Supply issues are well known in Canada’s medical cannabis program. While there are no overall product shortages across the system, the nature of the program that effectively limits a customer’s ability to ‘shop around’ combined with limited product availability in terms of specific products has left many patients frustrated.
While few producers ever run out of cannabis entirely, patients who seek specific strains or products, like high CBD dried flowers or oils, or other specific or rare or hard-to-grow strains for specific ailments, often have to go without or turn to the unregulated market for the same or similar products.
This is because while there are hundreds, possibly even thousands of strains and cannabis products available in this unregulated market, there are markedly less within Health Canada’s regulated medical cannabis. According to Health Canada, as of July 24, there were 220 dried cannabis products and 57 oil products available, in addition to other products like capsules, a spray, “clone products” and more. And while this is still a lot more options than many Canadians may be used to or familiar with, when trying to both compete with a black market as well as satisfy a need for a steady, cost effective and stable supply of medical cannabis, this discrepancy can mean the difference between an effective legal program and one that continues to struggle with it’s unregulated competitor.
Another side of this issue is how new licensed producers get access to the kinds of strains patients are demanding. As new producers come online to satisfy growing demand, with dozens more expected in the coming months, the question of how they get starting materials—plants and seeds—to grow the cannabis they seek to sell to Canadians can be a challenge.
While producers approved prior to April 1, 2014 were allowed to import genetics through domestic home growers approved by the government, since that cut-off date, producers have been forced to either find a way to import genetics from overseas or have had to purchase them from those producers who got through that first cutoff date.
The first option, importing starting material like seeds or clones from outside of Canada, is limited to a handful of countries with legal cannabis programs, and only a few LPs have so far successfully navigated that approach, going through Health Canada, Canadian Border services, the Canadian Food and Inspection agency, as well as these departments’ equivalents in the host country.
Last Fall, Health Canada said they were compiling a list of companies that LPs can potentially source genetics from, but this list currently only includes three companies (one in Spain, one in Germany and one in Columbia), one of which is owned by another LP. However, Health Canada says they have issued permits to LPs for four separate foreign companies in 2017.
“In addition to the 3 foreign companies that have been identified to date, Health Canada continues to work to identify and verify the legal standing of additional companies that may be able to provide cannabis starting materials (e.g., seeds, clones) for import to Canada,” Health Canada senior media relations advisor Tammy Jarbeau told Lift earlier this year.
“In addition,” Jarbeau continued, “in instances where a licensed producer is made aware of other potential legal foreign sources of cannabis starting material, Health Canada officials will liaise with the competent authority in the country of origin to confirm the legal standing of the company, and whether they are willing and able to export cannabis starting materials to Canada. Moreover, since the beginning of 2017, Health Canada has issued permits to licensed producers for the import of cannabis starting materials from four separate foreign companies.”
“...if the ACMPR has a vested interested in the government of Canada’s objectives in disrupting the black market, go to any top dispensary in Vancouver and you’ll see some really incredible genetics, some really cool, rare sativas, some stuff that’s hard to grow, some stuff that people have really put a lot of time and energy into, and if we don’t represent product that is at least of that quality, it’s going to be tough for us to compete.” - Dan Sutton, Founder of Tantalus Labs in British Columbia
Some new producers say the second option, sourcing from other Canadian licensed producers, offers new LPs more options and less paperwork than importing, but can still be a challenge for LPs seeking a unique variety. While many producers have extended seed and clone selections in their facilities, which of these they are willing to sell to competitors, and at what price, can be challenging. Some producers offer other LPs clones for sale with added ‘cutting fees’ for any clones made from the plants sold, while others offer a flat rate.
What this means for new producers and, expanding out, the Canadian cannabis market in general is a market that may continue to find challenges in competing with a black market with significant product diversity and variety, says at least one producer.
Dan Sutton, CEO of Tantalus Labs, a recently-licensed medical cannabis producer in Maple Ridge, British Columbia, says his company recently went through the process of obtaining seeds from Europe (Dan was unable to share the specific country), after not being happy with the options available domestically, both in terms of variety and price. The process, as he explains, was not easy.
“Just to give new LPs or people who are interested in understanding of the complication around acquiring genetics, especially germplasm seed stock, it was a 16 month process,” says Sutton. “We had to interact with the Canadian Food Inspection Agency, Canadian Border Services Agency, Health Canada, a [lot] of lawyers, maybe four different layers of lawyers, the government in country of origin, and actually orchestrate a whole bunch of new stuff that Health Canada didn’t know about, that we didn’t know about, that nobody knew about until we figured it out. And I hope that that becomes a more publicly available channel.”
“I would say it’s probably the most important foundation to a thriving cannabis brand and at the same time one of the most difficult problems to solve… It was one of the most out-of-the-box problems we’ve ever solved, and that’s saying something because building this place was insane, and getting a Health Canada ACMPR license was tough. If you think getting an ACMPR license is difficult and interpretive, and you’re having to interpret different laws, and then the inspectors come and tell you things you never heard before, the acquisition of genetics in its current state is a problem that needs to be solved and a path that needs to be cleared by regulators.”
Sutton’s hard work paid off. In July they received shipment of thousands of seeds that he says represent thousands of possible strain options. He says he’s excited to share their process with others because while he understands the value of protecting his own company’s market share, he also sees the need for the entire industry to mature and expand and be able to compete with the black market to offer medical cannabis consumers the variety they need and are asking for.
“If we have any hope,” continues Sutton, “...if the ACMPR has a vested interested in the government of Canada’s objectives in disrupting the black market, go to any top dispensary in Vancouver and you’ll see some really incredible genetics, some really cool, rare sativas, some stuff that’s hard to grow, some stuff that people have really put a lot of time and energy into, and if we don’t represent product that is at least of that quality, it’s going to be tough for us to compete.”
Another BC grower, United Greeneries, based in Duncan BC, had to turn to importing seeds as well after not finding the quality of starting materials here in Canada that they were looking for, Andreas Gedeon told Lift last year. Gedeon is the Managing Director and CEO of MMJ PhytoTech. United Greeneries is the Canadian subsidiary of MMJ-PhytoTech, based in Australia. Last December, the company announced an import permit for seeds from a partner company.
"We have been purposely not engaging in commencing growing at our Duncan facility (cultivation license was received June 28, 2016) with other LP’s plant material to avoid contamination of our grow areas with one of the many plant health issues out there. Most of them get transmitted from infested mother plants to the cuttings and quickly spread in the growing area. In the absence of sufficient licensed pest control products and fungicides for cannabis, initially growing from seeds in our newly built Duncan, BC facility was the best option to avoid these issues from the beginning."
United Greeneries has since developed mothers and clones from imported seeds and grown out finished crops as they await their license to sell, and will continue developing and stabilizing genetics from their imported starting material.
John Fowler, the CEO of 7 Acres, another licensed producer that was approved after the April 1, 2014 cutoff, says his company was able to secure imports through Dinafem Elites, based in Spain. 7 Acres specializes in supplying B2B sales of cannabis to other licensed producers, and also supplies genetics to these LPs as well. Pricing, he says, is currently $15-20 for initial cuttings and another $10-15 for plants propagated from those cuttings, with discounts available for exclusivity.
“Currently we offer two categories of genetics, 7ACRES Select and Dinafem Elites,” says Fowler. “In both cases our team worked closely with the industry leaders at Dinafem to select phenotypes from nearly 400 seeds started last year, which were acquired domestically.”
“I think genetics is one of the most important factors to the overall success of a cannabis cultivator. While we certainly have to be more creative in the legal market due to restrictions, there is lots of amazing material that can be selected, perfected and then developed into something new. We have resources and opportunities not available outside of the federally regulated space, this is a global advantage.” John Fowler, CEO of 7 Acres in Ontario
“We provide our genetics with a small upfront cost and an ongoing plant fee. Think of this as similar to farmers who buy seeds or plant starters every crop cycle, but applied to an industry with in-house asexual propagation. This aligns us with the end producer; we only enjoy success if they do over the long term. To encourage success we get our team involved with the producer to help improve the garden and maximize the quality of the finished cannabis. This also allows producers to change strains based on customer feedback with little additional cost.”
Fowler says that while there are obvious issues with sourcing genetics from outside the country, to him, the issue is more about knowing how to grow what you have and selecting new phenotypes through breeding.
“The issue of import is certainly a challenge, but it's not a panacea for genetics,” says the CEO. “To be valuable, seeds need the time, space and expertise to be selected. That has to be combined with the right vision, for example we don't always choose the highest yield or highest potency as there are many other important factors involved.”
“I think genetics is one of the most important factors to the overall success of a cannabis cultivator. While we certainly have to be more creative in the legal market due to restrictions, there is lots of amazing material that can be selected, perfected and then developed into something new. We have resources and opportunities not available outside of the federally regulated space, this is a global advantage.”
This ‘global advantage’ is something Roger Ferreira—CEO and Director at Beleave Inc, which received its license to cultivate in May of this year—hopes to make use of. Beleave was recently able to purchase clones from another licensed producer, WeedMD. Their hope is to use the handful of specific strains to grow out for immediate supply as well as being able to begin breeding new variations from these initial genetics that can become unique to Beleave.
“With the restrictions that exist, one of Beleave’s competitive advantages is to place an important focus on plant selection and breeding in order to introduce genetic and phenotypic diversity into the product stock available in the ACMPR. Ultimately, we want to provide the product variety and availability that both the medicinal and future recreational markets will require.
“From all starting genetics that we source, we are characterizing these for certain genetic and phenotypic markers of interest to carefully qualify them for our precision breeding program that we are implementing with Ryerson University. An important goal is developing a great new stock of genetics under the Beleave brand.”
Although Ferreira says his company is pleased with the “flexibility and autonomy” of their arrangement with WeedMD, he also says he sees how the limited availability in terms of genetic diversity can limit the industry’s growth. Although some strains are available from other licensed producers, finding the strains your future clients and patients will demand can be more challenging.
“With the restrictions that exist, one of Beleave’s competitive advantages is to place an important focus on plant selection and breeding in order to introduce genetic and phenotypic diversity into the product stock available in the ACMPR. Ultimately, we want to provide the product variety and availability that both the medicinal and future recreational markets will require." - Roger Ferreira—CEO and Director at Beleave Inc. in Ontario.
“I think a couple of the main challenges for LP’s are finding a plant acquisition or licensing agreement that fits their business model in terms of planned wholesale and retail sales, and then ultimately being able to find genetic stock of the intended product offerings that you’re looking for within the structure of such an agreement.”
For their part, Health Canada agrees with this perspective of creating better genetic diversity through the creation of new strains in house. In response to why this opportunity to import from licensed growers under the previous MMAR regime is not available to new producers, Health Canada simply says that it was a “temporary measure” that was created to “support the creation of a new system of licensed producers of cannabis for medical purposes.”
To address any need for greater diversity in strains and products, the regulator says that licensed producers are then able to use legally sourced starting materials from import or other licensed producers to “create new strains.”
This process, however, can take years to develop and then stabilize new strains, meaning that as more licensed producers come online to satisfy a growing demand for medical cannabis, those patients seeking specific, novel strains to deal with specific medical effects may have to do a lot of shopping around and experimenting to find what works.