Preparing for the Consumer Pot-Acquisition Onslaught

"[The study's purpose is to provide a] comprehensive outline of the scope and scale of cannabis consumption in Canada."
"Actual demand remains unknown and there is no statistically proven method to know demand with statistical certainty."
Health Canada-commissioned report on cannabis consumption in Canada 

"[There will be a] huge curiosity spoke [of those waiting to buy legal cannabis in the early days of legalization across Canada]."
"I don't think there will be empty shelves, but there might be shortages of some strains."
Brad Rogers, president Canntrust cannabis growers

Concerns are being raised over the ability of Canada's licensed medical marijuana producers to supply enough cannabis for a legal recreational market. (Julie Gordon/Reuters)

An air of expectancy is palpable among recreational drug users in Canada. The country is set to become the first to legalize recreational marijuana right across the country, by an act of Parliament. Cannabis growers have been revving up activities with frenzied determination. Investment in infrastructure for marijuana production has been driven on overtime. Advertising and public relations campaigns have been very visible over the past year. Suddenly, cannabis, a herb whose growth, production, sale, acquisition has been illegal save for prescribed medical services, is set to become readily available to consumers.

Cannabis-growth operators are confident they are able to spin the demand into amply-provided products to satisfy the drive by consumers to have their fix and smoke it too. And then, the stunning
news out of a report commissioned by Health Canada predicting that demand will outstrip supply in the first year of legalization. This, at a time when producers have been slavering to get their product to market, ramping up production with the happy visions of dollar signs twinkling in their bedazzled eyes.

With the use of a 2017 federal survey on cannabis use to enable the study's estimation of the numbers of Canadians and their appetite for readily-acquired, legal weed will be in the initial year of legalization, the calculation of 926,000 kilograms was arrived at inclusive of recreational and medical cannabis use; 41 percent higher than the Parliamentary Budget Officer's estimate in 2016 of 655,000 kilograms. The outlook, should the new number accurately reflect demand, augurs shortages from October 17 forward.

To industry experts this will not come as shocking new news, since they have predicted Canadian cannabis growers would be unable to produce sufficient product from the outcome, until the situation stabilizes and producers prove themselves equal to the difficult task of putting their production skills to the test, enabling them to satisfy demand and in the process build their singularly successful pot-production empires.

"We all know there is not going to be enough product on Day One, not nearly enough", pronounced Greg McLeish, a financial analyst who specializes in cannabis, with Mackie Research Capital Corp. His prediction is that it won't be until 2020 that supply will finally match demand. Even now, provinces preparing for an unprecedented demand in reflection of a product that was illegal until October 17, have updated their orders from 10,000 kilograms to 17,000 kilograms.

The issue, of course, is to be able to adequately stock legal stores and at the same time determine anticipated tax revenue collected from cannabis sales. Spinoffs such as job creation, and regulatory services to come out of the entire experience all require attention, from licensing to public education and policing related to matters such as driving infractions. If it all seems somewhat 'on the fly', that's because it is, despite the long window of preparation, given the many ponderables involved.

The study, commissioned by Health Canada had a price tag of $90,000 reflecting the combined research of Marijuana Policy Group located in Denver, and BOTEC Analysis research firm also in the U.S.There is uncertainty over how many pot users will simply continue supplying themselves from familiar illicit sources, from known dealers, dispensaries and friends. The anticipated shift to the legal market will rely upon competitive pricing and convenience, the variety of products and whether illegal dispensaries will successfully be shuttered by the law.

According to an estimate from a CIBC World Markets report, cannabis growers currently produce roughly 350,000 kilograms annually even while the large grow operations are expanding at a frantic pace and new companies vie for licences. Billions in investments are announced along with plans by ambitious companies to become leaders in the field. "Construction and production promises in this industry are a dime a dozen", the report by CIBC published in May, noted.