Canada's regulation of marijuana trade met with hope for future growth

For the past several years, Canada wrestled with marijuana legalization against the landscape of its black market. To this day, regulatory measures tussle with entrepreneurial aspirations.

According to Bloomberg, the aspirations of a pot paradise for Ontario isn't all it's cracked up to be. In the case of J.P. Mariwell, pot growers can't have tourists openly walk around their fields out in the open because the rules dictate no tours are allowed and shop windows have to be blocked, so the young people don't get any ideas by peering inside. "I just wish that customers could touch it or smell it," said Theresa Robert.

According to a report, "In just over two short years, we've reached 1,000 Authorized Cannabis Store locations across the province," the Ontario Cannabis Store (OCS) said in a statement last month.

At 5000 plants for J.P. Mariwell, hitting $7.8 million in sales is double their initial start-up costs. But it also requires a "provincially-run distributor" to get on board with the growers to stock their goods, and that'll require more licensing fees.

Farmgate stores like the one opened up by Sensi Brands Inc. in a train boxcar have strived to meet Ontario's rules. They hope to innovate the pot industry. "You have to put an excessive amount of money into the business in the hopes it will be approved," lamented Theresa Robert.

George Smitherman runs a marijuana lobby group in Canada. Given the current regulatory landscape, he expressed enthusiasm to Bloomberg about how growers will create their path forward for the industry. "There are so many creative, gutsy, courageous people. These are hard-core entrepreneurs."

For the March 2021 reporting period, Canada sold nearly 11.6 million packaged units of cannabis for medical and non-medical purposes. StatsCan showed Canada's recreational market stood at $2.62 billion last year, up 120 percent from 2019. The year ended with roughly 1,400 licensed cannabis stores operating in Canada, up from about 760 shops at the end of 2019.

In a research note, Stifel Analyst Andrew Carter said that he projects Canadian cannabis sales to climb to $4 billion in 2021, with additional growth expected to come from Ontario. "The Canadian market's development has trailed expectations, but the acceleration has really taken hold in 2020 with the expansion of retail access as well as the rollout of second-generation products," he said.

The StatsCan data showed that Ontario continued to lead the country with $727.5 million in sales last year, followed by Alberta with $573 million cannabis products sold. In December, Canada sold almost $300 million of cannabis products, up 14.3 percent from the prior month. Once extrapolated, that shows the country's market is operating at an annualized run rate of $3.58 billion.