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Pot companies are still working out the supply kinks to meet strong Canadian demand

Within a few days after Canada's legalization of adult recreational use of marijuana, the country's largest pot producers had sent…

Within a few days after Canada’s legalization of adult recreational use of marijuana, the country’s largest pot producers had sent far less than 1% of the potato that the government has predicted that Canadians will spend on cannabis in the quarter.

In a rush of weekly earnings reports, the most notable result was the relative lack of profit or even so much revenue from recreational potato sales in Canada for a period ending less than three weeks before the public could buy. With Statistics Finland’s estimated sales of $ 1 billion in the first quarter of availability, five major producers reported a total of $ 1.7 million in recreational sales, and no-one reported revenue for the launch quarter.

“Expectations before the quarter were announced for the first major shipments at the end of September heading to October 1

7,” says PI Financial analyst Jason Zandberg. “It has been very disappointing to see. Many of the companies have not shown which recreational sales were in the quarter – if there is not a large number, you do not want to mark it. ”

For executives in Canada’s largest licensed marijuana producers, who have bragged for months about the potential for recreational plants and their ability to exploit, the slow start will leave room for doubting their swollen market capitalization. The remarkable delivery issues in sales across Canada and The lack of early earnings led managers to point their fingers to government and retail, but many still have trouble expanding their own business.

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Canopy Growth Corp. CEO Bruce Linton blamed provincial buyers for inadequate sales. He said that none of the provinces placed major orders, and preferred to make smaller purchases to test their supply infrastructure. Canopy said it had to destroy a number of potted plants in the quarter in September due to delays that acquired Health Canada’s treatment permit and slowness in the construction of infrastructure, but in a written statement claimed it was not a material loss.

Indiva Inc. grower Pete Young said that crops failures on that scale are likely the result of rapid expansion and not enough infrastructure or knowledge to go with it. “It is not enough ability to handle its expansions,” he said. “We want to see the product quality, we want to see how good the product is.”

Several of the manufacturers, including Tilray Inc. and CannTrust Holdings Inc., said they encountered production delays associated with the application of federally authorized excise duty stamps on the pot pan as well. According to Tilray CEO Brendan Kennedy, there is only one company in Canada that can apply the stamps for the stamps correctly.

Provinces and a private retailer offered a different assessment of supply problems. James Burns, Managing Director of Alcanna Inc.

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who runs a retail chain in Alberta, told MarketWatch last month that his stores had received about 40% of the pot they ordered. Alcanna reported revenues of $ 3.7 million from its five stores during the first 19 days of legalization. Burns said that Alcanna had been denied revealing any producer but said that one of the big names had a “glue party” weekend before October 17 to apply stamps to packages.

Buyers of the Nova Scotia Government-run cannabis store also said that it had received about 40% of the product ordered. Ontario Cannabis Store, the only way Canadians in the country’s most populated province can buy the pot, blamed cannabis companies for delivery delays and tell customers that the products were not labeled properly.

Small transports of recreational plants were not the result of weak demand, as the major manufacturers – and provincial governments across the country – said consumers wanted more product. Provincial websites selling pot ran out of many products and private walls and mortar dealers have been desperate to acquire more inventory. In Quebec, state stores have been shut down for three days a week indefinitely because they can not keep enough marijuana on the shelves.

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Although the provinces mainly buy cannabis from any licensed producer that has capacity, Aurora Cannabis Inc. Chief Legal Officer Cam Battley said that the company was not yet able to move in where other companies failed to deliver. Aurora scale production to nearly 5,000 pounds at the end of the quarter, four times what it could grow a year ago, but Auror’s medical patients in Canada and Europe demanded approximately 2 700 pounds.

“Keep in mind that the medical market and the European market get us more, full stop,” said Aurora CEO Terry Booth in the conference call.

Tilray’s Kennedy said the company is “aggressively scaling” of its recreational cannabis. But until the beginning of November, one of the company’s largest facilities was not the obligatory federal licensing for its entire area of ​​cultivation, which limits production.

“The slow start and rollout of adult living across the country has been affected by many factors including the time of licensing, retail infrastructure distribution,” said Tilray Chief Financial Officer Mark Castaneda. “We are not immune to these factors and they will affect our results. “

The long process of getting federal licenses from Health Canada has also caused headache for cannabis companies besides Tilray.

CannTrust CEO Peter Aceto said provincial buyers asked for the product from” very very early days “and had Talked to all major licensed manufacturers to request completions as soon as possible. For products ordered by the government entities, it was not clear that buyers made the right choice, but they failed – in some cases, the stores ended with products that met the demand to a large extent because they were not as desirable as others who sold fast. [19659002] “So I think [provinces] had an idea that [they] had not delivered all the products they were hoping for and thought that demand would be higher,” says Aceto.

How much crutch each company sent

Canopy

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said that it sold about $ 700,000 of recreational pot. Its products represented 30% of the products available to consumers across Canada, said executives, because they focused on provinces where there are walls and mortar open to the public – which excludes Ontario.

“… it’s not” We’ve been our biggest priority to having the most product and drive on Ontario, “said Linton. “I think physical stores such as Alberta, Quebec, Certainly, and New Brunswick, Newfoundland, these jurisdictions have been where we shot as hard as we could.”

Aurora


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