The seemingly endless supply shortages ever since recreational cannabis was legalized have started having a domino effect on the Canadian pot industry. The latest news is that the province of Alberta will not issue any more cannabis retail licenses for up to 18 months, unless the supply shortages are addressed by the licensed producers who are mandated to grow and avail cannabis to the recreational and medical cannabis markets.
The Alberta Gaming, Liquor and Cannabis (AGLC) commission made the announcement, adding that the matter was out of their hands.
So far, 65 retail stores were approved and started operating. The province had promised to increase the number to about 250 stores within a year after legalization. However, the ongoing shortages have thrown a spanner in the works, and it may not be possible to hit that target.
Matters may worsen on the supply side if Ontario starts retail sales at the beginning of April next year as planned.
The moratorium on new licenses is biting the business community hard. This is because many of the potential retailers had already leased expensive premises for the retail stores, and now they are continuing to pay rent yet they aren’t operational. For how long can they keep making these rent payments before closing for good?
It isn’t clear what recourse the staff who had already been hired will have in light of this extended delay for new stores to open.
It seems the only winner in this situation is the black market, because consumers keep resorting to the illicit market in order to get what they want. Black market dealers are having a field day meeting the needs of a market that was blown wide open after legalization on October 17.
Meanwhile, Alberta is getting jittery because the delays in licensing new operators may drive investors to Ontario. That capital outflow would take needed tax dollars with it. Alberta is the only province that has so far put a halt on the issuance of new retail licenses.
Their position is understandable given that it makes less sense to bring more retailers on board when the current ones cannot even get half the cannabis that the need to satisfy clients. In fact, it has been widely reported in the local press that buyers are so desperate for recreational cannabis that they are maintaining 24/7 vigilance in order to be first in line when a new consignment of cannabis is delivered to a retail store. The supply chain should have been planned better to avoid such an extended shortage. Sunniva Inc. (CSE: SNN) (OTCQB: SNNVF) and Supreme Cannabis Company Inc. (TSX.V: FIRE) (OTCQX: SPRWF) aren’t happy about the bad rap that the industry is getting due to these persistent shortages.
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