Canadian pot industry faces growing pains

Canadian pot industry faces growing pains

Seven pot producers have run afoul of Health Canada amid a rocky start for the legal industry.

Health Canada has issued warnings to seven cannabis producers since Oct. 17 for violating new federal laws against promoting marijuana, as the post-legalization industry, which has been mired in country-wide product shortages and shipping delays, continues to find its feet.

“Since the coming into force of the Cannabis Act, Health Canada has communicated with seven regulated parties to promote an understanding of the new prohibitions relating to the promotion of cannabis in the Cannabis Act, and to bring specific concerns to their attention,” Eric Morrissette, a spokesperson with Health Canada, told BNN Bloomberg.

“All regulated parties contacted have addressed, or are in the process of, addressing the issues raised by Health Canada,” he added.

Health Canada declined to identify the companies in question or how they had violated the law. But the statement is a clear admission from the Canadian government that the rollout of legal marijuana has been problematic.

“Health Canada will not hesitate to take enforcement action to ensure compliance with the law and to disclose details of these activities as appropriate,” Morrissette stated.

Under the Cannabis Act, pot companies are prohibited from promoting cannabis or accessories or any services related to marijuana, or presenting it in a manner that evokes a positive or negative emotion such as “glamour, recreation, excitement, vitality, risk or daring.”

Yet, inevitably, Canadian pot laws are so new that the nuance behind some of the regulations are subject to interpretation.

 

Growing Pains

The first two weeks under the new marijuana legislation in Canada have been marred by operational setbacks in a number of provinces, including Ontario, whose online store has been mired with overwhelming demand and shipping delays.

Product shortages have also been reported in Quebec, with the former opting to shut down its provincially-run retail stores for three days a week to allow its inventory to catch up with demand.

GMP Securities analyst Martin Landry issued a report Monday specifying that these issues make it “increasingly clear” that recreational cannabis sales this year will be much lower than previously expected.

“The extremely limited distribution network in many provinces, fulfillment challenges in Ontario, inventory shortage in Quebec and LPs coping with limited availability of excise stamps may take several months to be resolved,” Landry said.

The reality is that, while they will be fertile ground for criticisms of Canada’s new pot laws, these growing pains were always likely to define the early days of the experiment with legalization and will take time to iron out.

“This is truly an unprecedented scenario,” Rebecca Brown, founder of Crowns Agency, which caters to the cannabis industry, said in an interview with Bloomberg. “You don’t usually see a multi-billion-dollar industry appear overnight. It would have been naïve to think that it was going to be completely functional on day one.”

2018-11-01T21:09:31+00:00

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Anthony Moran
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