Strike at 24 SQDC locations could be ending soon

by Grow Up Conference | Nov 10, 2023 | Media Partners, Stratcann

A strike that has been affecting 24 SQDC cannabis retail outlets across Quebec could be ending soon, says the union behind the action. 

On November 7, both parties received a recommendation from a mediator, which both accepted. The union will now present it to the approximately 230 members of CUPE 5454 to renew their collective agreement in a vote at a special meeting on November 12. It will be recommending acceptance of the decision.

CUPE 5454 (The Canadian Union of Public Employees) is one of the unions representing employees of some province-run SQDC cannabis stores. The union called a general strike in May of this year in response to the suspension of the president and vice-president of the union, along with 75 employees. 

The union has been calling for better working conditions and wages for their 300 members currently employed in two dozen SQDC branches. The SQDC has said that they hope to reach a negotiated agreement to the satisfaction of all parties involved.

“We managed to put an end to this crisis, which will finally enable the workers we represent to be paid wages befitting a Crown Corporation. They will have the last word, but our bargaining committee believes that this recommendation deserves acceptance,” commented CUPE representative Daniel Morin.

SQDC has not yet released a comment on the topic. In an update posted on October 29, the provincial agency listed several striking locations that were expected to occasionally close over “the next few weeks.”

Earlier this year, a Superior Court of Quebec issued an injunction to limit union “pressure tactics” against SQDC. 

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Aurora Cannabis’ growth buoyed by increased medical exports, cut flower business

by Grow Up Conference | Nov 9, 2023 | Media Partners, Stratcann

Aurora Cannabis is seeing an increase in sales of cannabis for medical purposes, buoyed by export markets, as well as a decline in sales in the non medical market. 

The Canadian cannabis producer released its financial and operational results for the second quarter of fiscal year 2024 ending September 30, 2023.

Total net revenue  was $63.4 million in Q2 2023, compared to $48.6 million in the same period in 2022. As in the previous quarter, Aurora attributes their increase from the prior period to growth in our global medical cannabis business and quarterly revenue in their plant propagation business, Bevo.

The company sold nearly 13.6 million kilograms of cannabis at a cost of ​​$4.75 per 2 grams of cannabis. This is a decrease in the sale price from the same quarter in 2022 at $5.21 for two grams of cannabis.

Medical cannabis net revenue was $43.8 million in the most recent quarter, a 42% increase from the prior year quarter, delivering 69% of Aurora’s Q2 2024 consolidated net revenue and 85% of Adjusted gross profit before fair value adjustments.

The company accrued $6.5 million in excise taxes from cannabis sales (2.3 million in medical sale and $4.2 in non medical sales. The company also wrote off $4.6 million in inventory and biological assets fair value and impairment adjustments, compared to a gain of $25.6 million in the same quarter in 2022 and a write-down of $3.3 million in the previous quarter. 

Aurora says this increase in net revenue of $12.8 million was mostly due to growth in its European business, which benefited from the introduction of new proprietary high potency cultivars, and higher volumes sold to Australia.

However, Aurora’s consumer cannabis net revenue for Q2 2023 was $12 million, down from $13.7 million in the prior year quarter. This decline in revenue is attributed to Aurora’s previously announced exit from the US CBD market and destruction of Reliva CBD inventory resulting from the Company’s decision to wind down its Reliva operations, as well as a “refocus” on premium categories. 

Aurora’s recent shift of one of its greenhouses in Alberta to a cut (non-cannabis) flower facility contributed $7.2 million of net revenue, about half of what non medical cannabis sales brought in. 

Net income from continuing operations for the three months ended September 30, 2023 was $300,000 compared to a net loss of $45.5 million for the same period in 2022. Aurora attributes the decrease in net loss of $45.7 million from the comparative prior year quarter to an increase in gross profit of  $33.5 million, an increase in other income of $19.1 million, and a decrease in G&A expense of $6.1 million.

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Canada’s cannabis regulations continue to evolve

by Grow Up Conference | Nov 9, 2023 | Media Partners, Stratcann

Health Canada’s 2022–2023 Departmental Results Report shows the cannabis industry in Canada continuing to evolve and expand.

In the past year, the federal health regulator granted an additional 179 licences for the cultivation, processing, and sale of cannabis for medical purposes, 125 licences for research, analytical testing, and/or cannabis drug, and 120 for industrial hemp. The agency also granted 1,805 import and export permits, primarily for export. 

The number of Canadians utilizing the legal market has also increased, with the proportion of household spending on cannabis in the legal market growing from 9% in Q3 2018 to 71% in Q4 of 2022. 

Health Canada also continues to oversee the country’s medical cannabis framework. In April 2022, Health Canada published the Guidance on Personal Production of Cannabis for Medical Purposes, based on stakeholder feedback, outlining factors that Health Canada may use when considering whether to refuse or revoke a registration for personal or designated production of cannabis for medical purposes.

In addition, Health Canada has been seeking additional evidence from healthcare practitioners to substantiate or support authorizations for high daily amounts of cannabis and communicated concerning trends to the appropriate healthcare practitioner, often the Provincial College of Physicians. 

Health Canada has been increasingly using its authority to refuse a request for authorization for medical cannabis if it was not supported by evidence, and could be considered to represent a risk to public health and safety, especially if it is believed the cannabis was being diverted to an illicit market or activity.

Health Canada also made amendments to the Cannabis Act and its Regulations that came into force in December 2022 that sought to better facilitate cannabis testing by improving access to testing materials and broadening the educational qualifications for those responsible for testing cannabis at licensed sites, as well as increase the public possession limit for cannabis beverages to better align with other cannabis products.

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In March 2023, Health Canada published a Notice of Intent in the Canada Gazette, Part I, seeking feedback on potential amendments to the Cannabis Regulations. The agency’s goal with these potential amendments is to streamline and clarify existing requirements; eliminate duplicative requirements; and reduce burdens where possible.

A public opinion research report that gathered information on the views and practices of patients and healthcare practitioners on access to cannabis for medical purposes was published in October 2022. 

In that report, Health Canada screened 91 instances of adverse reactions associated with cannabis products (24% required hospitalization and 4% were reported as life-threatening). The Department also published two annual reports highlighting adverse reactions involving cannabis products (October 17, 2018 – December 31, 2019 and January 1, 2020 – December 31, 2020).

In the past fiscal year, Health Canada also continued to conduct scientific assessments to characterize any possible risks associated with certain formulations or ingredients in cannabis products and responded to over 250 risk-related requests. 

In collaboration with research partners, the Department also published three peer-reviewed research reports:one of these issues was related to the pharmacological differences between different intoxicating cannabinoids;one on the characterization of by-products of components of cannabis vaping emissions; andone on the characterization of metal contaminants in cannabis vaping liquids.

Health Canada says it also continued to deliver public education and awareness campaigns in 2022-23. The Department updated and relaunched its Pursue Your Passion marketing campaign as both a virtual, ambassador-led program in schools and a teacher-led interactive lesson focussed on educating youth aged 13-15 on the physical and mental health effects of cannabis use. In March 2023, over 120 of these “ambassador-led sessions” were hosted in schools across Canada.

In May 2022, Health Canada also launched its s Reduce your risk: Choose legal cannabis campaign—a social media outreach campaign designed to provide Canadians with information on the risks of illicit cannabis products and how to recognize the differences between legal and illegal cannabis products. The campaign utilized web content, infographics, video, and various social media content.

Lastly, the Department also published two other resources to the Cannabis Resource Series—a set of public education resources built to provide Canadians with additional health and safety information related to cannabis: Growing cannabis at home safely and d Cannabis accessories for inhalation: minimizing your risk when smoking, vaping and dabbing.

Health Canada also invested over $9.6 million in contribution agreements In 2022-23 through its Substance Use and Addictions Program (SUAP) to support 24 projects related to the use of cannabis and its health effects, with a focus on youth and Indigenous populations. The majority of these projects were completed in 2022-23.

The federal health agency also led the development of multiple marketing campaigns on cannabis to raise awareness of the risks of cannabis and help prevent cannabis-related harms, especially to children.

Health Canada’s Indigenous Navigator Service, which supports Indigenous-affiliated applicants through the federal commercial cannabis licensing process to encourage Indigenous participation in the industry, supported an additional 13 licences for cultivating or processing cannabis to Indigenous-owned or affiliated applicants in 2022-23. This brings the total of licensed Indigenous businesses in Canada to 56. In addition, six licences were awarded in 2022-23 to Indigenous-owned or affiliated applicants to cultivate or process industrial hemp, for a total of 27.

Featured image via Organnicraft

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High taxes, regulatory fees, low margins meant the end of the road for OGEN

by Grow Up Conference | Nov 9, 2023 | Media Partners, Stratcann

The race to the bottom in prices is good for consumers but bad for growers, says Darren Brisebois, President of OGEN Cannabis, which closed the doors at its Calgary facility last week after going into receivership.

The company, which suddenly had to let nearly ninety employees go after hearing the news of receivership from their lender, has around 25,000 cannabis plants at various stages of production now scheduled for destruction. Its vaults, though, are mostly empty, says Brisebois, with their products selling quickly into several provincial markets.

Moving product wasn’t enough for OGEN to keep the lights on and payroll fulfilled. The company was at a difficult crossroads, he explains, struggling with the debt taken on to build their 60,000 sq ft facility (35,000 sq ft of cultivation space) while seeing the cost of cannabis products continue to drop.

The only path out that he could see, continues Brisebois, was to increase production somehow to lower the overall cost per gram to be able to eke out a profit in a market with wholesale indoor dried flower going for under $2 a gram, and production costs often over the $2 a gram mark. While his facility was producing about 5,000 kilograms of cannabis a year, he figured he needed to double that within the same facility to pay his bills and bring in a profit.

“We’re chasing this down, and the only way to be sustainable is to produce more. All of our costs are fixed.”

“Everyone on the market, they want to buy it for a buck, buck fifty right now,” he adds. “And the smaller producers can’t get the economies of scale that I have. So if you’re a small producer, I can’t see you getting below two (dollars a gram), indoor.”

The other big problem, he says, is government taxes and fees, both at the federal and provincial levels.
“When I look at my profit and loss statement, I’m paying somewhere between forty and forty-five percent right off the top to various government agencies. The selling price is now well below the cost of production.”

In addition, as more companies are closing and their supply gets sold at below-market rates, prices are further eroded, creating a downward spiral.

“The B2B market is really a big factor in this with a lot of different facilities closing. That puts even more downward pressure on the selling price per gram.”

Brisebois says the decision to close was not his, it was at the discretion of their lenders as well as pressures from the CRA.

Despite this need to get bigger, he says he also sees the pitfalls of growing too large and taking on too much debt—something he attributes to the early days of legalization when the industry was flush with cash.

Being small carries some advantages, but he thinks it can be a bit of a trap where it’s tough to really grow as a business.
“I wouldn’t want to be really big. I would rather be really small, frankly. And maybe there’s a labour of love in it. But it’s a catch-22 because maybe you can break even on that scale. Then how do you grow to establish yourself across the country?”

Another issue, he says, is the increasing cost of power in some parts of the country. In Alberta, this has been increasing significantly, contends Brisebois. Although he was able to lock in a low rate a few years ago, if paying current market prices, he says he would have seen his monthly electricity bill double from about $170,000 a month to more than $300,000.

This is exacerbated by an increasing cost to build, meaning anyone wanting to expand right now will have a hard time, especially with capital markets shunning most of the cannabis industry.

The future is probably somewhat bleak, he says.

“I think there’s going to be a handful of companies that will own portfolios of brands. I see a consolidation of market share.”

Companies will continue to swoop up the successful brands, he says, or just start their own brands with distressed assets they get from other closing companies. This is ultimately driven by consumer demand and what provinces buy, and is impacted by an enormous amount of regulatory and tax burden.

“It’s a very price-sensitive market. Price and THC. It’s really unfortunate, but that’s how it is for most consumers.”

Featured image via pancakenap.com

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