Business
Canadian cannabis exports surge 50% to CA$160 million in 2022-23
Amid declining medical cannabis sales in Canada’s domestic market and cutthroat competition in the adult-use industry, some licensed producers are increasingly looking to overseas markets for a financial lifeline.
Exports continued to surge in the 2022-23 fiscal year, with Canada shipping medical cannabis products worth 160 million Canadian dollars ($118 million) overseas, a 50% increase over 2021-22’s CA$107 million, according to figures shared by Health Canada with MJBizDaily.
David Hyde, CEO of Hyde Advisory & Investments in Toronto, believes Canada will have a leg up over competing export countries for a few more years.
“For the next two or three years, at least, we’re going to see continually increasing medical numbers (exports),” he said in a phone interview.
The brisk export growth comes as domestic sales of medical cannabis continue to contract.
Canadian domestic sales from April 1, 2022, to March 31, 2023, were CA$401 million, which was 9% lower than the previous year and 20% lower than the same period two years earlier, when medical cannabis sales were CA$501 million.
When medical exports are combined with domestic sales, Canada’s medical cannabis industry was worth CA$570 million last year – still the largest federally regulated medical marijuana industry in the world.
Will exports pivot from flower?
Health Canada did not share a breakdown of the value of flower exports versus extract exports, but flower is thought to command a majority of international sales.
But for how much longer?
Hyde said so-called Cannabis 2.0 products such as vapes and hash could help drive exports.
“I think there’s going to be a healthy export market in Canada for years to come,” he said.
“It’ll pivot from flower, gradually, to other product forms.
“At the same time, cultivators in those (importing) countries will slowly start to dial in their production, and Canada won’t have a captured market forever.”
Hyde noted Canada’s domestic industry is still dealing with a product glut, and the bottom dropped out of the market for business-to-business wholesale cannabis.
“So, what are your options? It’ll cost you CA$1.50 per gram to produce it, and you can’t sell it in Canada for more than that. So you’ve got to look at export,” he said.
Hyde also said more U.S. multistate operators are dipping their toes in the global market, and a lot of them are doing it through Canada – although New York-based Curaleaf Holdings has secured a toehold in Europe via the 2021 purchase of Emmac Life Science and a July acquisition of a processing facility in Portugal.
“They can go direct like Curaleaf. But many of the MSOs in the U.S., rather than navigating those tricky global markets, they partner with an LP in Canada, many of whom are desperate for cash,” he said.
“I’m seeing more and more of that – all those exports are through the Canadian license holder.
“In my mind, we’ll see more partnerships between MSOs and LPs, because there’s such a healthy export channel, their brands and IP.”
Craft driving exports?
Some industry insiders say higher-quality cannabis is helping drive exports higher, and that is increasingly coming from small-batch cultivation.
This comes as more Canadian cannabis entrepreneurs are turning to smaller micro-cultivation facilities at a time when the industry is facing a glut of “standard” product and falling prices.
As of March 2023, Canada had 423 micro-class licenses, which are typically associated with craft production because of their 200-square-meter growing limit.
At the same time, there were 568 standard licenses.
That’s a big change from two years earlier, when there were 426 standard licenses and 179 micro licenses.
Phil Campbell – the CEO of Herbal Dispatch, a marijuana marketplace that addresses the medical, recreational and export markets – helps facilitate international shipments of medical cannabis.
“There’s a lot of mass-produced greenhouse product by large, licensed producers, but some of the best product available is from craft producers, who don’t have a viable path to export unless they work with a company like ourselves,” he said in a phone interview.
Campbell said there’s complexity in getting import and export permits issued and establishing relationships with foreign regulators and vendors.
Such hurdles can be especially acute for small businesses.
“The global export market is very competitive. There are a lot of low-cost countries that are fighting for the international market,” Campbell said.
Deepak Anand, principal of ASDA Consultancy Services in Surrey, British Columbia, suggested craft production has been increasingly finding its way to international markets.
“A lot of the crafts and micros, because their licenses are only cultivation and not processing, they don’t have the ability to export cannabis,” Anand said in a phone interview.
“So they are now basically connecting with companies like Herbal Dispatch, as an example (to help facilitate those exports).
“That’s the future, because a lot of people don’t want product from big companies, whereas the craft guys have great products but they don’t have the certification.”
Source: https://mjbizdaily.com/canadian-cannabis-exports-surge-50-percent-to-ca160-million-in-2022-23/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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