Legalization Series: Packaging and Supply

A complex issue facing the legalization of Cannabis in Canada has to do with the packaging regulations, overall supply and pricing concerns.  These concerns affect both the medical and recreational Cannabis consumer directly.

The states in the US that have passed recreational Cannabis laws started by implementing medical Cannabis programs.  Once recreational Cannabis became available to adults in Colorado the medical program began to decline.  Medical Cannabis sales there were reported to be over $430 million in 2016 but decreased slightly to $420 million in 2017.

The overall decline of the medical program is a result of forgoing the hassle associated with obtaining a medical marijuana card.  Another reason is that the Licensed Producers focus more on the premium products which favour the recreational markets, giving patients fewer options and supply.  In some ways, the Licensed Producers seem to have abandoned patients to favour the bottom line.

Another topic being discussed in the community is the possible temporary product shortage.  For those in the medial program, it is common knowledge that the current Licensed Producers sell out of product regularly.  It is also common knowledge that Health Canada is slow to approve Licensed Producers.  It is projected the market will require as many as 200 Licensed Producers once legalization occurs, currently, there is just over 100.

Miles Light, co-founder of the Denver-based Marijuana Policy Group (MPG) feels a shortage is unlikely and estimates there will be 500,000 kilograms of “flower-equivalent” available upon legalization in Canada.  However, Mackie Research Capital forecasts licensed Producers will end the year with a production capacity of just over 100,000 kilograms.  Leaving a questionable gap in supply.

Providing consistent, high-quality products over the long term is something consumers will demand and will require some advanced technologies to achieve.  The licensed Producers who can accomplish this will have a competitive advantage in the marketplace and will also help to legitimize Cannabis use overall.

Health Canada regulations state Cannabis is to be sold in plain packaging with strict branding and advertising limits to deter children from consuming Cannabis.  However, retailers and Licensed Producers say branding is necessary to convince consumers to switch to the legal market and to differentiate each product and brand.  Advocates say these regulations are a disservice to consumers and will make it harder for individuals to understand the products being purchased.

One intention of legalization is to eliminate or decrease the illegal market.  However, the black market will continue as it has if there is a product shortage, as some people expect.  Same will be true if the packaging remains ambiguous, as the illegal market has appealing branding which is clearly recognizable.  Illegal Cannabis typically costs less than the legal product, which is another reason some individuals may not change their purchasing habits.  Time will tell.

References:  Fool.comState of Colorado, CBC, CBC, VICE News, Financial Post and  Global News.

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