Legal Cannabis in Canada; One Month Later
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On October 17, 2018, cannabis was legalized in Canada and the long-standing prohibition against this controversial and powerful plant was officially over…at least on paper.
The legalization of cannabis has not come without it’s challenges.
Perhaps the most immediate - and frustrating - challenge for consumers came in the form of supply shortages.
Legal cannabis stores all over the country sold out almost overnight. As consumers eagerly lined up to purchase legal cannabis, government stores struggled to meet demand.
New Brunswick was forced to temporarily close more than half its stores due to supply problems, while Labrador’s only cannabis store closed its doors to restock again after being depleted of product for nearly two weeks following legalization. British Columbia, Alberta, Manitoba, Saskatchewan, Quebec, and Nova Scotia all reported varying degrees of supply shortages in the days and weeks following October 17, 2018.
By all accounts, it looked like the whole country was jumping on the cannabis band-wagon and going up in smoke…but this was not quite the case.
Legalization Red Tape
The truth of the matter is that government supplies of cannabis were grossly inadequate to meet a relatively modest consumer demand.
Industry insiders have blamed this shortage, in part, on the rigorous regulations imposed on licensed producers by Health Canada combined with lengthy waiting periods to have licenses approved in the first place.
This system meant that hopeful producers spent months in limbo, waiting to hear if they had been licensed or not. When they were finally given the green light to go ahead, they found themselves racing against time to produce high-quality products, consistent with government-imposed standards and regulations.
Uncertainty around acceptable packaging standards and shipping procedures also led to production delays as licensed companies struggled to get cannabis out while simultaneously learning how to navigate the red-tape of legalization.
Dispensaries Shut Down
But it was not just licensed companies that experienced issues with supply following legalization.
Many existing – but illegal - brick and mortar dispensaries were either raided or told to shut down in the days following legalization. Many less-than-legal dispensaries were told that ceasing operation was absolutely necessary in order to maintain any hope of gaining an official permit and selling legal cannabis in the future.
Again, systematic, government delays in approving licenses has largely been fingered as the culprit in this scenario.
Postal Strikes Strike Again
But even those who were lucky enough to successful order cannabis using the online government sales platform experienced difficulty in ultimately obtaining their orders.
This was mainly due to the rotating strikes by Canada Post employees which were happening in a number of Canadian cities at roughly the same time as legalization. In Ontario, more than 1,000 complaints were lodged in relation to the delivery delays, poor customer service and billings issues associated with online cannabis sales.
Ironically, each and every one of these factors combined to create a cannabis shortage of monumental proportions in the wake of legalization.
And while this could have been somewhat anticipated, the real challenge is that there appears to be no end in sight. Some are predicting intermittent cannabis shortages well into 2020.
Shortages Affecting Stock Prices
This appears to have been one factor that negatively affected Canadian cannabis stock prices since October 17, 2018. Auroras’ share price lost about half its value, which came as a heavy hit to many who are invested in this industry.
As rumors swirl about other countries legalizing cannabis, some have speculated that Canada may already be falling behind in this new and emerging industry.
For its part, Health Canada has already announced that it has taken measures to help improve supply issues.
For example, they have expanded the licensing and capacity of producers, including upping maximum production capacity from 185,000 to more than 1.2 million square metres, which will allow licensed producers to produce more cannabis per operation. They have also hired additional staff to help evaluate applications in an effort to curb delay and create faster processing times.
But this is not likely to be enough. Resolving the long-term, cannabis supply issue will take a more concentrated, collaborative effort on the part of both federal and provincial governments who will need to work together to stream-line licensing, regulation, policy and production.
This is something we have yet to see. However, I have high hopes that it will occur sooner than later.
After all, a scarcity of cannabis in the advent of legal cannabis is not only tragically ironic – it is absolutely undesirable.