The article looks at smaller black market growers, as well as the emerging market for legal producers:
Canadian businesses are anticipating a windfall. A 2016 Deloitte report estimated the legal Canadian marijuana market will be worth $18 billion annually.
It identifies a few of the issues that we have talked about before at the Seed Investor, mainly the ideas of consistency of product, anticipated demand, and process of getting a licence to produce.
The black market growers interviewed in the Times article have echoed a concern with consistency.
As Betty Cracker, a Montreal based black market grower says:
“I want to evolve and give the best product, which means testing and consistency,” she said. “Right now, it’s very hard to be consistent.
This isn't just a problem with black market growers, large growers also have to be concerned about the consistency of their product as well.
That's why growers who are positioned with a strong growth strategy and stringent controls over the growing process will be the big winners in legalization.
(Interview with ABcann CEO Aaron Keay on their strategic approach to their growth technique)
The Times pointed out the growing anticipated demand ahead of legalization is a concern:
Just over a third of the 54 licensed producers — growers and sellers who trade in medical marijuana, and will be able to do so for the recreational market once it is legalized — are publicly traded companies. The three biggest have a combined market cap of over $2.5 billion. Some are internationally owned, and most if not all have an eye on the recreational market.
The reason is the demand for cannabis, which is expected to be at least 600,000 kilograms a year — about 1.32 million pounds — according to the Deloitte study. (The country’s 54 licensed producers currently produce about 20,000 pounds of dried marijuana a year.) With more than 12 percent of Canadians 15 and older (nearly 3.5 million people) reporting to have used cannabis in the past year, according to a 2012 report, many people are worried about a bottleneck in supply.
Nevada recently had to adopt emergency rules within the first week of recreational legalization to keep up with demand. Growers must be able to scale to large volume production while remaining consistent.
(ABcann Global Corp. (TSX.V: Abcn) (OTCQB: Abccf) Moves Closer to Kimmett Expansion with TSXV Approval of Cannabis Wheaton Investment)
OBTAINING A LICENSE
The Times article also points out the difficulty in getting a license.
The challenge for anyone wanting to go legal is getting a license to do so. Becoming a licensed producer is a marathon exercise in bureaucracy that can take up to three years.
Growers who received their license in the first wave had to go through a very strict process to ensure the highest quality of growing practices.
Now in anticipation for even greater demand then first thought, the Canadian Government is trying to streamline the approval process:
The federal government is keenly aware of the problems. Health Canada recently streamlined the licensing process, allowing for increased growing capacity among existing license holders and shorter delays for applicants.
The problem with streamlining the process is that new LP's (Licensed Producers) aren't being held to the same standards that older LP's were.
Investors would be wise to look closely at companies that went through the initial approval process.
Here at the Seed Investor we've been saying that there is one Canadian grower that is poised and ready to overcome all of these issues. That company is ABcann Global (TSX.V: ABCN OTC: ABCCF).
It's based in Canada and it was one of the first companies to obtain an official legal marijuana production license.
It has the facilities and capital to expand production and meet demand and is ramping up production now.
It has more than $43 million in its war chest to expand and it's just broken ground on their second marijuana growth facility of 100,000 square feet.
It is a technological powerhouse that has the growth techniques to produce quality consistent product at a large volume.
See why we think ABcann is Canada's strongest grower.
Read the full NY Times article here