For many in the greenhouse sector it’s been a new crop introduction that has been impossible to ignore, and certainly one from which we can all learn lessons.
December 23, 2022 By Gary Jones
So, we’re a few years into the world of legal cannabis production, and it seems to have been a bit of a roller-coaster for many. How has it been for you? Maybe you aren’t interested in it at all. But for many in the greenhouse sector it’s been a new crop introduction that has been impossible to ignore, and certainly one from which we can all learn lessons.
According to Government stats, “For the December 2021 reporting period: Licensed indoor and outdoor cultivation area held by licence holders stood at 1,756,642 m2 and 713 hectares (7,130,900 m2).”1 That’s 175 hectares (over 430 acres) of protected cultivation of a new crop in four years. When else did you see that with another crop? Whatever you think, it’s something to take notice of.
But don’t forget that ‘cannabis’ is not one product, it’s actually a range of products. The same Government stats show that up to end of December 2021, “In total, 16,636,345 packaged units of cannabis were sold across Canada for medical and non-medical purposes. Dried cannabis sales represent 58% of total sales, edible cannabis 24% and cannabis extracts represent 17% of total sales.”1 I’m not sure of many other greenhouse crops that provide dried, edible and concentrated versions for retail sale, especially with dried being the most important to overall sales.
However, all is not rosy. “Nationally, 69,698,724 packaged units of cannabis products were held in inventory by cultivators, processors, distributors and retailers. The total inventory of packaged units of dried cannabis held by cultivators, processors, distributors and retailers represents 3.7 times total sales. Likewise, total inventory of packaged units of edible cannabis and cannabis extracts represent 4.7 and 4.8 times total sales respectively.”1 Would you consider carrying nearly five times your production as inventory? We’re usually looking to move product as soon as it’s ready for sale. We can argue the details of the stats (especially if you are a greenhouse cannabis business with up-to-date market info) but consider the spirit of this. A new crop, four years into business, showing some very unusual behaviour in the marketplace. No doubt this is dependent on the nature of the plant and why it is sold, and the subsequent high intensity of government involvement.
FIGR is a cannabis production facility in Charlottetown, P.E.I., and centre of a recent CBC News report. “But as busy as the company and its 130 employees are, and as solid as sales have been, the CEO said it’s hardly translating into a profit. “If you look across the industry, I don’t know that you’ll find a licensed producer reporting a profit at this point. And as a local company competing in the industry, we’re certainly not immune to that either,” said Alex Smith, FIGR’s CEO. “The industry is not viable right now for licensed producers.”2 “Smith said the biggest issue is the excise tax imposed on cannabis producers. For every gram of cannabis they sell to distributors, they owe the government $1, or 10 per cent of the per gram price — whichever is greater.”2 And unlike many greenhouse crops, cannabis has a thriving illicit – and lucrative – production base against which it has to compete, leading to lower sale prices, typically down from ‘$7-8 per gram at the beginning of legal cannabis production to $4 or less per gram now, and $1 of that is lost to the excise tax.’2 In the CBC article, George Smitherman, president of Cannabis Council of Canada said “many cannabis businesses across the country are on the brink of closure.”2 This is reflected in employee numbers. “While FIGR’s CEO said the company has avoided laying off any employees, it has started eliminating some positions as people have left them. In fact, over the past two years, staffing numbers at FIGR have dropped from 160 to 130.”2 I know this, and real-time actual lay offs, reflects the situation at many other greenhouse cannabis producers.
It has been a wild ride with the introduction of this particular new crop. No doubt it will continue to be so. But don’t let this put you off trying new things. This is a pretty unique situation.
‘Cannabis Market Data Overview’, Govt of Canada, accessed October 27 2022 at https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/research-data/market.html
Steve Bruce, “Why a P.E.I. cannabis company says it’s losing money, in an industry-wide trend” CBC News, Oct 21 2022 accessed October 27 2022 at https://www.cbc.ca/news/canada/prince-edward-island/pei-cannabis-producers-struggles-taxation-1.6623310
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