Price compression in Canada’s cannabis industry has been relentless, with no relief expected any time soon. This is placing pressure on producers of all sizes: big LPs have an abundance of mid-grade flower in their vaults, and smaller growers are fighting to differentiate their products in a saturated market.
The price pressure is also giving a boost to some product categories.
“Every large producer is looking for a product that costs less to make or where they can regain the value they’re losing on a mid-quality flower,” says Tanner Stewart, Co-Founder and CEO of Stewart Farms in Milltown, New Brunswick. “The massive flower surpluses have driven innovation in the milled, pre-roll, and extracts categories significantly, with low input costs on flower allowing for a lot of innovation in the infused category.”
This market dynamic has provided an opportunity for smaller operators to add value.
“Infused Cannabis has been a welcome category for outdoor growers and has provided a major base of volume sales for outdoor LPs – I see nothing but positives to this category,” says Colin Davison, president of McIntyre Creek Cannabis, an outdoor grow operation in the Okanagan. “This has been a huge success for us.”
Nonetheless, the pricing distortion created by the over-production of cannabis by large, well-financed LPs continues to create challenges for smaller producers. No product categories are immune from the effects of price depreciation.
“We’ve stopped making infused pre-rolls because the market has crashed,” says Gord Nichol, president and co-owner of North 40 Cannabis in Nipawin, Saskatchewan. “A distributor asked us to replace a product they were happy with. We reversed-engineered it and realized we couldn’t compete. All these big producers are selling their products at steep losses, and the only one who’s benefiting is the consumer – for now.”
Some industry observers believe that the surplus of biomass is also affecting the ongoing debate about what qualifies as an edible. Health Canada insists that any edible cannabis product over the 10 mg THC limit can’t be defined as an ‘ingestible extract’, but some companies beg to differ.
“If you look at all the high-level lobbying from large corporate companies lately, their whole raison d’etre is to increase THC limits in edibles,” says Kyp Rowe, president of Victoria Cannabis Company in Victoria, BC. “Companies like Organigram and Indiva are lobbying hard to have this increase in order to capitalize on all of the excess biomass that they can turn into distillate for edibles.”
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