Since the legalization of recreational cannabis sales in 2018, Canada has faced a substantial challenge in managing the supply and demand dynamics within its regulated cannabis industry. Recent data from Health Canada reveals that licensed producers have been forced to destroy an unprecedented amount of unsold and unpackaged cannabis, shedding light on the ongoing struggle to achieve equilibrium in this burgeoning market.
Over the period from 2018 to the first half of 2023, a staggering 3.7 million pounds (1.7 billion grams) of unsold, unpackaged dried flower were destroyed by Canadian cannabis companies. The destruction included approximately 24 million packages of cannabis, according to disclosed data from Health Canada. This indicates a significant oversupply issue, with the destruction of old and low-THC content products that lack market demand.
Industry analysts attribute the surplus to the initial rush of licensed cultivators to mass-produce cannabis, fueled by the stock market's focus on production capacity rather than market demand. The heyday of cannabis stocks, lasting from 2017 to around 2020, led to the construction of massive greenhouses that often failed to produce the high-quality, high-potency marijuana desired by consumers.
Several factors have contributed to the destruction of cannabis, including business closures and insolvencies, which mandate the destruction of unsold inventory. Labeling requirements pushing consumers towards high-THC products, coupled with the overproduction of undesirable strains, further compounded the issue. Additionally, some provincial wholesalers' preferences for high-THC products left a surplus of lower-THC cannabis without a viable market.
The closure of large greenhouses in recent years has curtailed cannabis production capacity, signaling a potential move towards supply-demand equilibrium. As of June 2023, the Health Canada data indicated an unpackaged inventory of almost 1.2 billion grams, and industry experts suggest that the oversupply situation may intensify with the release of data from the peak cultivation months of September, October, and November, known colloquially as Croptober.
Cannabis industry veteran Farrell Miller advocates for increased national coordination between federal and provincial regulators, emphasizing the need for a comprehensive approach to licensing and oversight. She suggests that a more coordinated effort would provide valuable insights into product movement, helping to align production with consumer demand. Miller underscores the importance of setting minimum THC requirements for cultivation license holders to ensure market relevance and prevent the accumulation and subsequent destruction of low-impact cannabis products.
The massive destruction of unsold cannabis in Canada underscores the challenges the industry faces in achieving a delicate balance between production and demand. As the nation continues to navigate the complexities of its evolving cannabis market, a coordinated effort between federal and provincial regulators, coupled with adherence to market trends, is essential for sustainable growth and the prevention of further cannabis waste.
This story was first published by MJBizdaily.