Federally licensed producers in Canada are stockpiling more cannabis than ever, new figures from the Canadian authorities present, indicating that some producers are in retailer for more monetary pain because the market appears for equilibrium.

Deeper industrywide cuts would possibly nonetheless be wanted for the big producers to shed extra manufacturing, even because the business continues to see spectacular month-on-month retail gross sales progress.

As of April, Canadian cultivators and processors had amassed roughly 620,144 kilograms (1.four million kilos) of unpackaged cannabis inventory – outlined as marijuana in inventory that isn’t packaged for sale to shoppers on the retail degree.

In addition, roughly 85,014 kilograms of packaged inventory was being held in April by federal license holders, retailers and wholesalers – outlined as cannabis in inventory that’s packaged for sale to shoppers.

Craig Wiggins, managing director of market researcher TheCannalysts, stated “It’s plain old supply and demand. If you cannot sell what you’re making, it starts backing up and you will eventually have to write it down or destroy it if it doesn’t sell.”

“The total addressable market is growing. There’s no question about it,” he stated. “But it’s not growing to the extent that it can absorb the unsalable product, so adjustments are coming.”

It is an analogous story for extracts, edibles and topicals, although Health Canada makes use of “packaged units” to measure these inventory ranges.

For instance, the Health Canada information reveals more than 9 million packaged items of cannabis extracts in April versus gross sales of just a little over 1 million packaged items.

In the lead-up to legalization in October 2018, the biggest Canadian producers spent billions of {dollars} build up manufacturing capability and on acquisitions – strikes criticized as a nod to inventory market buyers slightly than an try to handle precise client demand.

Much of that capability was proven to be misplaced, regardless of a short-lived shortage within the months after legalization.

Since the scarcity abated, producers akin to Aurora Cannabis and Canopy Growth raced to slash prices and extra manufacturing, laid off hundreds of employees and wrote down billions in inventory. Some are promoting greenhouses for a fraction of their unique price.

“We’ve seen a cutting of capacity, but the capacity that they reduced to might still be optimistic,” Wiggins stated.

Brock University enterprise professor Michael Armstrong stated looming out of doors harvests this fall may additionally issue into inventories.

The quantity of house licensed to develop cannabis outside now exceeds indoor and greenhouse.

“The (production) bump next fall is probably going to be even larger (than 2019’s), so current indoor production plans should be taking into account that a surge is going to come from outdoor.”

Health Canada’s cannabis market information will be found here.

Matt Lamers is Marijuana Business Daily’s worldwide editor, primarily based close to Toronto. He will be reached at [email protected].

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