What went wrong?

That’s the question at the heart of a recent story in The Guardian about Canada’s ailing cannabis sector, written by London-based reporter Michael Power. In 2018, the United Kingdom legalized medical cannabis and Power predicts that the UK will follow Canada’s lead and legalize adult-use cannabis within the next five years.

Like many other nations that are considering evolving their cannabis laws, the UK is looking to Canada to learn what’s worked and where the sector has floundered.

Power points to Canada’s much-maligned retail patchwork as one issue that has plagued the sector’s growth, highlighting Ontario’s lack of stores in particular. The province has worked to remedy that in 2020, with new stores opening on an almost weekly basis, but the spread of COVID-19 has temporarily halted those expansion efforts.

For now, there are fewer than 100 cannabis stores in the nation’s most populous province. Until that changes, other issues the industry is facing — like the mountain of oversupply which Power notes is weighing in at 400 tonnes — will continue to grow. 

Power also discusses the quality of Canada’s legal products, which have been criticized for being overly expensive, less varied and less potent than what is readily available on the illicit market. One of the stated goals of legalization was to move consumers out of the legacy market and into a legal framework, but those efforts have faltered as access to legal cannabis remains an issue in most of the country.

Licenced producers have taken steps in recent months to address this, with many offering discounted products, like Hexo’s Original Stash. An ounce of Original Stash retails for about $125 in Quebec and $140 in Ontario, prices that are competitive with the illicit market. According to StatsCan, New Brunswick faces the highest price disparity between the legal and legacy markets. On average, a gram of legal weed in New Brunswick costs $11.36 a gram, while illegal cannabis goes for $4.90 a gram.

Legal prices in Canada are inflated by a number of factors, including provincial wholesalers, who take a cut from every sale, and the excise and sales taxes, which push price points further north. And then there’s the costs of regulatory oversight.

Regulation, characterized by many who work in the industry as “extreme,” coupled with high barriers to entry, has further slowed Canada’s market development. The illicit trade does not need to be concerned about any of these factors.

Power also points to a lack of cash flow in the industry, overlooked medical cannabis consumers, and stock promoters and short-sellers fuelling market fluctuations as things that have gone wrong.

He does note, however, that despite all of the negatives, Canada’s approach to legalization has not been a failure. “If we compare it to the UK cannabis industry, where illegally trafficked children have been found enslaved in abandoned buildings growing cannabis for gangsters, it is better by several orders of magnitude,” Power writes.

For all the faults of the sector and the government’s approach to legalization, the fact that Canadians can now legally grow cannabis in their own homes cannot be overstated. This is a monumental shift after a century of prohibition. The Canadian cannabis industry is still nascent, and while COVID-19 has further dampened even the bleakest economic outlooks, it’s a sector that will continue to mature and grow in the years ahead. Canada can be proud of its precedent-setting position. 

“What Canada’s experience demonstrates is that cannabis legalization does not instantly deliver some great social panacea,” Power writes. “There is no promised land. But we should never lose sight of this essential truth: Canadians can no longer be jailed for growing and eating and smoking certain flowers. That is a huge, fundamental step forward, no matter what the stock market indices say.”