Year 3 of Cannabis Legalization – Welcome to the Hunger Games
For Jenn Larry, Chief Commercial Officer at MTL Cannabis in Quebec, it means seeing so many colleagues bob up and down the tough industry over the past few years that she feels particularly humble about being in one of the few Sun rays of light.
Success is often the exception, not the rule, in today’s market. Instead of being discouraged, Larry is driven by a dose of ambition and insecurity.
“I use that every day as a motivation to say, ‘You will never get it right, overcome fear and just do your best,'” she said on the phone from Montreal.
The small cultivation company, led by brothers Mitch and Rich Clement, will celebrate its first anniversary in October, the same month as Canada’s third anniversary of adult legalization.
“I would say that is the essence of who we are,” she explained. “Access used to be illegal. Back then we needed passion and we need passion now. ”
“So legalization is actually a welcome relief. But I wouldn’t be honest if I said there is a day when we don’t say, ‘Are we sure?’ “
Now available in nine provinces, flower fans will love MTL’s Sage ‘N’ Sour variety. Jars has moved so fast that the company expanded and recently negotiated a reverse acquisition agreement with Canada House.
The deal will allow them to expand the growing space, human power, and other resources to produce more varieties.
“Everyone only knows us with our Art Signature strain, Sage ‘N’ Sour,” she said. “But we sold Cookes ‘N’ Crème in Quebec. So hopefully we will bring it to some other provinces of the country as a kind of delicious drop. “
Mergers, layoffs and oversupply
But MTL’s steady, profitable surge is an outlier that defies the larger trends that were defined over the past year.
While some farmers are at least increasing their sales, if not yet in profit or size, many have continued the previous year’s downward trend, laying off more workers and closing more farms.
Big companies like Aurora, Canopy and Tilray have all closed their facilities this year, reporting deep losses while targeting mergers and acquisitions instead.
Canopy bought Ace Valley and Supreme; Tilray merged with Aphria; Hexo acquired 48North and Redecan, and Aurora’s CEO recently told Insider that they are now betting on medical cannabis, not adult cannabis.
“The industry is still in its infancy and the dust is still settling,” said Lucas McCann, chief scientific officer of the consulting firm CannDelta, based in Toronto. Gone are the turf wars that were characterized by the construction of huge cultivation facilities in the hope of producing huge quantities of products.
“And now we see a small oversupply effect.”
A little oversupply is perhaps an understatement. In December, Health Canada reported 1.1 billion grams of unsold cannabis. That number has declined since then, but Health Canada still has hundreds of thousands of grams of unsold flowers and edibles in inventory.
As prices have fallen, sales have increased from the pandemic. Driven by retail growth in populous provinces like Ontario and British Columbia, as well as more flexible and tailored delivery and online ordering options.
Innovation and new products define year 3
According to headset data, sales have been dominated by mainstream flower hits like Pink Kush by Pure Sunfarms, pre-roll pinners like Back Forty, tokens like Shred, and bulk bags by brands like Homestead Cannabis Supply.
Pre-rolls in particular saw a surge this year, with Redees, 7 Acres and Color among the top sellers. Non-flower products were also more diverse than ever this year. Wana, Bhang, and Spinach were among Canada’s most popular edible brands this year.
Headset also highlighted new fast-acting options and formats such as lozenges, sublingual strips, and full-spectrum edibles entering the market.
Vape carts are filled with more refined and tasteful oils than ever, with premium live resin options, and carts filled with lesser-known cannabinoids like CBN. There are more concentrate options too, from bubble hash to wax.
The popularity and dangers of craft cannabis
Craft brands like Dunn, Carmel and Organnicraft have flexed their muscles this year, supported by networks like Shelter and sought after by shoppers eager to spend a few extra dollars on premium products.
According to the Craft Cannabis Association of BC, it has not been easy for craft producers, many of whom have been reluctant to switch from legacy and / or medicinal cannabis to the new model for adult use.
“… the barriers to entry are still extremely high, including high costs in all areas, banking and insurance issues, strict regulations, challenges with local authorities, an undeveloped supply chain. With state marketing restrictions, there are real challenges in distinguishing craft products from others in the market, ”Director Sarah Campbell wrote in an email.
“The process is long and tedious, and not for the faint of heart.”
Last month, craft businesses launched Stand for Craft, a letter campaign calling for high excise tax rates to be cut in order to give small producers who can’t make long losses a chance for long-term success.
Retail locations are exploding, investments are increasing
There has been more attention and investment in store experiences this year, said Krista Raymer, co-founder of Vetrina Group. Since the in-store purchase opened after the lockdown, lifestyle-driven merchandising assets are largely being tested in-store for the first time.
In Ontario, the number of stores rose to over 1,000 that year. Shelves with products in the same category are gradually being replaced with eye-catching branding focuses, like the old grocery store elements in Superette stores like refrigerators and shopping baskets.
“There is a pushback to shift all of our communication from digital platforms with our customers to a tactile, physical experience,” said Raymer in a phone call. “It helps our customers to make decisions more confidently and to know what to expect.”
But that does not mean that the technology has lost value this year. It’s more important than ever, but more focused on building a steady supply of high-quality, personalized recommendations for each shopper to improve the customer experience.
The Fire & Flower retail chain’s Hifyre platform, for example, is partially designed to use a customer’s preferences to provide insightful recommendations for future purchases, rather than prompting customers to scroll through product categories on menus in the store or on iPads. Those who join the company’s Spark Perks program are recommended based on what they’ve bought and liked so far.
“Hifyre IQ and Spark Perks have really enabled us to really explore how we can recommend products to consumers that we know they’ll love,” said Matthew Hollingshead, chief innovation officer at Fire & Flower and president of HiFyre.
“And then, based on their buying behavior, what they watched, what they liked, what they rated, we can also look at how we can optimize the product offering for them and make sure they get something they would love, not just choosing something. “
Store experiences and product recommendations could be the differentiators that will define the next phase of the cannabis industry, which will likely mean some adjustment to the retail front, especially in Ontario.
Social justice campaigns are on the rise
In addition to the excise tax campaign, the hope is for more appropriate restrictions on purchases of cannabis drinks and more investment in educating the public about issues such as unregulated products or the health risks of cannabis compared to alcohol over the next year.
The Cannabis Amnesty advocacy group has called for a racial justice assessment that would measure the impact of legalization on racialized communities, and it is also hoped that Health Canada’s recent consultation will lead to greater involvement of indigenous entrepreneurs and communities in the regulated cannabis regime will.
Larry and the rest of the MTL Cannabis team share a dream that the industry will continue to improve. They will bring in the same attitude this year as last year, perfecting one strain at a time before being brought to each province one at a time.
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