alberta company opened its massive 11 thousand-square-foot flagship store in West Edmonton Mall in November 2019. Fast forward to the present day, Aurora closed the sale of its Polaris facility in Leduc, Alberta. With closing the facility, the company has said that 8 per cent of its workforce will be affected.
Aurora is one of many companies feeling the impacts of the tight hold the government has on the sector.
Despite big and small companies struggling to attract customers in the country, one BC government survey has different news. According to the government of British Columbia, there has been a decrease in consumers who purchase from unlicensed stores. Down from “56 per cent in 2018 to 17 per cent in 2021, and 71 per cent say they purchase from licensed retailers.”- gov.bc.ca. There is always the question of who is filling out these surveys and if everyone is answering honestly.
As mentioned, big and small companies have been feeling the pressure of government restrictions, among other things. In the future, more big companies may sell off assets or reduce their workforce to tighten the purse strings. As for the micro companies out in the market, more acquisitions and mergers may be possible. Due to the saturation that occurred at the start of the Cannabis Act, the industry is still settling down.
Speaking of market saturation, there have been many companies that initially jumped on the bandwagon. With everyone competing for sales, prices have dropped, with companies trying to grab their portion of the market share.
Rising interest rates have also been an issue. Companies need to raise capital to grow, and the cannabis sector is no different. With the government implementing a series of Federal Reserve hikes, it will be interesting to see how companies fair in 2023.
To say there has been a conservative approach to the sector when legislation was drafted is an understatement. Everything from bottle design, window displays, and how much THC and CBD are allowed in one package was considered. With over five years of information and legal sales, for the federal government to look through, there is a lot up for discussion.
Not everything is negative. In 2023, the federal government will come together to amend the Cannabis Act. Also, with several years of exposure behind it, the sector has become more widely accepted for both medical and recreational use. There are still many reports about the market and how it is slated to double to over $8.5 billion over the next five years. With new products like vapes, edibles and beverages, growth is out there.