October 18, 2018 4:51 pm
Updated: October 19, 2018 8:18 am

A legal pot supply shortage will fuel the black market, experts say

WATCH: On the second day of Canada's new era of legalized cannabis, it's clear the government's plan has become a victim of its own success. As Ross Lord reports, it's killing the vibe for some consumers.

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On day two of recreational cannabis legalization in Canada, retailers are turning people away because they’ve run out of stock.

READ MORE: Here’s how much cannabis costs across Canada

Quebec’s cannabis Crown corporation said some items are unavailable on its website, and given the scarcity of products across Canada, it expects “significant” short-term supply challenges.

Alberta and Prince Edward Island also said certain products have sold out online after brisk business on their cannabis sales portals on the first day of legalization.

It’s the same across the country.

WATCH: Stick with your dealer? Or buy pot legally? How legalization will affect the black market


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Winnipeg marijuana advocate Steven Stairs also said there is a big shortage of cannabis with the risk of even running out.

“It’s a supply and demand,” said Stairs. “They’re worried about even having enough stock in the stores in the next few weeks.”

“We’re talking about possibly even running out of cannabis and these companies are trying to keep up with demand, but it’s really not feasible right now due to the scale of production that they have going,” Stairs told Global News Radio 680 CJOB.

READ MORE: 4 in 10 Canadians say price of cannabis will determine if they buy legally, Ipsos poll finds

Additional growing pains facing the industry is legal pot’s pricing, which Stairs says is brought up by high taxes and extensive red tape.

“When the government sees that their regulation and taxation system is burdening their ability to defeat the black market, they will take another look at how they do things,” said Stairs.

The ‘grey market’ dilemma

A range of issues, from licenses to packaging, has contributed to the supply issues Canadians are now facing.

“Most of the cannabis produced in Canada right now…doesn’t come out of the black market but rather medically licensed growers, the grey market,” Cannabis Commerce Association of Canada director Jaclynn Pehota told Global News.

She said while these small-scale producers grew pot legally, the pot wasn’t sold legally.

MORE: For the launch of our weekly newsletter Cannabis IQ, we’re giving away $100 Visa gift cardsClick here to find out more.

“The project of legalization, in my opinion, was TO capture those cultivators and bring them into a regulated recreational market,” she said. “Failing to do that has resulted in what we see right now.”

These growers haven’t been able to move over to the recreational market because licenses for them weren’t available before Oct. 17. Those who applied on Wednesday will still have to wait for their application to be processed.

WATCH: How your pot is being produced ahead of legalization

As for large-scale growers with the appropriate licenses, such as Tweed or Aurora, there have been issues that have limited supply.

“Problems with crop failures… there’s been excuses on packaging delays, etc.” Pehota said.

“Leaving retailers and consumers ​in this like bizarre limbo ​where they have ​limited supplies of mediocre kinds of ​products.

READ MORE: ‘It’s all sort of spoken for’: Sask. cannabis retailers grapple with supply shortages

Pehota said there’s nothing stopping consumers from returning to the black or grey market.

“If you can’t compete on price point, if you can’t compete on price, if you can’t compete on variety, then you’re in a tough spot,” she said. “And that’s exactly where we are now.”

READ MORE: Pot sells out online in Winnipeg, lineups grow outside stores

“Once the government fixes their regulatory and taxation system supply will soar,” Stairs agreed, “bringing demand and prices down.”

*with files from the Canadian Press

© 2018 Global News, a division of Corus Entertainment Inc.

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