Times are tough in Quebec's cannabis industry The newspaper was able to list a dozen companies that have gone bankrupt or are in serious financial trouble, including the last on the list, the Fuga Group of Stoneham-et-Tewkesbury in the state capital.
In Quebec, there have been six corporate bankruptcies in the cannabis production and processing market since 2021, including four in the last year alone.
Some bankruptcies, such as those of Zenabis in Montreal ($114 million) or Navaya in Boisbriand ($35 million), are in full swing (see table). This does not include the ten companies that are subject to a construction mortgage because they have still not paid their suppliers.
- Listen to the press review commented by Alexandre Dubé above QUB:
The problem companies are currently facing is related to a lack of liquidity, according to Pierre Leclerc, president and CEO of the Association québécoise de l'industrie du Cannabis (AQIC).
“This is a phenomenon we saw in the western part of the country and Ontario early last year. We thought Quebec would be spared because we arrived a little late. Unfortunately we are not. “A significant number of companies are currently in financial difficulty,” he admitted.
Photo Stevens LeBlanc
Competition on the black market
According to Mr Leclerc, it is currently extremely difficult to sell products at a profit due to competition on the black market and the tax burden on producers.
“As soon as we say the word cannabis, we are excluded from any government policies and programs. This means that 100 percent of the money injected into the system comes from private capital.”
Several companies are publicly traded, but in Quebec the vast majority of companies in this space are private, he says.
“So they are not able to finance themselves. You don't have a line of credit. You don't have any loans. They have no mortgages on the buildings. Everything is paid for with equity. So you see the strain on businesses when they cannot have banking facilities to offset the fluctuations that they face,” he explained.
The producers also criticize the rigidity of the distribution system of the Société québécoise du Cannabis with which they do business.
“In real life, if you get another product call in six months and you get demoted, you're not selling anything to anyone. There are no long-term supply contracts.”
According to Mr. Leclerc, there are about 75 active cannabis producers in the province. The emerging industry does not lose hope for improvement. The export market looks promising and we are confident that the development of new sectors will ultimately lead to concrete results.
Debt of the Fuga Group
Among the companies in trouble is the Fuga Group, which is mired in $3 million in debt and has therefore filed a notice of intent to make a proposal to its creditors under the Bankruptcy and Insolvency Code.
The journal was able to contact its president, Philippe Laperrière. The latter declined our interview request. However, he hinted that he was working on a revival.
“We are focused on restarting the company and making a proposal to creditors,” he said.
Groupe Fuga's letter of intent was registered on January 30, giving the company 30 days to prepare a proposal while being protected from its creditors. This deadline could be extended by the court.
–In collaboration with Philippe Langlois
Tough times for cannabis companies
Since 2020, many cannabis companies have been experiencing financial difficulties.
Here is the list:
Corporate bankruptcies
2023: 9327-2359 Quebec Inc. (Montreal East) $282,714
2023: 9477-5632 Quebec Inc. “ZENABIS ®” (Montreal) $114,671,231
2023: AMDJ-Canna Inc. (Amos) $2,282,630
2023: Navaya Inc. (Boisbriand) $35,906,696
2021: Bo Star Holdings Inc. (Montreal) $899,127
2021: Laboratoire Artémix Inc. (Notre-Dame-des-Prairies) $94,172
Notice of intention to make an offer
2024: Groupe Fuga Inc. (Stoneham-et-Tewkesbury) $3,018,197
2020: Tidal Health Solutions Ltd (Montreal) $17,753,510
Bill C-36 on arrangements with creditors
2023: Gelcan Company Inc. (Pointe-Claire) $26,744,722
2022: MYM Nutraceuticals Inc. (Vancouver) and
Trichomes JWC Acquisition Corp. & As. (Toronto) * $70,339,814
2022: Zenabis Ltd. “ZENABIS ®” & Als. $128,500,000
Proposal based on declaration of intent
2023: Corporation Terranueva (L'Assomption) $10,131,920
* Both entities are linked through the same folder
Source: iTerram Technologies Inc. (Terram.io)
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