The Canadian Cannabis Market - My Perspective
I have been watching this develop from the day Trudeau got elected; this is what I have gathered. I am no expert, but I am invested in this space and ultimately try to read all the positives and negatives that come out, that way I keep my head and try not to think I am going to be a millionaire (not possible, but its nice to dream...). I got in early so am not freaking out like many investors who have gotten in this year near the peaks and I am also not a day trader, I am holding onto this investments for at least a year until after it is fully legal.
To start; the one thing I know for sure, there is a demand for pot. I live in Vancouver and in my neighborhood there are 3 shops on Commercial drive which sell 'medicinal' cannabis and I have never been across one, at any time of day, where there are not at least five people in line waiting to be served. This may be a skewed view, as Vancouver has always been known for its 'liberal attitude', but I have also heard very similar things from people in Toronto before they all got shut down.
I am writing this in the perspective of someone who is considering opening a brick and mortar site to sell cannabis once legalization happens. I am also synthesizing some of the articles and information that has come out about the Canadian approach to legalization.
- GOVERNMENT STUFF -
It has been about a year of the proposed bill has passed through stages in the government, the bill has now been passed to the Senate, which some people are fearful of, as they have been known to slow things like this down to turtle pace. The second reading was last week and apparently, that was pretty quick for a second reading. I am no Canadian government expert, I just go by what I read on Reddit, and take EVERYTHING with a massive chunk of salt.
The Senate usually breaks over the holidays and we will get a better idea of if they are going to meet the July 1st deadline after the holidays. Politically I think it will be suicide if the Liberals don't get at least SOMETHING passed by July 1st. Whether that's a) completely open retail; or b) online only, with the complete legality of homegrown and possession, that's yet to be determined. I am not totally sure the structure of the senate and how much pull parties have in influencing them (are they elected? are they members of parties...I did not pay too much attention in Social Studies), but it sounds like many of the members are for the bill, they just like to be thorough...as good Canadians...
The federal government has left it up to each province to figure their own distribution out. Ontario is going to the dreaded LCBO model, with other provinces (MAN, NB) either adopting a hybrid or completely private model. BC has come out with a model which is exactly like our liquor distribution; meaning stores can order the product and sell it privately. This has been met with a lot of raised eyebrows (fucking everything is in this city) as people think this will obviously inflate the price and keep the black-market intact and alive. Alberta's plan seems a bit different but kind of the same. Many people were for it on the subreddit, so that's a good sign, or maybe its just the difference between BC users of Reddit and Albertan users of Reddit, who really knows.
At the end of the day, a business owner is going to have to order the product from licensed producers (good for me, as an investor) but may be bad as a business owner. The 1$ tax on every gram has been met with some resistance. People don't think its fair, but for someone who is looking to sell to tourists, don't think that really matters. In my opinion for the business owner; what is going to matter is how much you are going to expect to buy the product for, and what margins will be. One company I have invested in (from Alberta, ACB) has their cost per gram right now at about 2$. With intentions of it going down once that massive facility in Edmonton is completed. Maybe one could project based on how much it costs to produce a pint, bottle of wine, or bottle of beer, and then what that product looks like after it goes through all the government bullshit...to project how much you'd be looking at retail wise, not sure if that's a good parallel, but something you'd have to consider.
- The Demand -
There have been lots of numbers thrown around and I don't really trust any of them to be honest. An article that came out a couple years ago said only 20% of Canadians consume Cannabis but 30% would if it were legal . I really question the legitimacy of a study like this, what kind of stoner answers studies... But basically, every article that has come out after has sourced this number as "10 million Cannabis consumers in Canada" with a potential of 2 billion in sales.
Lately, these numbers have been a bit higher, but who knows who is pulling the strings getting the hype built up. A recent article was published today that the market will triple by 2021. Again questionable; but when they are saying people are leaving major firms to get into this market, it makes you think. The Canadian companies have expanded across the globe, settling in places which have legalized for medicinal purposes such as Germany, but will probably follow Canada in the legalization for all eventually.
- The Vision -
Personally, what I've always thought would work, is a dispensary set up like a winery, more than a stoners basement. A lot of the dispensaries here still have that "trippy vibes" kinda thing going on. A couple that I have seen in Washington seem a bit classier and I think that one place it would fit well is in a tourist town (Banff, Jasper, Whistler, Muskoka's). The big cities will have distribution deals with big players, but being able to move into a space which has no distribution will be key for an entrepreneur. Really though, with a product like pot, you could easily set up a desk and have the product behind you for the first couple years and it will sell. But one day you could grow into a place that is fancy enough. I feel if you are the first to open the door, you could also be the first to react to the changes as you will have the distribution channels already set up. This will definitely be a trial and error process for the government, as I think the demand will require them to adjust certain rules such as the "no branding" policy they have right now.
TL:DR; for the investors, be careful, everything is peaking like crazy right now, hitting unprecedented highs, I'd be super nervous to be a day-trader with these guys.
For the entrepreneurs: its tough to say what this is all going to cost, and how you are going to get your product. Best of luck to all of you!