Skip to Main Content

How the Cannabis Industry is Changing

The cannabis industry today is vastly different from that of its inception over four years ago. The Canadian cannabis market was one of rapid growth, both in the number of licensed producers (LPs) and cannabis retail stores, with nationwide monthly cannabis sales hovering around $13 million per day according to recent government sales data.

Analysts are suggesting that the cannabis industry’s profitability is slowing, while new players are working to ensure it continues to grow and thrive. A lot has happened since 2018, and as we enter 2023, Cannabis Retailer is reflecting on how the cannabis industry is changing.

Farmgate Grows in BC, ON, and NB

The first farmgate store opened in Ontario in 2020, with stores slowly popping up in British Columbia and New Brunswick. Currently, there are just over a dozen farmgate stores across these three provinces.

Farmgate retail stores, which operate under a Production Retail Store License, allow the brand to be the direct ambassador of their own products to consumers, increase opportunities for canna-tourism, and provide rural and Indigenous communities the opportunity to create robust and thriving economies through cannabis.

Direct Delivery Builds Brand Loyalty

BC was the first to roll out direct delivery in August 2022. The BCLDB’s goals for the program include the elimination of the illicit market and providing a path for small-scale producers to enter the legal market competitively.

BC was the first to roll out direct delivery in August 2022.

“One of the great things about direct delivery is that it allows the retailer to build a relationship directly with the micro,” says Cory Waldron, a multi-store retailer and director at the Retail Cannabis Council of BC (RCCBC). “A retailer can call the micro with questions around shipping, orders, quality and returns, and other information that is otherwise unavailable through the LDB central distribution model.” He explains that these relationships help retailers tell the brand story to consumers, helping build brand loyalty.

New Players Strengthen Independent Retailers’ Voice & Capabilities

With the BC General Employees Union (BCGEU) strike that significantly impacted the retail supply chain over the summer, the call for support for independent retailers was louder than ever. Advocacy around the industry is at an all-time high.

Advocacy around the industry is at an all-time high.

The Retail Cannabis Council of Canada (RCCC) was formed in October 2022 to bring an organized voice for independent retailers to lobby the federal government. The RCC is made up of the Retail Cannabis Council of BC (RCCBC), the Retail Cannabis Council of Ontario (RCCO), and the Retail Cannabis Council of Saskatchewan (RCCS), and other provincial bodies will be invited to join once they form. The RCC plans to advocate for changes to marketing restrictions, edible dosage limits, and a revision of the excessive excise tax that threatens the profitability of LPs and retailers.

Weed Pool also came onto the national scene as a cooperative that levels the playing field for independent retailers by securing better pricing from provincial suppliers and direct delivery through larger volume collective purchases. The cooperative currently operates in Saskatchewan and BC. Waldron, who is also a director of Weed Pool and the first retailer to use the platform, says that the website platform helps BC retailers avoid multiple POs, invoices, and shipping costs. According to Waldron, both micros and retailers share in the company profits when they become members, which is a significant added benefit.

Another new player supporting independent retailers is the Independent Retail Cannabis Collective (IRCC) that was created in September to assist independently-owned and operated cannabis retailers by providing access to important revenue opportunities, and giving them ways to enhance their professional development and education to facilitate and nurture overall business health and growth. The Collective also presents networking opportunities for independent cannabis retailers to learn from one another and trade tips concerning innovation, the use of technology, customer service, merchandising, or anything else that might elevate their store’s performance.

First Nations and Provinces Enter into Government-to-Government Agreements

Many First Nations from coast-to-coast have a strong cannabis economy. With each nation being unique, some are operating cannabis businesses under their sovereign rights, while others are entering into government-to-government agreements with their respective provincial or federal bodies to participate in the regulated market.

Many First Nations from coast-to-coast have a strong cannabis economy.

Among some of the First Nations that have government-to-government agreements are Cowichan Tribes, Snuneymuxw First Nation, Mi’kmaw communities in Nova Scotia, Williams Lake First Nation, Kispiox First Nation, and some Anishinabek Nations within Ontario.

The Tsleil-Waututh Nation entered into an agreement with the Province of BC in November 2022 under Section 119 of the Cannabis Control and Licensing Act. “This is reconciliation in action, and it is an important part of the Province of BC’s commitment to the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP),” notes Chief Jen Thomas of Tsleil-Waututh Nation.

Licensed Producer Innovations

While some may argue that Canada has missed the boat on being a large player in medical cannabis research and development, some players are stepping up through biopharmaceutical and nutraceutical advancements. Domestic and international research is being conducted by Canadian companies that may see Canada’s global profile increase for innovations such as time-release technology and formulations based on nanoparticles.

A Rise in Minor Cannabinoids

While THC still reigns supreme for consumers, minor cannabinoids like CBN (cannabinol) and CBG (cannabigerol) are starting to get more shelf space across all product categories. While the jury is still out on the efficacy of CBN for sleep, some brands are capitalizing on the perceived sleep-inducing effects of the cannabinoid that is the result of oxidized THC.

CBG is known to have no psychotropic effects and is being researched for its potential for reducing pain, regulating sleep, and increasing energy. A downside of the rise in minor cannabinoids in the recreational market is that with current laws budtenders can’t educate the consumer on their potential medicinal benefits.

Photo credit: Maria Azzurra Mugnai, CC BY-SA 3.0 <http://creativecommons.org/licenses/by-sa/3.0/>, via Wikimedia Commons

Wins for Advocacy

In November, Bill C-5 was passed, a feature of which is its Declaration of Principles in Section 10 of the Controlled Drugs and Substances Act (CDSA), which re-orientates substance use as a social and health issue rather than an issue of the criminal justice system. It also removes mandatory minimum sentences for personal drug possession and provides for free, automatic, and permanent sequestration of conviction records relating to the possession of all drugs for charges after the Bill’s passing.

While challenges still abound for drug policy in Canada, Cannabis Amnesty called the Bill’s passing a “direct response” to their advocacy towards legislation that seeks to undo the harms caused by the criminalization of cannabis and its unequal enforcement on Black and Indigenous people.

Demand for Competitive and Fair Wages

Cannabis retailers have had difficulty attracting and retaining staff due to the inability to pay competitive wages, including a living wage. While some retailers have gone above and beyond in their compensation strategies, others have seen increased budtenders and retail staff unionization within their stores. Various labour groups have cropped up demanding fair working conditions, compensation, and living wages.

What’s Next for Cannabis in Canada?

One thing we know about Canada’s cannabis industry is that it is full of highly capable people and groups with a passion for making the industry the best it can be. Advancements such as direct delivery, farmgate, and government-to-government agreements with First Nations signifies growth in the industry, albeit slow. The increase in advocacy groups working on behalf of small businesses, micros, independent retailers, and industry workers show a great investment in the profitability and success of the industry.

Canada’s cannabis industry is full of highly capable people and groups with a passion for making the industry the best it can be.

The Cannabis Act is currently undergoing its review and the period for feedback for stakeholders wrapped up on November 21, 2022. The Honourable Jean-Yves Duclos, Minister of Health says, “Through this useful, inclusive, and evidence-driven review, we will strengthen the Act so that it meets the needs of all Canadians.” Let’s hope it also meets the financial needs of all cannabis businesses in Canada.

Tags: Bill C-5 (2), Cannabis Act (40), Cannabis Industry (183), Independent Retail Cannabis Collective (3), minor cannabinoids (1), Retail Cannabis Council of BC (8), Retail Cannabis Council of Ontario (6), Retail Cannabis Council of Saskatchewan (3), Weed Pool (1)