Twenty twenty saw a big increase in new licence holders, from cultivation to processing to sales, and 2021 will likely see this trend continue. This increase of licences represents a crowded marketplace, but also increases opportunities for partnerships and collaborations between licence holders. We’ve seen it with companies like Shelter and North40, and we’ll see more soon.
In this current trend, micro licence holders are emerging as a serious contender on the Canadian stage with more than 160 now licenced, and new licences being issued pretty much every week. A handful of early licence holders in this category, like Dunn Cannabis and Habitat, have already begun reaching the consumer market, and are commanding respectable prices for their product, especially compared to what we see for their standard licence colleagues.
Part of what I expect will really begin to change the landscape for micros—in 2021 and beyond—will be the increasing number of processing and sales licences being issued to both micros and standards. This is because one of the hurdles up to this point for micros has been a path to market, and usually needing to partner with a processor with the appropriate sales licence in order to reach provincial markets. As more of these licences are issued, this gives micros and other cultivators more opportunities for developing these kinds of partnerships.
Part of what I expect will really begin to change the landscape for micros—in 2021 and beyond—will be the increasing number of processing and sales licences being issued to both micros and standards. This is because one of the hurdles up to this point for micros has been a path to market, and usually needing to partner with a processor with the appropriate sales licence in order to reach provincial markets. As more of these licences are issued, this gives micros and other cultivators more opportunities for developing these kinds of partnerships.
In 2020, Health Canada issued around 75 new sales licences in each of the four product categories: Dried/Fresh, Edibles, Extracts, and Topicals. They also issued more than 100 processing licences. Each of these licences represent more options for cultivators to bring their product to market than previously existed, and there’s little reason to think this trend will not continue. This will mean more high quality “craft” options for consumers to choose from.
While vertical integration used to be the standard catch phrase for anyone entering the legal cannabis industry in Canada, increasingly licence holders are finding success in developing partnerships to get their product to market, while focusing on what each partner can do well. For example, this means cultivators can focus on cultivating without worrying about the added costs and logistical challenges of processing packaging and sales to provinces, or processors who only want to focus on say, edibles, or extracts, can focus on that and outsource the flower input to talented growers.
Although some argue that creating these separate licensing categories represents extra regulatory burdens for licence holders in getting their product to market, the opposite is true. If we look back to the old medical regulations, prior to legalization, where there was only a one-size-fits-all licence category, those who only wanted to grow, or only wanted to process, were still forced to engage in a licensing process that required all these categories to be addressed. By breaking up these steps into different licences, this actually removed unnecessary burdens for those who wished to focus on one side of the production stream. At the same time, it still allows those who wanted to cultivate and process to do both.
The number of cultivators who are opting to build partnerships rather than vertically integrate in this fashion seem to prove this out. Growers who can grow good cannabis don’t need to invest in processing and packaging when a third party can do it for much less. Processors don’t need to worry about growing their own inputs when there are hundreds of other more skilled licence holders out there already doing it.
So as we continue to see new licences, these opportunities for partnerships will only increase. More partnerships means more options, less of a capture market where growers have only a few processors to choose from, and giving cultivators more power means more options for retailers and consumers.
For consumers, this will mean more variety to choose from when buying cannabis, and more of the types of high quality, craft options many feel has been lacking on the legal market—until now.
David Brown is the founder of StratCann, a cannabis industry publication with a special focus on micros and nurseries. Prior to founding StratCann, David was a Senior Policy Advisor to Health Canada's cannabis branch from 2018-2020, working—among other things—with the regulation team on the crafting of new licence categories like micros and nurseries. Prior to his time with Health Canada, David was a co-founder of and Communications Director for Lift Cannabis and Editor in Chief of Lift News. Follow him on Twitter, like everyone else does, @drowbb.
