CannTrust

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The scandal surrounding CannTrust’s non-compliance due to five unlicensed grow rooms has been a topic of interest for the past few days. But based on an update by Global News and a direct message to clients, things are as bad as they can get.

Initially, news developments implied that, despite a substantial amount of product being mandatorily or voluntarily held, sales would continue for any remaining stock.

However, a recent e-mail to CannTrust’s medical clients showed that this is not the case. Naturally, this is disappointing and distressing to the over 70,000 medical clients CannTrust serves – the author of this article being one of them.

Unfortunately, this leaves everyone with a slew of questions and few answers – the most important being when new product will be available.

 

CannTrust E-Mail

 

Late in the evening on July 11th, CannTrust’s clients received an e-mail about the situation. One excerpt reads as follows:

 

“Dear CannTrust Patient,

 

We deeply value the trust you place in us to provide you with your medical cannabis products. We are currently working on a facility review with Health Canada and as a precaution, we have implemented a voluntary hold on the sale of our medical products as of July 10th, 2019.”

 

Because the infraction occurred at their lone harvesting facility in Pelham, Ontario (manufacturing is done in Vaughn), their entire supply is in question. According to the rest of their message, they halted sales in the interest of consumer safety:

 

“Your safety is our first priority and we would like to assure you that all previously sold and current inventory products have passed quality control testing at Health Canada approved labs as well as CannTrust’s own quality control processes and safety reviews.

We thank you for your patience and sincerely apologize for the inconvenience this may cause. We are working diligently to correct the matter and will keep you informed.”

 

At least customers can feel safe knowing that they did not purchase any contaminated or substandard products.

However, this leaves over 70,000 patients with a choice. They can either switch providers or wait out the storm. But given how long government investigations can take, it is likely that this storm will be a long one.

 

No Estimate

 

Naturally, this author sent an e-mail to CannTrust’s customer service in hopes of getting answers about the shortage. Unsurprisingly, it failed to shed any light on the situation.

When asked if they had a rough idea as to when supply would be available, their response was:

“Thank you for your email. Ensuring product safety and availability is our priority but at this time, we do not have a definitive answer.”

This does not mean that CannTrust is simply going to wait, however. The reply continues:

 

“We are exploring options to mitigate product shortages and will keep you informed as soon as product becomes available.”

 

Global News offers a similar answer. Based on a press release earlier during the day on July 11th, the company said:

 

“CannTrust is working closely with the regulator through the review process and expects to provide further detail of the duration of the hold and other development as they become available.”

 

Perhaps the one redeeming quality in this entire situation is CannTrust’s transparency.

 

WeedAdvisor’s Commitment to Quality and Safety

 

At this point, it little else can be said about the situation with CannTrust. Until Health Canada and CannTrust are done with the appropriate procedures (and consequences), CannTrust is essentially in limbo. This will likely have a catastrophic financial impact on the company. Fortunately, clients have plenty of great options to choose from.

To make the choice easier, WeedAdvisor has so far provided product descriptions for the vast majority of Canadian licensed producers, available in our “Reviews” section.

 

 

 

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According to The Leaf, ripple effects of CannTrust’s run-in with Health Canada are already spreading. On July 8th, CannTrust announced that five grow rooms were found in their Pelham facility. These rooms had been operating since last October, but only received a license in April.

Concerned over a small batch of products, CannTrust’s Danish medical marijuana partner, Stenocare, has put a hold on this shipment until they verify its safety or are forced to destroy it.

Stenocare, who partnered with CannTrust in March of 2018, received its first shipment of cannabis oil in September of that year.

Whether CannTrust executives knew about these rooms is unclear. What is clear are the inevitable consequences. For instance, Monday’s announcement plummeted the company’s stock by 20%, although it has since gained some momentum toward recovery.

At this point, the damage is clearly done.

 

Batch Quarantined

 

Stenocare acted quickly to ensure that no unsafe or unregulated products make it to the market. The Leaf explains:

 

“Stenocare said Tuesday that it has been in contact with the Danish Medicines Agency and the single batch has been put in quarantine for potential destruction, pending an ongoing investigation by Health Canada.”

 

The Danish company receives a lot of shipments from CannTrust, most of which were completely fine. According to Stenocare, the affected batch is just a small fraction of the total products received, with the vast majority “unrelated to the current issue.

Unfortunately, the case is not the same for CannTrust.

 

Impact on Inventory

 

Fortunately for Stenocare, the small amount of product involved means that impact on inventory will be negligible. In a statement, Stenocare said:

 

“Stenocare operates with a significant inventory, which means that most likely this matter will have no impact upon Stenocare’s continued ability to serve the market as required. Stenocare expects to be unharmed financially or otherwise from this unfortunate matter.”

 

CannTrust, on the other hand, is about to face a bumpy road. 12,500 kilograms of cannabis were held back, with 5,200 kilograms placed on “hold” by Health Canada. CannTrust also voluntarily kept another 7,500 kilograms from hitting the market.

Unfortunately, this means a potential crisis for medical clients. According to The Leaf:

 

“CannTrust’s chief executive Peter Aceto said this represented the “majority” of the company’s inventory and warned of product shortages ahead.”

 

This represents a potential crisis for individuals who heavily rely on CannTrust’s products – many of which (ironically) won awards.

 

Investigation and Fallout

 

Peter Aceto explained that CannTrust is launching an investigation to figure out how this all happened. The company enlisted the help of a third party to track down how this incident occurred.

But while CannTrust works to find answers, this leaves a lot of questions. How badly will inventory be affected? How long will it take to recover? What additional options are there?

There is no telling exactly how much time it will take to recover the lost inventory – a total of over 25,000 kilograms. But considering it takes three months for the company to harvest and process just under 10,000 kilograms, a shortage of this magnitude will be staggering and likely last for some time.

For those being left out in the cold, there are options. Individuals who know their medical needs can likely find similar – if not identical – strains from other licensed producers. Switching is easy, requiring a simple phone call to the new LP of choice, who then transfers the prescription over.

Alternately, patients could choose to purchase those similar or identical strains from a recreational dispensary.

 

WeedAdvisor’s Concern for Safety and Ethics

 

Sadly, this is not the first time we reported on licensed producers who broke the rules. Adding an award-winning company like CannTrust to the list of regulatory violators is shocking, but only proves that no licensed producer is immune to such misconduct.

Stories like these, however, a critical to public interest and thousands of patients. This is why, in our effort to consistently educate potential consumers, we will always report developments like these. Such news is simply too critical to ignore.

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At approximately 7:30 A.M. Eastern Standard Time, CannTrust customers received an e-mail from the medical licensed producer. According to the rather vague e-mail, the company advised its clients that their greenhouse in Pelham, Ontario had been deemed non-compliant by Health Canada, but did not go into further details.

Media outlets like Marijuana Business Daily, however, obtained more information from CannTrust and offer a more complete picture.

Despite CannTrust’s assurances that they follow the law, the discovery of previously unlicensed grow rooms indicated otherwise, prompting Health Canada to rate CannTrust as “non-compliant.”

To their credit, the rooms were eventually licensed before Health Canada’s inspection, but that does not change the fact that they opened the rooms prior to their licensing – a contravention of legal industry practices.

Medical users are not the only ones who could be affected. CannTrust also has a line of recreational brands – SynrG, Xscape and Liiv.

So far, there are no reports of toxins, pesticides or biological organisms being found in the unlicensed herb.

 

Customer E-mail

 

CannTrust’s e-mail to its medical clients was rather simple and fairly non-specific. They raise awareness about their run-in with Health Canada:

 

“We’re a company that is built on a philosophy of transparency, trust and excellence, so we want to share some important news with you. CannTrust recently received a compliance report from Health Canada notifying the Company that its greenhouse facility in Pelham, Ontario is not compliant with certain regulations.

 

The actual cause, however, is something Marijuana Business Daily has to reveal:

 

“CannTrust’s greenhouse facility in Pelham, Ontario, received a “noncompliant” rating by Health Canada for operating five unlicensed rooms.”

 

These rooms had been present for the last six months, but only received a license in April. During their tenure, they produced a notable amount of marijuana.

However, despite the fact that medical and recreational users could very well have been buying unlicensed cannabis, CannTrust’s e-mail tells the public that the product was ultimately safe:

 

“We want to assure you that all products sold to patients and customers have passed both testing at Health Canada certified labs and CannTrust’s quality control processes and safety reviews.”

 

Eventually, CannTrust pledged to work with Health Canada in ensuring future compliance. While this may help alleviate concerns, it does not make the company’s actions any better.

 

Magnitude of Impact

 

Five grow rooms may not seem too significant, but Marijuana Business Daily demonstrates that nothing could be further from the truth.

In fact, upon their discovery, the five rooms led to 12,500 kg of product being held back. Health Canada also froze an additional 5,200 kg of dry herb processed in the rooms until they are satisfied that CannTrust is compliant. CannTrust, meanwhile put its own “voluntary hold” on 7,500 kg from its facility in Vaughn.

A total of 25,200 kg is no longer available for sale (if we factor in the voluntary 7,500 kg). How does this compare? According to Marijuana Business Daily:

 

“For context, the company harvested 9,400 kilograms in the whole last financial quarter.”

 

If we calculate the timeframe, the total loss amounts to about three months of product.

Naturally, CannTrust expects a shortage, stating in their e-mail:

 

“The Company is exploring options to mitigate product shortages and will keep you informed as soon as product becomes available. Ensuring product safety and availability is our priority.”

 

The fallout from this situation is catastrophic. As of this article’s publication on July 8th (the same day of the e-mail), there appears to be a robust product list with no changes. If anything, more strains were recently made available.

Whether this is an accurate reflection of their current inventory or whether the site is yet to update remains unclear.

 

WeedAdvisor’s Commitment to a Safe Cannabis Industry

 

The news of this situation is rather surprising, giving CannTrust’s history. In fact, the author of this article is a CannTrust client and has had nothing but positive experiences with the products and staff.

However, this does not change the fact that CannTrust’s instance of non-compliance was intentional. Non-compliance incidents might be brushed off when it is a simple case of human error, but unlicensed grow rooms do not accidentally appear. Hopefully, the company, and others like it, will learn to stay compliant for the sake of their reputations.

Clearly, Health Canada enforces compliance with a passion, which is why WeedAdvisor understands the need for businesses to follow the law. To that end, we offer several business solutions, allowing for real-time data-tracking, consistent reports to regulatory bodies, compliance monitoring and solutions for recovering following an incident.

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By now, we are no strangers to the struggles of the Ontario Cannabis Store (OCS). After issues fulfilling orders, issues with customer service and a security breach to top it off, the distributor could really use some good PR.

They intended to do so by offering same-day cannabis delivery via courier in the Greater Toronto Area. Although a small start, considering they serve the entire province, it at least showed promise that things were heading in the right direction.

However, according to Global News, that all changed on April 26th, when the OCS announced that they would be pulling the plug on the project.

 

Little Explanation Given

 

According to Global News, the same-day delivery service was announced in January and scheduled to begin by March.

Hopes have now been dashed for GTA residents who want faster cannabis during a time when brick and mortar shops are sparse. But perhaps the most frustrating part of all is that public does not know why the measure was cancelled. Global News explains:

 

“The Ontario Cannabis Retail Corporation, which conducts e-commerce as the Ontario Cannabis Store, did not cite a specific reason for why it decided not to proceed, and the OCS was not immediately available for comment”.

 

In all fairness, the OCS would not cancel such a promising option unless their hands were tied. The problem is that they are unwilling or unable to provide the public with an explanation. It only adds to the frustration and disappointment from the OCS losing a potential redeeming quality.

 

Already Implemented by Other Producers

 

It might be argued that same-day courier delivery is not sustainable. But nothing could be further from the truth. Not only is it sustainable, but it is also a regular practice among some medical producers.

Licensed producer CannTrust – responsible for the SynrG, Liiv and Xscape recreational brands – offers same-day delivery of its medical strains in the GTA, in addition to alerts shortly before the package arrives.

Aurora Cannabis is another company that offers the service, this time in Calgary and Edmonton – a much larger area to cover than the GTA.

 

Let Producers Handle Recreational Shipping

 

Most – if not all – medical LPs sell their own brands of recreational cannabis or simply offer their medical strains in the market under the same names. Clearly, these companies can handle same-day shipping of their products.

A possible solution would be to implement the same e-commerce process for recreational cannabis. Remove the current government-controlled recreational distribution and instead let each producer give people the option to buy online directly from them.

This is the case with literally every retailer. Anyone can go on a company’s website and buy everything from electronics to groceries. Why should recreational cannabis be any different?

Of course, this is a tall order, given that the government wants to keep marijuana on a very tight leash in the interest of public safety.

 

WeedAdvisor’s Goal to Make Cannabis Accessible

 

Be it medical or recreational, WeedAdvisor wants every interested adult to have easy access to cannabis. Currently, this is simply not the case.

While we cannot fault the government for every issue, they have consistently fallen short of the public’s hopes and expectations.

However, this means that there is plenty of room for improvement. Over time, this will likely be the case. Meanwhile, WeedAdvisor offers a variety of business solutions to cover government, LP and retail needs.

Our desire is to one day be at the forefront of cannabis reform, providing help and support to everyone involved.

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Licensed producers may differ in many ways, but one thing they had in common was their collective struggle to remain profitable. After months of hype led to huge overvaluations across every company, the lack of sales due to supply shortfalls and other hiccups ended up bursting the investment bubble. Consequently, stocks crashed almost universally across the industry.

CannTrust was not spared the fallout. On March 29th, CTV News reported an 18% drop in share value, following a fourth quarter net loss instead of the predicted net gain.

But The Financial Post reveals that, just one month later, CannTrust is back with a vengeance, intent on regaining lost ground.

 

Reasons for Initial Loss

 

Q4 2018 was not a good time for CannTrust. CTV News explains:

 

“CannTrust posted a fourth-quarter net loss of $25.5 million or 26 cents per share, compared to a $6.3 million profit or eight cents per share during the same quarter in 2017”.

 

While the market’s anticipated success of licensed producers was inflated, there are many different reasons why CannTrust – and its many counterparts – fell short in Q4.

One issue was start-up costs. Like many LPs, CannTrust came out with its own line of recreational cannabis, specifically Liiv, Synr.g and Xscape, which offered rebranded versions of their medical strains.

However, it was not a simple matter of slapping a new label onto their existing medical inventory. Entering the recreational arena presented a slew of regulatory hurdles and compliance requirements, which all cost a great deal of money.

CannTrust’s chief executive, Peter Aceto said in a conference call:

 

“[The] rollout has not been without its challenges for the company, its competitors and provincial distributors. For CannTrust in particular, we have had to train hundreds of new staff, absorb the cost of a much larger facility, and vigorously implement automation and process improvements, particularly related to product testing, quality assurance and product handling”.

 

Another key issue is that CannTrust has already been absorbing the rather suffocating excise tax ($1 per gram or 10% of the final cost) to ease the financial impact on its medical consumers, as have some other LPs.

At the time of the CTV News article’s publication, CannTrust was also waiting on the completion of a new facility, which would provide 50,000 kilograms of cannabis per year. Construction was complete, while CannTrust waited for “final licensing”.

They believe that this will allow them to once again be “in the black” by late 2019.

 

Current Outlook

 

Although CannTrust is not quite out of the woods, things are still looking better. According to the Financial Post:

 

“CannTrust Holdings Inc. says the company’s net revenue for its first full quarter after legalization of recreational cannabis will be $17 million, more than double what it was a year earlier”.

 

CannTrust also expects a five percent increase in net revenue compared to last quarter, when they were scrambling to get their feet on the ground in time for legalization.

The company also announced that it harvested over 9,400 kilograms of cannabis from its Niagra facilities – a 96% increase from Q4 of 2018. They also point out that the cost of both dry herb and oil have remained relatively stable.

Overall, the rough start for CannTrust – and likely other major LPs – could start smoothing out in the near future.

 

WeedAdvisor’s Support of Licensed Producers

 

WeedAdvisor is very well aware of how costly legalization has been thus far. Regulatory limitations and lack of supply caused an increase in overhead. With no product to sell, LPs found themselves unable to recoup the costs, causing serious strain across the board.

Now that things will hopefully look up for LPs, it is time for them to ensure that they stay focused on every aspect of their businesses. These include tracking, safety, efficiency and compliance – to name a few. Thanks to WeedAdvisor’s complete package of business solutions, we can offer reliable assistance in the aforementioned areas and more.

 

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