By Jen Skerritt
There’s one bummer question haunting all the marijuana businesses popping up between British Columbia and Newfoundland.
How much do Canucks like weed, eh?
A
year before recreational cannabis is expected to become legal in
Canada, there’s an explosion in companies cultivating the stuff. At
least 10 marijuana outfits have new listings this year on the TSX
Venture Exchange and Canada Securities Exchange. Some 51 enterprises
have gotten the green light to grow pot, and 815 applicants are in the
queue. All told, it could be enough to raise the country’s raw-weed
output more than tenfold.
This is where skeptics see froth. “If you ask people today
why they don’t use, it’s a small percentage who say ‘because it’s
illegal,”’ said Neil Boyd, a criminologist at Simon Fraser University in
Vancouver. “In many respects there might be an overestimation of
demand.”
Long-time users and growers insist he’s wrong, but investors aren’t so sure. Producer MedReleaf Corp.
tumbled as much as 28 percent last month in the worst debut for a
Canadian IPO in 16 years amid concern pot stocks are overvalued. Shares
of Canopy Growth Corp., the country’s first billion dollar marijuana start-up, are down 21 percent in the past three months.
The
North American Medical Marijuana Index, which tracks leading cannabis
stocks in the U.S. and Canada, has plunged 21 percent since Prime
Minister Justin Trudeau’s government in April unveiled its plan to legalize the drug by next July, 16 years after Canada permitted it for medical use.
Of
course, some of the decline may be attributed to the situation in the
U.S. Many in the Trump administration, Attorney General Jeff Sessions in
particular, are no friends to the industry. For Canadian companies, the
risk isn’t political.
“There seems to be a little bit of investor
fatigue,” said PI Financial Corp. analyst Jason Zandberg. He said
they’re having trouble differentiating between the producers, new and
old, and what might give them competitive advantages.
That’s to be expected, according to marijuana bulls, in a
brand-new market that hasn’t even arrived yet. Parliament still has to
pass the recreational law (though there’s little question it’ll do so).
Then the federal government will have to write rules on taxation, and
each province will have to decide how to regulate distribution.
“Nothing
is going to be perfect right off the hop,” said Jon Bent, a licensed
medical marijuana grower who has been cultivating plants on his 11-acre
farm outside Winnipeg for five years. “It’s baby steps -- and the
industry is moving quickly.”
The question is whether it’s going
too quickly, considering the variety of estimates about how much
recreational weed Canadians will end up regularly ingesting. Some
educated guesses are that about 15 percent of Canadians partake now,
legally and otherwise. That’s around 5.4 million people, roughly the
population of Colorado, which gave the nod to recreational marijuana in
2014. Medical and recreational sales there rose 56 percent last year, to
nearly $1 billion, according to Cannabase, operator of the state’s
largest market.
One projection,
from the Canadian Parliamentary Budget Officer, is that 4.6 million
people age 15 and over will use cannabis at least once and consume
655,000 kilograms next year, and that 5.2 million will be doing so by
2021. Other reports peg future recreational consumption at 420,000
kilograms a year with sales reaching C$6 billion by 2021, Canaccord
Genuity Group Inc. said in November. For its part, the government agency
Health Canada anticipates a mature medical marijuana market will be
around C$1.3 billion.
That could underestimate the number of
Canadians who will refuse to buy from corporate weed growers, said Chad
Jackett, 38, who runs a medical marijuana dispensary in Squamish,
British Columbia, and uses cannabis oil everyday to treat nerve pain.
His concern is that new regulations will sideline the independent
farmers who advocated for the plant for years, and grow small amounts.
“I will definitely not be using anything” from one of the big outfits,
Jackett said. “If I don’t have enough of my own then I’ll be getting it
from somebody else whom I trust.”
Underscoring how confusing it all is, a few alarms
are being sounded that there won’t be enough to pass around on Day One.
In fact, Colorado faced some shortages of legal supplies in the first
year. A similar rush emptied shelves in Nevada, where sales started on
July 1.
By 2015, Colorado had the opposite problem, according to
Denver-based researcher Marijuana Policy Group, with supplies
approximately 51 percent larger than demand. The average price sought by
wholesalers for recreational flower has fallen 52 percent since lawful
sales began, according to Cannabase.
None of this has dampened enthusiasm in some quarters
in Canada. MedReleaf has raised C$100 million, all of which is going
toward expanding capacity, said Chief Executive Officer Neil Closner.
He
said the disappointing IPO was due to a general market slowdown and
“not a reflection of demand for our product.” Likes others in the
business, he is confident Canadians will be keen enough to lawfully
imbibe that the blossoming industry will be supported.
Bent, the
pot farmer outside Winnipeg, is just as upbeat. Surveying part of his
crop, in a room brimming with 30 bushy plants ripening under the glow of
hot lamps, he said the oft-misunderstood reefer is definitely going
mainstream. Even his cousin, a “religious librarian,” became a convert
after experimenting in Denver, he said. “These are people who would
never, ever try it” if it were illegal.
“It’s really gaining popularity and really starting to lose that stigma,” Bent said. “I see a lot of money being spent.”
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