The industry has an issue of producing more than it can sell.
There is a worker at the facility.
The photo was taken by Ian Kucerak.
Cannabis growers destroyed a record amount of unsold product last year.
More than 400 million grams of unpackaged dried cannabis were destroyed by Health Canada in the first half of the year. There is 26 per cent of the dried cannabis produced.
More than seven million units of packaged cannabis were destroyed in the same period according to the federal agency.
There are a lot of cannabis companies in this country. David Hyde is a co-founder of Canna Navigators Inc., a cannabis licensing and regulatory consulting company.
An inability to move product can be enough to break the bank for some licence holders.
It is threatening the survival of a number of cannabis companies in this country
David Hyde
Since Canada legalized recreational marijuana use, the amount of destroyed unpackaged products has gone up. In 2020, about 280 million grams were destroyed, while 156 million grams were destroyed the previous year.
The amount of destroyed unpackaged cannabis increased from 27 million grams in 2020 to 98 million grams in 2021.
Brad Poulos, who teaches a course on the business of cannabis at the Toronto Metropolitan University, said that the launch of the legalized cannabis industry caused excess production.
The term "dot-com bubble" refers to investor enthusiasm that can lead to a market or sector becoming wildly overvalued.
When the market became legal, the cannabis industry was pressured to deploy huge amounts of capital. It is sitting on a lot of stuff.
He said that it had been this way for three or four years.
One of the main reasons for this scale of destruction is the increasing number of product returns after items fail to sell in stores. The overproduction of low-quality or low-potency products that consumers are not interested in is what leads to these returns.
He said that some producers tried to get ahead of the curve by stocking up on different products, only to find them undesirable for consumers and unsellable in stores.
Retail stores were slow to open after legalization. Many licence holders expected hundreds of more stores to sell their products in the year 2020 and are now having their cannabis destroyed.
A large amount of cannabis has a large value. It takes a lot of money to get a product into its final form. It is not possible that this is sustainable.
It is not easy to determine how much of a decline is needed to balance supply and demand. According to a note to clients in April, Health Canada production data doesn't segment output by potency.
The Canadian cannabis industry is moving towards a more rational competitive landscape according to Chen.
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