Selecting a supplier
Ahead of the legalization of recreational cannabis, companies are ramping up their production capacities. However, decision makers in provinces will have to ensure that they select the right suppliers to meet the demand for recreational cannabis.
Currently, Canada has a total of 91 licensed producers, of which 48 are in the province of Ontario. How a province goes about selecting its supplier will be critical for big and small players alike.
Factors influencing supplier selection
As we can see in the chart above, Canopy Growth has listed eight factors that are expected to influence the supplier selection.
Some of the factors listed will be more critical for some provinces than others. For example, production capacity and cannabis inventory for a province such as Ontario, which is Canada’s most populated province, will matter more than for a province that may not expect to have a flood of demand.
However, product variety, product quality, branding, and price are some factors that will be considered carefully by most provinces before they make their supplier selections.
Indications from Ontario and Quebec
Each province is expected to take a different approach to selecting its suppliers. Some may go with only large players, while some may keep the opportunity for small players open.
Earlier this year, six companies (HMMJ) reported their supply estimates to the province of Quebec. These six suppliers included large players such as Hydropothecary (HYYDF), Canopy Growth (WEED), Aphria (APHQF), MedReleaf (MEDFF), Aurora Cannabis (ACB), and Tilray. On the other hand, the Financial Post reported that Ontario would be keeping its options open for all licensed producers in Canada.
Next, we’ll discuss Canopy Growth’s capacity expansion pipeline.