Canadian Cannabis Industry Faces Challenges Due to Oversupply and Price Drops

The Canadian cannabis industry is grappling with significant challenges over four years after legalization, as experts point to a surplus of products leading to a downturn in the market. According to Michael Armstrong, an associate professor at Brock University, the industry initially expanded rapidly to meet demand, but this has resulted in an oversupply since mid-2019. This surplus has caused prices to plummet from over $7.00 to as low as $3.00 per gram in some areas

Delta 9 Cannabis recently announced a reduction in its cultivation capacity, leading to 40 layoffs at its Winnipeg facility. CEO John Arbuthnot attributed this decision to the oversupply in the Canadian market, which has compressed prices and margins, making profitability difficult. The company also closed its Osborne Medical Clinic and implemented pay cuts for board and executive staff, though retail stores remain unaffected

Retailers in Winnipeg are also feeling the pressure. Tom Doran, owner of Jupiter Cannabis, expressed concern over the rapid increase in the number of cannabis stores in the city. Since he opened his store in 2020, the number of stores has grown from 15 to 99, leading to increased competition and concerns about sustainability if this trend continues

Doran advocates for stricter regulations regarding the proximity of cannabis stores and criticizes the Manitoba social responsibility fee, which takes six percent of gross cannabis sales. He suggests a minimum distance of 300 to 500 meters between stores to alleviate market saturation. The current situation, with stores densely packed in areas like Portage Avenue, is seen as unsustainable for independent retailers