When Canada legalized recreational cannabis in 2018, it opened up a lot of possibilities and uncertainties for the healthcare industry, the country, and beyond. To address these unknowns, the government promised to review the law after three years to ensure its effectiveness. However, as the three-year mark approached, the COVID-19 pandemic took over public health concerns, diverting attention away from the review. In the meantime, many cannabis companies faced challenges and hardships, leading to staff cuts, company consolidations, and closures.
Finally, in September 2022, the government launched the review, and a preliminary report was released recently summarizing the panel’s findings from industry, healthcare, and community groups. Although the report didn’t provide any recommendations, the final report is expected in March. However, implementing legislation based on the review’s suggestions could take even longer, causing concern among cannabis stakeholders. As the fifth anniversary of recreational cannabis legalization approaches, they worry that without regulatory changes, the industry will continue to struggle.
George Smitherman, the President and CEO of the Cannabis Council of Canada, emphasized the urgency felt within the industry. According to a survey of their members, about 80% are unable to achieve cash flow positivity after five years. Smitherman describes the industry as a “low margin prison,” where despite efforts, success is not guaranteed. He attributes this struggle to various factors, including the significant market share of illicit sellers, the burdensome excise tax, the race to lower cannabis prices, and advertising restrictions that hinder matching customers with the right products.
The panel conducting the review heard from 500 people representing 200 organizations, including members of Smitherman’s council. The feedback covered a wide range of topics, from backyard growers to Indigenous participation and cannabis-related hospitalizations. A key takeaway for businesses was the recognition that they’re facing immense challenges. The report highlighted that despite the growth of the legal cannabis market, companies across the supply chain are struggling to make profits and maintain financial stability. The hyper-competitive market, combined with regulatory fees, mark-ups, and taxes, is suffocating businesses of all sizes.
Beena Goldenberg, the CEO of Organigram Holdings Inc., a licensed producer, called for a reevaluation of the excise taxes imposed on cannabis producers by federal and provincial governments. The current tax structure, designed when cannabis was expected to sell for $10 per gram, places a significant financial burden on producers now that prices have dropped. Furthermore, Goldenberg expressed the need for relaxed packaging and advertising restrictions, as they limit companies’ ability to educate consumers about their products.
Goldenberg’s concerns are echoed by other retailers who want to label products according to their origins, ingredients, or cultivation methods. Some argue that pot should be able to be marketed as freely as tobacco or alcohol. However, David Hammond, a professor at the University of Waterloo, warns against this, citing public opinion against excessive cannabis advertising. He suggests that consumers can find the information they need at cannabis shops or through provincial pot distributor websites.
The medical community remains cautious about potential changes and insists that public health should not be compromised. Many support the current cautious approach to cannabis in Canada and even advocate for stricter regulations on possession, distribution, and purchase. Their stance is influenced by data from the Canadian Institute for Health Information, which has reported an increase in cannabis-related emergency department visits, hospitalizations, and cases reported to poison centers. While some increase can be attributed to greater comfort in seeking medical attention after legalization, the numbers were already rising pre-legalization.
Regarding the delays in the review and industry calls for change, the Minister of Health’s press secretary emphasized that the Cannabis Act prioritizes the health and safety of Canadians and aims to displace the illicit market. Aoun mentioned that an independent expert panel is currently conducting the review, and their work is ongoing.
Goldenberg fears that the process of enacting changes will be slow and worries that some companies won’t survive the wait, as many are already on the verge of bankruptcy. The cannabis sector has seen a significant number of applications for creditor protection and license holders leaving the market. As a result, she believes that changes need to happen quickly to save struggling businesses.
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