In January 2024, the Israeli Commissioner on Trade Levies lodged allegations of price dumping against 10 Canadian cannabis companies importing flower into the country. As a global market connector, CCX and GCX is the trusted source of the wholesale price of cannabis. Our data was provided upon the release of the initial complaint. Our goal is to bring transparent pricing and standardization to the global industry. The following article written by Arnau Valdovinos explores the investigation’s findings, the economic implications of the tariffs, and potential strategic responses by Canadian businesses.
Despite a Biased Investigation, Israel is Likely to Impose Tariffs
Last January, the Israeli Commissioner on Trade Levies launched an investigation into ten Canadian companies accused of selling cannabis flowers in Israel for lower than the Canadian spot price. The recently published preliminary results found dumping rates ranging from 63% to 369%, leading to the decision to impose tariffs to reset import prices equal to production costs plus an 8% profit margin.
Canadian producers increased their market share of imports into Israel from 58% in 2020 to 85% in 2023. According to the investigation, aggressive pricing and sales strategies alienated local companies: oversupply and falling prices forced Israeli producers to sell below production costs and scale back operations, leading to financial distress, an economic downturn, and losses in investment and jobs.
While the analysis of the Commissioner reviewed the accounts of Organigram, Decibel and Pure Sunfarms, the investigation suffered from multiple biases:
- Insisting on comparing bulk wholesale prices into Israel with packaged sales to Canadian retail. The assumption is that LP margins account for 75% of the retail price — however, LPs receive no more than 1/3 of what consumers pay.
- Canadian producers actually trade at a premium in the Israeli market: as indicated by the CCX spot price, 2023 bulk transactions in Canada averaged CAD 0.96/g, compared to CAD 2.1/g for Canadian products into Israel.
- Oversupply in the country has broader causes: in 2022, Canada imported 20 tonnes (30% of supply), while local LPs produced 43 tonnes. Inventories surged to 19 tonnes, with 12 tonnes of product destroyed.
- Israeli patients appear to prefer premium imported products, as evidenced by the higher prices of Canadian products compared to local ones.
Despite all indications pointing to a flawed investigation, no evidence of creative accounting by the investigators is likely to alter a decision that has already been made. Adapting to the new reality is now paramount.
The Impact of New Trade Barriers: Strategic Adaptations for Success
Israeli tariffs reflect a broader trend capable of reshaping the global landscape for cannabis trade. Australian LPs have been pressuring the government to prioritise domestic supply. In Germany, the UK, Poland, and France, local producers are scaling up operations, potentially anticipating similar demands to remain competitive. Moreover, beyond cannabis, trade protectionism is the zeitgeist of the decade, as tariff wars between China, the US, and the EU span across economic sectors.
The imposition of tariffs aims to shield the Israeli industry from price dumping, but it could result in higher prices for local patients and a decline in product quality. Hopes for local cultivators to regain competitiveness could be trumped by an inflow of cheaper yet higher-quality produce by nations like Portugal, Uruguay, and South Africa, poised to fill the gap left by reduced Canadian imports.
Canadian companies have multiple avenues to respond:
- Firstly, depending on the tariff structure, trade with Israel might remain profitable within the current margins, particularly for companies that have sunk compliance costs to enter the market (e.g. CUMCS-GAP certification).
- Alternatively, Canadian LPs could redirect efforts towards more lucrative and growing markets where products remain highly valued: Australia, Germany, Brazil, Poland, UK. Israel is very mature and approaching its potential anyway.
- Another potential strategy for Canadian companies is to explore nearshoring options to circumvent tariffs, by partnering with processors in unaffected countries such as Portugal, in spite of increased fulfilment costs.
Despite challenges from protectionism in the coming years, the upward trend in global cannabis trade is expected to persist. Demand continues to expand year after year, progressive regulations are slow to come but do indeed come, and more countries are developing their domestic markets. Canada remains the top global cannabis exporter —this is unlikely to change— but companies must adapt strategically to maintain their competitive edge.
Arnau Valdovinos
As the Founder and Principal Consultant of Cannamonitor, Arnau connects the dots of the global cannabis supply chain through independent insight on the international market. An evidence-based drug policy reform advocate, since 2018 Arnau has provided intelligence and actionable advice to medicinal, recreational, and CBD companies across 5 continents and 20 countries.
