By / January 5, 2020

The Canadian cannabis market goes from euphoria to disappointment

Canadian cannabis was a big hit in the fall of 2018 during legalization. This enthusiasm was dampened by chaotic management which allowed the illegal market to flourish.

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A “gold rush” ignited the legal Canadian cannabis market

On Oct. 17, 2018, when Justin Trudeau’s government made Canada the first G7 country to make cannabis production and sale legal, it was a gold rush. Investors and individuals set out to conquer an industry that promised exponential growth.

The shares of Canadian cannabis companies already active in the medical cannabis market skyrocketed on the stock market.

For example, Canopy Growth, a global giant based in Ontario, has seen its capitalization reach nearly $15 billion (CA$20 billion), with its share price rising from $1 in 2016 to $65 in September 2018.

The eight largest national companies in the sector including Aurora Cannabis, Aphria, and Quebec’s Hexo, are benefiting from the same enthusiasm.

Canadian cannabis forecasts were optimistic during legalization

This craze is also based on very optimistic forecasts. In 2015, a study published by Deloitte estimated that the Canadian cannabis market “excluding medical cannabis” would be worth $6 billion annually.

“Everyone wanted to be part of it,” recalled Mickael Dufresne, President of the Hessen trading firm in October 2019. “Everyone; even those who were not aware of the risks inherent in an emerging industry.”

However, the euphoria has largely dissipated. The Canadian cannabis market is now emerging for what it is: a buoyant sector for the long term, but one that will still experience a few ups and downs before companies reach interesting break-even points.

A person lighting a joint to represent the Canadian cannabis market
Canada has still yet to expunge the illegal market with legalization causing monetary concerns for cannabis companies. (Source)

In truth, Canopy’s inventory has plunged 50% in a matter of months, to at present stand at around $27. In the autumn, Hexo determined to withdraw its monetary forecast for 2020, inflicting its title to drop to $2.11 in mid-November, and proceeded to dismiss 1/4 of its workforce.

The nationwide market sees a slow realization

The expectations had been actually unrealistic as to the rapid earnings to be anticipated, and the investments to launch on the nationwide market had been undoubtedly undervalued.

However, a number of exogenous elements additionally clarify the tough start-up of the sector.

To promote authorized cannabis, the shops are inconsistently distributed all through the territory and their general quantity is much under targets. Alberta opened 300 stores in a single year, while Ontario, with its 13 million folks, opened only 25.


(Featured image by sebastiaan stam via Unsplash)

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First published in Le Monde, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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