Slowly, Steadily Moving from Turbulence to Stability: Cannabis in Canada This Year

The holiday season always offers a moment to wind down the year, breathe a bit more, and look at the past 365 with some added clarity. 2023 was certainly an adjustment period for the cannabis industry in Canada. While it might not have felt like it at times, we made pretty significant progress that is going to set us up for a strong 2024. Market consolidation and notable regulatory body relaxations are laying the stepping stones toward a market with more realistic and sustainable growth. ???

--> From spaghetti strategy to sustainable selection?

There were a lot of companies that left the market the past year. These departures opened up more space for the businesses, like Token, that were able to stick around. With more breathing room available, market share and shelf space are starting to open up. ?

In 2022, it often felt like we were all throwing spaghetti at the wall in the hopes something would stick. Product launches were frequent, often haphazard, with a focus on catching the eye of the provincial purchasers rather than on long-term viability. LPs used to pitch any product to get a coveted PO, with the intention to figure the rest out later. There was a pressure to release something new every three months just to stay relevant and top-of-mind with the provinces. The LPs and the governments were all trying to figure out what the consumer actually wanted, resulting in a pervasive trial-and-error approach over the first few years of the industry. The result was a market with a lot of moonshot products that showed innovation but were not sustainable for reorders. Stores and consumers were inundated with competitive options that effectively drowned each other out. ?

In 2023, we really learned that saying yes to everything is just not sustainable. Out of necessity, we had to cull down to consistent, reliable products that come with consistent, recurring POs. Luckily, this also timed up with a lot of companies understanding their personal sweet spot found between what they are good at, what consumers want, and what has a sustainable margin. We can more confidently say no because, as time will always bring with it, we now have more information and we know better about what will work, and what won’t. The customer is starting to develop more measurable preferences. Those who stuck it out the past couple of years were agile enough to first pivot through those years of uncertainty and constant product generation, and then who were able to settle into one (or a few) of the variety of opportunities. This was a phase of focusing in on creating consistent, reliable products that garner not just one-time POs but foster long-term partnerships and customer loyalty. In general, the market is simply supporting less fluff. Innovation will return, but there will be a recovery time for this settling and recovery. After we see more consistent purchasing behaviours, we can all begin to explore a re-introduction into product expansion. ?

--> Cutting (some of) the red tape ?

Regulatory easing was an undeniable game changer this last year. The provincial boards are becoming more business friendly. AGLC and OCS in particular both took solid steps to create a better playing field. This year, AGLC made it a mandate to reduce red tape in the industry – which was absolute music to our ears. Some highlights of how Alberta simplified regulations:?

• Reducing listing fees for LPs – previously a margin killer - by an impressive 83% and reducing shipping fees by 11%?
• Allowing LPs to give cannabis samples to retailers to promote products and increase product knowledge?
• Providing sales data free of charge?
• Enabling retailers to operate temporary sales locations at adult-only events such as festivals or trade shows?

OCS is now moving smaller brands into flow-through status. This allows them to establish a more predictable rhythm of small but regular POs, reducing the risk of an RTV on a one-off, large order. Overall, the boards are doing a better job of demand planning. These changes have made a tangible difference and reflect a more realistic and business-friendly attitude.?

--> Survival of the fittest and the power of positivity?

Overall, I’ve felt a change in general industry sentiment. There's less frustration, less anger, more understanding, and a shared commitment to the grind that defines this space. With so many layoffs and shutdowns, the remaining population of the industry is skilled and really want to be here, and they know what to expect. Working alongside people who are really good at their jobs, get the industry, understand the plant and want to be in the space is invigorating.?

I’m optimistic about settling into this phase of solid, realistic growth. If we allow ourselves to be guided by the learnings and strengthened by our resilience, we are collectively poised to make something great out of 2024. As always, I’d love to hear from my network – what have been your takeaways from 2023?

Here’s to an incoming year of sustainable growth and shared success. ?