‘Reckoning coming’: Cannabis cultivators, applicants near 1,000 in Canada

More corporations than ever are lining as much as be licensed hashish cultivators in Canada regardless of an more and more aggressive market outlook, in accordance with new knowledge from the nation’s regulatory physique for hashish producers.

As of Dec. 31, 2018, virtually 840 website purposes have been in the licensing pipeline, Health Canada informed Marijuana Business Daily.

That’s a 30% improve from August, when 588 applicants have been in the queue.

Currently, 145 approved cultivators, processors and sellers are licensed underneath the Cannabis Act.

Echelon Wealth Partners analyst Russell Stanley estimates the Canadian market alone can’t help all the potential cultivators in the pipeline.

“Within Canada there are over 130 licensed producers, and we don’t need 130 of anything for the Canadian market on its own,” he stated.

“There has to be a reckoning. It’s a when and not an if.”

Analysts anticipate the scarcity of licensed product all through the nation to show to oversupply in two to 5 years.

That means new entrants into the market – and even most present cultivators – will want a technique past cultivation.

In a current report for institutional buyers, CIBC World Markets predicted that solely a handful of gamers will come to dominate the worldwide hashish market, and only a few corporations will stay as much as expectations.

The report estimates hashish gross sales in 2020 shall be roughly four billion Canadian dollars ($three billion) with cumulative earnings earlier than curiosity, tax, depreciation and amortization (EBITDA) of roughly CA$1.2 billion.

Hurdles, differentiation

Experts say differentiation shall be a necessity for brand spanking new entrants, who will face fierce competitors and tight margins from present producers ramping up cultivation, new micro-cultivators coming on-line later this yr and licensed outside manufacturing getting into the marketplace for the primary time.

New cultivators can anticipate to hit obstacles quicker than licensed cultivators in years previous, in accordance with Khurram Malik, a associate with Toronto-based monetary advisory agency Jacob Capital Management.

One of these hurdles might be capital.

Even although marijuana companies in Canada raised a document CA$11.96 billion final yr, new corporations with a give attention to cultivation might face a capital crunch sooner.

“That initial money is hard to find now because people are not investing in grow ops (in Canada) anymore,” Malik stated.

“If I was a Canadian grow op with a Canadian strategy looking to raise money in Canada to expand, that’s going to be challenging,” he stated. “Whatever inner projections you must generate money stream, you’re in all probability not going to hit them until you’re one of many uncommon breed.

“It took the big guys years to figure out how to grow anything at scale and quality, and they’re still trying to figure it out to some degree.”

Malik stated differentiation shall be important to survival, whether or not that comes right down to creating distinctive mental property, model technique or taking a worldwide – relatively than a Canadian – outlook.

Canada’s guidelines on edible hashish, infused drinks, extracts and topicals will take impact earlier than Oct. 17, 2019, and companies are already partnering as much as capitalize.

Matt Lamers might be reached at [email protected]

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