The weed wireCanada’s mountain of mids continues to peak

Health Canada reports a record high 620,144 kilograms in unpackaged legal cannabis inventories
Michelle Gamage Michelle GamageJuly 9, 20207 min

Canadian cannabis producers are sitting on a huge glut of products that the market isn’t prepared to buy, according to new figures from Health Canada.

The industry snapshot is the first to be published in months, after the Covid-19 pandemic put the market data reports on hold from March until June.

As of April 2020, there were 46 million cannabis products in total on the market, while medical and recreational users bought just 7.5 million products during the same reporting period.

Less than half, or 41 per cent, of those products are held by distributors or retailers, StatsCan said — with the rest of the 38.5 million products held by cultivators and processors.

That’s an inventory of dried flower 5.8 times that of flower’s total sales, and an inventory of extracts 8.6 times that of extract’s total sales, Health Canada noted.

And that could spell trouble for producers who are far oversupplying current market demand.

Canadian LPs storing way more weed than they're selling: Health Canada
Graphic via Health Canada

The latest figures from Health Canada show the industry has amassed over 620,000 kilograms of unpackaged dried flower which could spoil and become worthless. That inventory has continued to compound and vastly overshoots the moderate increase in medical and recreational sales over the same period.

The data in the Health Canada snapshot is also from April and is three months old.

Since then, LPs across the country have been shutting down facilities and slashing production budgets while struggling to attain profitability. Industry giant Aurora Cannabis Inc. (NYSE and TSX: ACB) recently said it would be closing five facilities and laying off 500 staff. Canopy Growth Corp. (TSX: WEED), as the world’s largest cannabis company, has also been shuttering production facilities and has laid off close to 1,000 employees. Both companies reported the closures and layoffs were designed to restructure the companies towards profitability.

Read more: Aurora Cannabis to close 5 facilities, lay off 700 staff in search for profits

Read more: Canopy Growth shares sink after reporting another billion-dollar loss

That’s not to say it’s all bad news — cannabis retail sales have been steadily increasing since legalization according to Statistics Canada. Year-over-year weed sales in April increased 142 per cent to $180 million, up from $75 million the previous spring.

Dried cannabis flower dominates the largest chunk of the those sales with 5.5 million products sold by April 2020, making up 73 per cent of total sales, according to Health Canada.

Canadians are quickly warming to extracts too, despite their months-long rollout delay. By April products like vapes, topicals and infused beverages made up 14 per cent of total sales and with edibles making up 12 per cent of sales, or just over 900,000 products sold.

But production for these products has also ramped up, vastly overshooting what consumers are buying. Almost 45,000 topical products were produced between March and April, of which just over 2,000 were sold for the same period.

All that weed is grown in around 200 hectares of indoor growing space and 280 hectares of outdoor production space, Health Canada noted. More and more LPs are ditching pricey indoor grows for cheaper outdoor crops where cannabis can be grown for as little as $0.10 per gram. Analysts predict the industry-wide shift to the outdoors will also create an oversupply of low-cost product.

Read more: Outdoor cannabis licences almost double

Top image via Deposit Photos

 

michelle@mugglehead.com

@missmishelle

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