Canada gears itself for a billion-dollar marijuana industry as D-Day looms

Speculation is rife about just how big a slice of the marijuana pie will be devoured by Canada when it – in all probability – “goes green” on 7th June.

But needless to say, billions upon billions of dollars will be made when recreational weed becomes legal on that date when the green bill is presented for the vote by the Canadian Senate.

Considering that the Senate voted 44-29 in favor of the pro-cannabis bill in the first stage of the law-making procedure last March, it would appear more than likely that Bill C-45 will be given the nod in this final stage of legalization.

Figures being bandied about

The figures being bandied about are that marijuana sales in Canada could soon be generating a staggering $10.4 billion annually.

The country’s Parliamentary Budget Officer (PBO) has projected initial marijuana sales at about US$4 billion, while Deloitte puts that figure in the US$5.3 billion region. These are the projected sales of the recreational market only and do not include Canada’s medical marijuana market which has been legal since 2001 with a reported annual turnover of $567 million.

Comparing apples toapples?

To attain these projections, Canada is being compared with Colorado’s weed industry that reached US$684 million in its first year. Would the late John Denver be singing “Rocky Mountain High” about these predictions, one wonders?

According to the Colorado Department of Revenue (CDOR), weed sales during the first quarter of 2018 reached $280.5 million, with a further $88.1 million generated with the sale of medical cannabis. This combined total puts Colorado on track for record sales in 2018. Generally speaking, the first quarter of the year is never the peak sales period with July through to September generating the peak demand period. Taking this into consideration, it seems more than likely that Colorado’s marijuana sales will generate $1.6 billion in 2018.

In fact, the sale of marijuana has seen steady growth since 2014 when Colorado declared marijuana legal for recreational consumption. Total sales last year were $1.5 billion, representing a 15% increase over the previous year.

Industry pundits point out that comparing Canada with Colorado makes sense because:

  • Both legalized medical cannabis several years before taking the plunge into the recreational weed market
  • Both areas enjoy a huge amount of public support for legal weed

Comparing population figures

Last year, population figures were 36.3 million in Canada and 5.6 million in Colorado. By multiplying Colorado’s annual weed sales with Canada’s 6.5 times larger population, pundits arrive at the $10 billion+ annual marijuana sales figure in Canada.

This figure is regarded as realistic because industry pundits are expecting the Canadian market to mimic sales and trends set by Colorado.

What about the marijuana stock market?

As we previously stated on our website, now that Canada looks more than likely to give its proposed Cannabis Act the nod in June, Wall Street pundits are growing increasingly optimistic about their investments sky-rocketing in the near future. In fact, the predictions being bandied about estimate sales of marijuana growing three-fold over the next 24 months.

So in essence, what this means is that the Canadian marijuana stocksare also set for an explosive growth rate.

One just has to look at Canada’s two major pot growers – Canopy Growth Corp and Aurora Cannabis – that are gearing up to produce in excess of 400,000kg of marijuana annually, with predictions set at two million kilograms by the end of 2021. Both growers have undertaken massive expansion programs involving a combined 6.9 million square feet of production facilities.

Add to this the fact that the Bank of Montreal and GMP Securities recently bankrolled a $175million Canadian dollar deal with Canopy Growth for the release of five million shares on the stock market and one can understand why pundits are feeling bullish.

The Bank of Montreal’s decision could also pave the way for a marriage between the financial and marijuana industries. Banks, until now, have shied away from any involvement with theweed world for fear of stepping on federal toes.

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