More than a year ago, Canada made recreational cannabis legal. So why are people still buying it on the black market? When Canada legalized marijuana just over a year ago, it appeared like anyone who was anyone wanted to interrupt into the market.
The media nicknamed the frenzy Canada’s “green rush”, as investors like Snoop Dogg and therefore the former head of Toronto’s police clamored to urge a slice of the multi-billion-dollar-pie.
But just like the gold rush of the 1850s, the luster would soon fade, leaving prospectors within the dust.”It didn’t take a rocket scientist to acknowledge that these stocks were trading on fantasy and not on fundamentals,” says Jonathan Rubin, CEO of the latest Leaf Data Services.
With decades of experience within the energy commodities markets, Mr. Rubin saw the legalization of cannabis in states like Colorado and California within the US (and later Canada) as a “once during a lifetime” opportunity to urge in on the bottom floor of a brand-new commodity.
“I had this epiphany that this is often getting to be a commodity a bit like the other commodity,” he told the BBC.
What that meant was that just like the price of wheat or pork, the wholesale price of cannabis was getting to fluctuate with the market. So rather than investing within the cannabis itself, Mr. Rubin started New Leaf to trace the worth of cannabis in states where it had been legal. Investors et al. within the industry buy access to the present data.
Canada becomes the second country within the world to legalize cannabis Canada cannabis legalization: ‘We know the planet is watching this business model has given Mr. Rubin a stimulating viewpoint of how the market has unfolded.
In Canada, he says, the rollout has been disappointing.
“They haven’t had the expansion in sales and earnings that they’ve envisioned,” he said. “I don’t need to mention it is a failure, but there’s definitely frustrations.”
Wholesale prices have dropped by about 17% since New Leaf started tracking data, which has kept profit margins tight for producers.
Sales have also slowed, consistent with Statistics Canada. It’s led to a rollercoaster ride for the stock prices of publicly-traded cannabis companies.
In May 2018, Canadian producer Canopy Growth made headlines when it became the primary marijuana company to list on the NY stock market. Six months later, the stock price doubled when it hit a high of $52.03 (£39.77) a share. Now, the stock price is back to where it had been, and their competitors have suffered similarly drastic losses.
There were early signs of trouble.
When cannabis became legal on 17 October 2018, there wasn’t enough supply to satisfy the demand. Long lines and backlogs of online orders plagued consumers. Producers weren’t sure what strains would be hottest were, and kinks within the distribution chain were still being ironed out.
“Trying to know what strains we should always grow, in what formats and what quantities – we did an excellent job but we didn’t nail everything,” says Canopy president Rade Kovacevic.
A patchwork of provincial laws has also made it harder to urge products to consumers. While it is easy to shop for cannabis in some places, in other brick-and-mortar shops are few and much between.
This is very true in Ontario, Canada’s most populous province. bureaucratic procedure and a cap on the number of cannabis shops have made rollout slow. Retail licenses were awarded by lottery, and therefore the province held the number of licenses at 24, to serve a population of 14.5m.