Employees look over medical marijuana buds at Tweed., in Smith Falls, Ont., on Dec. 5, 2016. THE CANADIAN PRESS IMAGES/Lars Hagberg
Canada just made it a lot easier for companies to get licenses to produce medical marijuana — something industry experts predict will significantly boost the country’s cannabis supply and potentially result in hundreds of new companies entering the system ahead of the legal recreational market next year.There are currently 428 companies in the queue applying to become licensed cannabis producers (or “LPs”).
On Friday, Health Canada announced in a news release it had streamlined the notoriously lengthy and rigorous application process to become an LP. The new measures will “enable increased production,” the department stated. Since the licensing program came into effect in 2013, there have been 45 medical marijuana production licenses granted, the most recent of which was granted this week.“I do see this as a game-changer, a significant development that will impact the cannabis sector overall,” said David Hyde, a security consultant who has worked with 155 LP applicants, including 18 that have been granted licenses.The approvals process has picked up this year, with one or two companies getting licenses every month. Currently, only patients with valid medical prescriptions can legally get cannabis in dried or oil form from one of these LPs, through the mail. Otherwise, they can apply to grow their own.
The changes announced by Health Canada include hiring new staff to help speed up the application process that can sometimes take more than a year, removing the cap that prevented LPs from growing more than a certain amount, as long as it’s within the capacity of their vaults. And the companies now have more freedom to modify and expand their facilities.Many licensed producers have lamented the layers of bureaucracy required to get a license, including extensive criminal background checks of those in charge, as well as costly security infrastructure requirements.
“The world is going to explode in terms of the opportunities.”
Hyde predicts that a significant number of the applicants in waiting will be granted licenses in short order because of the revamped procedures. And even though these are all medical licenses for now, he added the changes are clearly to help the industry get prepared for the significant recreational demand to come. A report released by Deloitte predicts Canada’s recreational market could be worth billions.Once the Liberal government’s recreational cannabis law comes into effect likely sometime next year, these companies are slated to be at the helm of the supply chain, although it will be up to the provinces and territories to decide the way in which the product is sold.“Canada is really the global gold standard in terms of cannabis production. So the export market is also going to be shining brightly. So I think we’re going to need several hundred producers at the end of the day of different sizes across this country to provide all the different needs that are going to come down the pipe,” explained Hyde.
“The world is going to explode in terms of the opportunities.”But with all of this new growth comes concerns that the industry is becoming homogenous. On Friday, cannabis business analysts warned an audience at the Lift Cannabis Expo in Toronto about “massive investor fatigue.”“Fundamentally, to some degree, these businesses, as prescribed by Health Canada and being in a highly regulated industry are almost forced to be identical,” Aaron Salz, CEO of Stoic Advisory, said in a speech on Friday. “People can’t tell the difference between licensed producers anymore.”
“People can’t tell the difference between licensed producers anymore.”