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Growers strive to meet cannabis demand as the industry keeps growing

The widening gap between licensed producers and consumer demand has continued to grow since Canada fully legalized cannabis back in late 2018. Cultivators are struggling to meet demand because of government-imposed regulations that have curtailed retail operating hours as well as the number of licenses provided. As such, the supply shortages have severely impacted brick-and-mortar retailers in Canadian provinces such as Ontario, Quebec, and Newfoundland and ultimately caused some to shut down.

Despite the limited supply, Brock University Professor Michael Armstrong argues that supply will eventually catch up with demand if regulatory complications can be resolved. Armstrong cites data from 2017, comparing it to current production rates and highlighting that producers are growing at a faster rate. Moreover, Armstrong says that not only were producers stockpiling their inventory, but each inventory per month was growing exponentially larger. Consequently, Armstrong believes that supply can catch up to the demand by the end of 2019, when Health Canada projects that the demand for total cannabis consumption is expected to reach a million kilograms per year. Furthermore, following the recent passage of the "second legalization," which enabled cannabis-based products such as edibles, extracts, and topicals to be commercialized, consumer demand is expected to grow. And while the demand is outpacing supply, eventually cultivators can meet the demand and in return, drive higher revenue margins and profitability. According to data compiled by ArcView Market Research and BDS Analytics, worldwide consumer spending on legal cannabis reached an estimated USD 12.2 Billion in 2018. And by 2022, it is expected for consumer spending to reach USD 31.3 Billion while registering a CAGR of 26.7% from 2017 to 2022. 

While the U.S. is the largest global market in the cannabis industry, federal regulations still deem cannabis a controlled substance. The U.S. is the largest region due to select states that have moved to legalize cannabis entirely. However, many operators are interested in Canada because it is fully legalized. And despite the U.S. being the largest market, the majority of the largest cannabis corporations are headquartered in Canada, primarily because of legality matters. Nonetheless, most of the largest operators have expanded their businesses into the U.S. and other legal markets around the world. However, the development of the industry is also causing consumer preferences to change.

According to a study conducted by researchers at Columbia University's Mailman School of Public Health, American adults have been found to increasingly use cannabis on a daily basis since 2007. The statistics show that, while more and more users are entering the marketplace, it is also retaining existing users. And while new users may prefer a more subtle product, long-time users are beginning to demand more potent and natural products.

However, large licensed producers are unable to meet the demands of avid consumers. Generally, large-scale producers aim towards growing wholesale cannabis, which usually results in lackluster qualities of strains. As a result, "craft cannabis" producers have come into the spotlight because of their unique and potent strains.

Craft cannabis is known as an artisanal profession, similar to craft beer or craft coffee, where producers take immense pride in their work and strive to produce the best quality product. Craft cultivators typically engage in a meticulous and tedious process to ensure their products are up to the highest standards. For instance, large licensed producers typically have automated farms to speed up efficiency. On the other hand, craft cultivators usually operate small-scale grow houses, which allow them to tend each individual plant to ensure high-quality end results. "As the era of cannabis prohibition comes to an end, now is the time to think about what kind of cannabis industry and cannabis agriculture we want. Craft Weed will help us plan for a future that is almost here," according to a synopsis by the MIT Press, an affiliate of the Massachusetts Institute of Technology. 

Source financialbuzz.com         

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