The legislation of the cannabis industry operations in Canada has now passed its second year. The main goal of the country’s government when it comes to allowing manufacturers and dispensaries to operate locally was to combat the black market.
As per the law, 30 grams of this is only allowed to be possessed by a person who is 18 and above in public. The plants or oils should only be purchased from legal and licensed retailers. However, home grows are allowed as long as only 4 plants are grown per residence.
The seed or seedlings should only be purchased from licensed platforms. Many home growers choose i49 for this as the seedlings can now be ordered online. Such seedlings are easier to grow and wouldn’t take a long time to grow as well.
Canada’s reason to allow the operations of this industry is quite different from what the main objectives are of the United States. The US also would like to combat the black market, but many of these states are also focused on tax profits and how they could benefit from the growth of the market.
Canada’s objective to only battle the black market may be the reason why this industry appears to be struggling. During its first year, there were many observations that people pointed out and wanted to improve.
Mackie Research Capital shared their observations to investors during the first year of legislation. The company observed how there seemed to be a limited supply of products. Many products easily sold out and take a while to get replenished.
Mackie Research also sees that the prices of the products are not competitive with the black market. This is why there are still many people who are still buying from the illegal market. An interview with a cannabis enthusiast explains why people are still getting their supplies outside the legal market.
The interviewee said that the lack of supply makes people disinterested in buying from legit dispensaries. Because there aren’t many supplies, the lines in dispensaries are usually long. Lining up takes a lot of time as IDs are still being checked too.
Generally, it’s also cheaper to buy products in the black market. During the first year, edibles are not yet legally distributed and so many are left with the choice to create their own edibles and some would also sell them privately.
It was just in October of last year when edibles and other products like ointments and topicals became legal. However, it took until December when manufacturers released these products. The same observations also applied to this.
It appeared that the manufacturers were not prepared for the demand of these products as supplies also easily run out. This could be another challenge the industry will face as more products are now allowed to be sold to Canadians.
The truth is that the share prices of the industry are tumbling down and many analysts are saying that there may be Canadian companies that might have to file for bankruptcies this year. Some producers are already even looking at their options to exit the market.
They are looking at having to be bought by their competitors. Some are already selling their equipment and greenhouses at discounted prices just so they can still get some money from the failing business. However, despite how some businesses are already prepared to sell out, experts say that it will be tough to sell such business right now.
Greg Engel, the chief executive officer of Organigram, a producer in New Brunswick said, “But in most cases, those are assets you don’t want to take on. They’re not efficient. Certainly, there’s going to be additional insolvencies.”
An industry expert named Rishi Malkani also shared his thoughts about how businesses will be doing this year. According to Malkani, “There’s a lot of trepidation, understandably, and I think it’s going to be some time before the capital markets come back.” He is thinking that there may be more than a dozen businesses that may face significant cash crunches in the next few months.
Canada has around 200 businesses in this industry. The biggest producers or manufacturers are even reporting losses, especially during the last quarter of 2019.
Now, there are still experts who are saying that the release of more products like the edibles could make a difference this year. This is as long as companies speed things up in terms of production and become more competitive with the black market.