(This is the second in a two-part series on Canada’s medical cannabis exports. The first installment is available here.)
Australia and Israel were the top markets for Canada’s medical cannabis exporters last year, as the quantity of flower shipped overseas continued to surge, according to new figures shared by Health Canada with MJBizDaily.
In the April 2022-March 2023 fiscal year, Canada’s exports of medical marijuana flower were 59,986 kilograms (roughly 132,200 pounds), a 48% increase over the previous year’s 40,640 kilograms.
The vast majority of exports, however, went to only three countries, meaning exporters risk being dependent on a very small number of markets.
Almost 80% went to Australia and Israel, which together were responsible for importing 47,332 kilograms of Canadian flower.
Germany was the next-biggest importer, accounting for 9,560 kilograms, or approximately 16% of the total, according to the Health Canada data.
Since 2017, Canada has exported 126,025 kilograms of medical cannabis flower for commercial and scientific use.
In total, the value of Canada’s medical cannabis exports last year increased to 160 million Canadian dollars ($118 million), about 50% more than fiscal 2021-22’s total.
Aurora Cannabis CEO Miguel Martin told MJBizDaily in a phone interview he sees medical cannabis exports as a long-term play for his company.
“It’s a big opportunity. The margins are about 2.5 times what they are in Canadian rec, and not declining,” Martin noted, referring to Canada’s recreational cannabis market.
Australia, meanwhile, was the top importer of Canadian cannabis extracts.
Among the top five importing countries, Australia accounted for 93%, or 8,392 liters (2,217 gallons), of the total 9,042 liters of medical cannabis extract products exported.
The Cayman Islands was second, receiving 320 liters of Canadian exports.
Brazil, Barbados and South Africa rounded out the top five last year, with 136 liters, 103 liters and 90 liters, respectively.
Some of the factors driving Canadian cannabis exports are:
Increasingly higher-quality products in the Canadian domestic market, which remains saturated with competition and oversupply.
Higher margins overseas, in part because of excise levies in Canada.
Fewer competitors capable of competing internationally, given higher barriers to entry in most of those markets.
Aurora’s Martin said part of what is driving exports higher is the good reputation of Canadian products overseas.
“There’s a lot of equity and credibility for Canadian medical cannabis product,” he said.
But the export market is getting more competitive, with countries such as Colombia and Denmark aiming to grab more of Canada’s share.
Similarly, more nations have ambitions to be net exporters than there are countries with plans to import meaningful quantities, signaling competition in the import/export market will get more intense in the coming years.
Canadian licensed producers also risk becoming dependent on a handful of international markets, where regulations can sometimes change with little to no warning.
Martin said he’s confident more import markets will open up, as slow-moving regulations in some countries doesn't allow production to keep pace with demand.
He pointed to Poland and the United Kingdom as nations with potential.
Martin said regulatory certainty is an important factor.
“One of the things for us is we want to be in markets where the regulatory framework is predictable - even if it’s slow,” he said.
Citing the German opportunity, Martin said that “gearing up for that is a way bigger opportunity than hoping and praying that something is going to happen in the Netherlands."
Most importing countries require European Union-Good Manufacturing Practice (EU-GMP) certification, or something similar, which is costly and takes time to achieve.
“One of the more finite resources that is really important out there is EU-GMP flower. That’s a very expensive, very hard thing to do, and not a lot of people are doing it at scale, and all of those markets require it," Martin said.
“When you see new markets come online, it’s not just the size, it’s who (is capable) of addressing it.
“As these markets come online, you’re going to see the same winners, and they’re usually multinationals.”
Deepak Anand, principal of ASDA Consultancy Services in Surrey, British Columbia, suggested that Canadian exports are gaining momentum, in part, because some countries that allow medical cannabis sales still don’t have enough domestic production to match demand.
Australia, he said, is licensing more cultivators but not enough to meet domestic consumption in the regulated market, meaning imports will still be needed to fill the gap.
But Anand warned that recent regulatory changes are creating potential headwinds for prospective exporters to Australia.
Starting in July, all imported medical cannabis products in Australia were required to comply with stricter import requirements.
“I think that will result in a little bit of a limiting of how much product actually is going to continue to go into Australia,” Anand said.
Anand has his eye on Portugal, which he expects to increase imports.
“A lot of people are now exporting to Portugal, with the intended market being Germany,” he said.
“There is quite a bit of money on the table from a revenue standpoint from exports.”
Matt Lamers can be reached at firstname.lastname@example.org.