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84% of Product Unsold in April

Only 16.4% of packaged units of cannabis were sold in April 2020, according to a recently released report from Statistics Canada.

Out of 46.3 million units in the inventory of producers, distributors and retailers, only 7.6 million were sold in medical and non-medical markets. Of that 7.6 million, the lion’s share was dried flower accounting for 73% of sales, while edibles and extracts accounted for 12% and 14% respectively. Not only that, but producers have 6.2 million plants waiting to be packaged, as well.

According to the new data, sales for non-medical cannabis have stayed fairly steady since October of 2019, give or take a couple hundred thousand. Production, on the other hand, is consistently and exponentially increasing.

Supply and demand dictate that when there is excess supply in the market, the lack of demand will drive prices down. This is good news for the average consumer, but not so much for the suppliers with millions of kilograms of packaged and unpackaged cannabis sitting in a warehouse. It also creates dried out product by the time it reaches the consumer.

If demand is staying consistent, why are so many LPs producing several times the amount that retailers can sell?

According to Ian Chadsey, VP of Investor Relations at Delta 9, the huge numbers typically come from the large producers with the larger production capacity. They can harvest several kilograms of cannabis, but may not have the retail network to sell it. Comparatively, he says, Delta 9 produces much less flower, however, with their retail stores and wholesale customers they can sell what they produce.

“The main reason there is excess capacity in the market place is that many provinces were slow in allowing new retail stores to open,” he says. “For example, Ontario has 100 retail [cannabis] stores and 600 liquor stores. There are 1,000 retail stores in Canada and the country needs 4,000 to 5,000 retail stores to support the market.”

With the illicit market still making up the majority of cannabis purchases, perhaps once more storefronts open and prices come down, the legal market will be able to compete and the demand will meet the supply.

Whatever the reason, only the future can tell how this will play out for them.