Growing Cannabis In Canada

Canadian Cannabis Industry Braces for Government Shift

The Canadian cannabis sector, valued at over CAD $5 billion annually, is navigating unprecedented uncertainty as the federal Liberal Party prepares to elect a new leader. With Prime Minister Justin Trudeau announcing his resignation and opposition parties threatening a no-confidence vote, industry stakeholders warn that a change in government could derail critical reforms—including excise tax adjustments, THC potency limit revisions, and regulatory harmonization—for years. This article explores the political, economic, and regulatory challenges shaping the industry’s future, featuring insights from CEOs, policymakers, and retail leaders.

Leadership Transition Threatens Long-Awaited Cannabis Reforms

The resignation of Prime Minister Justin Trudeau and the Liberal Party’s leadership race (concluding March 9, 2025) have plunged the federal government into limbo. Industry leaders fear that an early election—potentially triggered by a no-confidence vote in late March—could reset years of advocacy efforts. Emma Andrews, CEO of Nextleaf Solutions, a leading cannabis extract manufacturer, emphasizes that regulatory progress hinges on stable governance:

“A new cabinet means starting from scratch. Whether it’s excise tax relief or raising THC limits for edibles, we’re looking at a 3–5 year timeline before meaningful reform.”

Key pending issues include:

1. Excise Tax Overhaul: Producers pay $1 per gram or 10% of product value (whichever is higher), straining margins for small businesses.

2. THC Potency Limits: The 10mg THC cap on edibles, criticized as “outdated” by retailers, fails to match consumer demand or U.S. markets.

3. Regulatory Harmonization: A proposed national excise stamp system to replace provincial variations remains stalled.

Three to Five Years: Realistic Timelines for Regulatory Momentum

In a January 24 fireside chat with The Dales Report, Andrews outlined her pragmatic outlook for the industry. Despite years of lobbying, she warns that leadership changes will delay progress:

“You can’t skate toward where you hope the puck will go. New ministers need time to settle, assess, and prioritize. Businesses betting on quick fixes won’t survive.”

Case Study: The Edibles Market Struggle

Canada’s edible market, projected to reach CAD $1.2 billion by 2026, is hamstrung by the 10mg THC limit. By comparison, U.S. states like Colorado allow 100mg packages, driving cross-border demand. Andrews argues:

• Consumer Preferences: 67% of edible users seek higher doses for medical or recreational use.

• Illicit Market Growth: Strict limits push consumers to unregulated sources, costing Canada CAD $3 billion annually in lost tax revenue.

Excise Tax Inequities

A 2023 study by Deloitte found that 42% of licensed producers operate at a loss, with excise taxes consuming 25–35% of revenue. The Cannabis Council of Canada proposes tiered rates (e.g., 5% for small producers) to foster competition. However, with Parliament prorogued until March 2025, legislative action remains unlikely.

Proposed Regulatory Package in Limbo

A sweeping regulatory package—slated for finalization in late 2024—now risks indefinite delay. Key components include:

1. National Excise Stamp: Simplifying compliance for multi-province operators.

2. Packaging Reforms: Reducing plastic waste and labeling costs.

3. Medical Cannabis Access: Streamlining prescription processes for veterans and chronic pain patients.

Hugo Alves, CEO of Auxly Cannabis Group, notes that an early election could shelve the reforms entirely:

“If a May election happens, this package collects dust until 2026. Even if delayed, US-Canada relations will dominate the agenda—not cannabis.”

Health Canada’s Funding Crisis

Health Canada’s cannabis division faces a 15% budget cut under interim spending measures, exacerbating application backlogs:

• Licensing Delays: New producer approvals now take 18+ months, up from 6 months in 2020.

• Compliance Bottlenecks: 30% of amendment requests (e.g., facility expansions) require 90+ days for review.

Conservative Government: Cautious Optimism for Industry

While federal Conservatives have historically opposed cannabis legalization, retail leaders like Omar Khan (High Tide Inc.) see potential for pragmatism:

“Provincial conservative governments work with us—they see job creation and tax revenue. Federally, that logic could prevail.”

Conservative Policy Shift

• Alberta Model: The province’s private retail system (1,300+ stores) generates CAD $700 million yearly, demonstrating conservative support for economic growth.

• Tax Reallocation: High Tide advocates redirecting excise revenue to enforcement (combatting illicit sales) and public education.

Federal-Provincial Tensions

Despite federal delays, provinces like Ontario and BC are advancing reforms:

• Ontario: Permitting cannabis cafes (2025 pilot program).

• BC: Allowing farm-gate sales to boost rural economies.

Election Scenarios: From Policy Gridlock to Progressive Reform

Scenario 1: Liberal Minority Survives

If Trudeau’s successor retains power, priorities include:

• US Cannabis Diplomacy: Aligning with potential federal U.S. legalization.

• Social Equity Programs: Expanding grants for Indigenous and minority-owned businesses.

Scenario 2: Conservative Majority

A Conservative win could bring:

• Fiscal Restraint: Reduced Health Canada funding, slower licensing.

• Tax Compromises: Lower excise rates to counter illicit markets.

Scenario 3: NDP-Led Coalition

An NDP government might prioritize:

• Public Cannabis Retail: Expanding government-run stores.

• Medical Access: Subsidizing cannabis for low-income patients.

Strategic Advice for Cannabis Businesses

1. Diversify Revenue Streams: Invest in white-label manufacturing or international exports.

2. Lobby Collectively: Join industry groups like Cannabis Council of Canada for unified advocacy.

3. Prepare for Delays: Assume no major federal changes until 2027–2028.

Conclusion: Patience Amid Political Chaos

The Canadian cannabis industry’s future hinges on navigating political instability, regulatory inertia, and global competition. While CEOs like Andrews and Alves brace for prolonged delays, retail innovators like High Tide Inc. are cautiously optimistic. As Omar Khan concludes:

“We’re not just sellers—we’re job creators and taxpayers. Any government, conservative or liberal, will eventually recognize that.”

With the next election set for October 2025 (or sooner), stakeholders must balance realism with resilience—a defining challenge for Canada’s cannabis landscape.