Manitoba adds medical marijuana to list of items it exports
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Last week, Manitoba added another item to its long lots of exported products — medical marijuana.
Delta 9 Cannabis sent off its first shipment to Australia and the company has seven other export permits lined up for additional shipments totalling about 100 kilogram of cannabis flower and another six kilograms of concentrate.
Although it’s a relatively small volume for a company like Delta 9, which produces about 6,000 kilograms of product per year, the international export business is seen as a potentially lucrative market for Canadian cannabis producers.
Company CEO, John Arbuthnot, said whereas Delta 9 is getting about $1 per gram in the Canadian wholesale market, the same product can fetch $3 to $4 per gram in the international market.
To date, all Canadian exports are in the medical marijuana markets and almost all of it has gone to three countries — Australia, Israel and Germany.
It it illegal for Canadians to export to any country where it has not yet been legalized, even to the U.S. where more and more states are legalizing cannabis, but it is still illegal on the federal books.
Sarah Seale, a Toronto-based consultant to the Canadian cannabis industry, said with proven quality and low cost production in Canada, it makes sense for Canadian licensed producers to engage in the export markets.
“But,” she said, “The barriers to entry to the export market are crazy. It’s lots more challenging than people thought.”
She gave an example of one of her clients who had to wait nine months to be able to ship to a client in Israel because of particularly stringent pesticide testing requirements there.
“We actually had to get labs trained up to be able to comply with Israeli regulations,” she said. “Nobody really saw that coming.”
But as challenging as it might be, the international markets are seen as a great opportunity for Canadian producers.
“As much as the sales channels are still small and evolving, they are certainly growing,” Arbuthnot said. “Overall patient numbers and export numbers will continue to grow.”
According to the most recent data available from Business of Cannabis, Canadian licensed producers exported close to 16,000 kilograms in 2020, which was 113 per cent greater than 2019 and cannabis oil exports were up 73 per cent that year.
The total exported volume represents about one-one-hundredth of the total Canadian cannabis market.
Arbuthnot said the export market is one avenue for potential growth. About six weeks ago the company reduced its production capacity and was forced to lay off some workers.
“What do we need to do to increase revenue and to bring those jobs and capacity back on line?” Arbuthnot said. “The export market will play a part in that.”
Because the Canadian market has developed high quality and low cost production — it is now recognized as the lowest cost producers in the world — there will continue to be opportunities.
For instance, Arbuthnot said a German company that it was consulting with, had electricity costs that were 10 times Delta 9’s.
Seale said although the markets are still being developed, there are opportunities for Canadian exporters.
“Canadian product is trusted,” she said. “With other countries just starting the legalization process, who would you rather get your trusted medication from? Someone who just figured it out or someone who has been doing it to for a few years?”
She said with the whole world legalizing and with many Canadian producers achieving EU-certified good manufacturing standards it could be part of a licensed producer’s long-term strategy.
“It would be crazy not to include it in their strategy,” she said.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.