The Current State Of The Canadian Marijuana Market

Just under 10% of federal cannabis license holders in Canada have exited the market since legalization in October 2018, according to new government data.

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Canadian government public documents show that approximately 95 cannabis licensees have left the industry since cannabis legalization, representing 9.7% of the licenses issued during that period. There are currently 920 federal cannabis licenses in force, with micro-licensees accounting for 38%, or 340. The data suggests that industry predictions of a “rationalization,” or thinning out, among cannabis producers has not materialized, as new entrants far outpaced those exiting the hypercompetitive industry.

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Those who left include:

• 15 were micro license holders, a class of license limited to 200 square meters of growing canopy.
• 13 were sale-for-medical-purposes only.
• 67 were standard license holders, which face no canopy limits.

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The reasons behind the withdrawal from the market

First, the government overtaxes cannabis businesses along the supply chain, and different excise rules apply to various cannabis derivatives and other products, such as edibles.

However, that excise formula was created by policymakers who expected wholesale prices to be over CA$10 ($7.10) per gram. Instead, actual prices are more than 50% lower.

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In addition to the high federal excise tax, they also point to a variety of factors:

1. Overproduction remains the main problem today: a record 561,459 kg of dried cannabis was produced in 2021, bringing the total stockpile of licensed producers, wholesalers and retailers to 1.4 billion grams. Even more, producers have destroyed about 900 million grams of cannabis since legalization.

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2. Cannabis production is unevenly distributed: the majority of dried cannabis production (43%) comes from 10 standard licensees and 56% from 307 standard licensees, while approximately 178 micro-cultivation licensees account for less than 1% of all cannabis production (October 2019 to December 2021).

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3. New entrants outnumber exits: Because new entrants far outnumber exits, the Canadian government's goal of "rationalizing" or reducing production by producers in the cannabis industry has not been achieved, and increased production by head standard licensees will increase competition in the industry, with other standard licensees facing survival Other standard licensees face survival difficulties and choose to exit and seek restructuring.

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4. Legal market sales are twice as high as the illegal market: Following the legalization of marijuana, unlicensed marijuana stores have declined dramatically, with legal market sales statistically twice as high as the illegal market by Q4 of 2009. These illegal operators are now shifting their focus to online, making regulation more difficult.

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Increasing efficiency and reducing costs in cannabis retailing and production may help Canadian cannabis companies stay afloat in a low-price environment.

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But, under the development of a new microbial limit from the Canadian health department, cannabis is required to irradiate to reduce pathogens.

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While regulatory agencies may consider it safe to use electron beams or gamma radiation on cannabis, most growers prefer to avoid radiating products altogether. The typical practice in the industry is to use electron beams, which are offered by only two companies in Canada: One in British Columbia and one in Quebec. The cost is $60 a kilogram with a minimum $1,500 charge. This undoubtedly increases the cost for growers and affects the time consumers get fresh?plant products.And every week that goes by, the dried flower is losing some of its terpenes and its cannabinoid potencies.

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A 2016 study funded by Netherlands producer Bedrocan looked at the overall effects of gamma irradiation on four separate cultivars. The results showed no change in THC, CBD or moisture levels but a 10–38 percent reduction in terpene content. Terpenes are not only a source of cannabis flavor but can have a synergistic effect with cannabinoids. In other words, terpenes play an extremely important role in determining the experience of smoking each type of flower.

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Despite the ubiquitous 510 thread cartridge, the new vape hardware is full of possibilities. It has led more people to choose vape products over flowers to ensure the user experience, and consumers' attention to 1gram products has increased. Regarding capacity, the demand for cartridges is mainly for 1ml products, while the demand for disposable is mainly for 0.3ml to 0.5ml products.

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According to Headset data, the Canadian market is still rising regarding vape product sales. Overall, Cartridge products continue to dominate the market, with disposable products accounting for a lower percentage than in the U.S. market. From the current sales of disposable products and the proportion of products, the acceptance of the disposable market in the Canadian market has been greatly improved, and it is expected that the sales of disposable products will continue to grow and the proportion will continue to increase.

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CILICON believes the future of the cannabis vaporizer industry is personalized. The intense competition in the cannabis vaporizer industry requires every vaporizer manufacturer to produce and distribute a quality product for all e-cigarette users to be unbeatable in the cannabis market.