Legal supply of cannabis will lag demand for years
The good news is: Canada’s cannabis companies are worth billions of dollars and US brewer Constellation Brands can feel smug about its timely investment in Canopy Growth. The bad news is: It could take years before the legal supply of cannabis will meet demand.
Canada became the first large country to legalise cannabis for recreational use on 17 October 2018. As of now, punters are within the law if they consume fresh or dried cannabis and cannabis oil. What is more, they can also grow at home up to four plants. The government set 18 as the minimum legal age for smoking weed, whereas some provinces have put the smoking age higher.
As was pointed out by the Economist newspaper recently, Canada has been heading towards legalisation since 1972, when a commission recommended that the possession of cannabis should be decriminalised. This was to no avail. Nearly 30 years later, in 2000, the Supreme Court ordered the legalisation of marijuana for medicinal use, which was implemented in 2001. Today nearly 331,000 registered patients (out of a population of 36 million people) buy pot, produced by 120 licensed facilities.
What may have triggered the liberal government’s push towards legalisation were the involvement of organised crime – an estimated USD 4.5 billion annually in profits have been pouring into the back market – and the attraction of cannabis to children. The Economist reported that young Canadians are the most avid users in the rich world: almost one in three children aged from 11 to 15 years old have consumed cannabis.
Organised crime will not exit the business, though. That is because neither the federal, nor the provincial governments will be able to cope with demand for legal cannabis. According to estimates, the federal government, which regulates production and health matters, has issued only enough permits to supply 30 percent to 60 percent of demand in the first year.
Most provinces, which are responsible for regulating the sale of cannabis, will have too few legal retail outlets initially. Worse still, in Ontario, the most populous province with 13 million inhabitants, there will be no retailers selling cannabis because its new government, which came into power in June 2018, dropped plans to sell cannabis through government-owned shops. Ontario wants private retailers to step in. The first one will open only next year. In the meantime, Ontarians can buy cannabis online from the government.
It is easy to imagine that once the legal supply of cannabis is sold out, consumers will have to turn to their dealers.
By the way, when Prohibition came to an end in the US in 1933, legal distillers – unlike the brewers – could not meet demand for 15 years. Hopefully legal suppliers of cannabis will catch up more quickly in Canada.
