When Statistics Canada released the cannabis market data for October of 2020, the numbers left some people scratching their heads. The data revealed that legal cannabis producers have 961,070 kilograms of unpackaged dried cannabis inventory waiting to be sold. That equates to nearly 1 billion grams, or about three years’ worth, according to BNN Bloomberg.
Why is this happening? Don’t retailers bring in millions of dollars in sales every year? How could there still be so much inventory left over?
Customer Preference and Industry Trends
According to industry experts, it could be any number of things causing the overstock. Some retailers have speculated that the bloat is caused by failed strains and product formats. They say that the burgeoning market was throwing darts at the wall, trying to find what products would stick, and that the excess is simply the ones that didn’t, such as lower THC strains.
On top of that, a trend of sun-grown cannabis cropped up in 2020, which George Smitherman, President and CEO of the Cannabis Council of Canada, thinks may have contributed to the quickly growing volume.
“I do think it’s very important to point out that one of the key factors driving these large inventories was the harvesting of outdoor crops because there’s been quite a dramatic expansion of outdoor planting,” Smitherman says. “That’s certainly not the only factor, but it was a driving factor in volume increases through the fall of 2020.”
David Clement, North American Affairs Manager for the Consumer Choice Center, has a few ideas as well. He thinks that federal regulations on marketing, branding, and packaging are restricting legal producers from getting the word out about their products, thus leaving them sitting in a warehouse.
“From the onset, we thought that these regulations were overly paternalistic, and handcuffed the legal industry from effectively communicating and advertising to adult consumers. These current regulations have prevented legal producers from effectively advertising to consumers currently purchasing cannabis in the illicit market,” says Clement. “We know from the numerous RCMP drug busts that there is still strong demand for illicit cannabis, and allowing for legal producers to effectively advertise to adults would help transition those consumers to the legal market, and curb the issue of over-supply.”
While production of packaged products increases at roughly the same rate as sales, unpackaged production continues to grow each month, adding to the growing pile of cannabis waiting for a home. With production facilities that need to keep producing to survive, and the popularity of dried flower beginning to wane, how can the industry address this building issue?
According to Clement, “The glut in the legal space is a serious problem, but some simple consumer-focused solutions could help alleviate the issue of over-supply.”
Photo courtesy of Elsa Olofsson