MJBizMag September 2020 - 14

Trends&HotTopics | Matt Lamers
Is Canada Up for Grabs?
V
iewing Canada's cannabis sector
through the lenses of publicly
traded companies presents a
bleak view of the industry: Market leaders
are struggling to rein in massive
losses while provincial regulators are
burdening enterprising businesses.
The reality, however, is quite
different.
Recreational cannabis sales
have consistently posted impressive
month-over-month gains since
legalization, and regulators across
the country have generally done
what they said they'd do.
Even Canada's medical marijuana
industry, which many wrote off on the
eve of adult-use legalization, has fared
well, losing only 4.8% of its registered
consumers since recreational cannabis
sales began.
But if things are going well for the
broader market-and the country is
home to the largest centrally regulated
medical cannabis industry in the
world-what's the problem in Canada?
Mistakes Made
Two major errors made by some of the
country's larger cannabis businesses
offer lessons as well as opportunities
for competitors.
The first mistake cannabis
companies made was blaming
regulators and lawmakers for their
poor financial results. The law
establishes the rules of the game while
regulators set the boundaries where
businesses get to play. Complaining
about the rules is probably a waste of
time and energy. Rather, businesses
would be better off competing where
they're allowed to compete.
For example, Hexo Corp. and
other Canadian license holders have
repeatedly blamed their poor financial
performances on Ontario's slow rollout
of legal stores-even though the
province is on track to open exactly the
number of stores it promised in 2018.
The other mistake made by large
producers was an executive-level
fixation not on customers but on
investors. That focus contributed
to massive overinvestments in
greenhouses, as that was what
investors wanted to see at the time.
Marijuana Business Daily reported
in January 2018 that Canadian
producers had already bankrolled
enough greenhouse and indoor
space to meet demand. But those
investments didn't stop for another
year. Now, those properties are being
unloaded at significant discounts.
A more customer-centric approach is
finally becoming normalized, but only
after large Canadian producers spent
three years chasing imaginary markets
around the world, essentially wasting
their once-extensive capital holdings.
Now that most of Canada's largest
marijuana companies are in full
withdrawal-essentially trying to slashand-burn
their way to profitability with
dwindling capital reserves-industry
observers have to wonder: Is Canadian
market share up for grabs?
Until recently, the market share of
large Canadian producers appeared
locked up. But navigating the
changing market will require these
players to fend off competition while
simultaneously eliminating thousands
of jobs, stanching their bleeding
coffers and turning over most of their
executive teams.
Forget about expansion-most of the
current Canadian market leaders are
in survival mode. Smaller players who
grew their businesses responsibly now
sense opportunity.
14 Marijuana Business Magazine | September 2020
Large producers face declining market share and cash reserves as competitors eye their turf
Door Open
The Canadian market is also in the
midst of a " Cannabis 2.0 " rollout,
vastly expanding the product selection
available to consumers.
Edibles, extracts and topical
cannabis products started trickling into
stores across Canada at the end of
2019, though wider distribution is still
ramping up.
Two other factors will weigh on the
Canadian market in the months ahead:
* The impact of large-scale outdoor
production.
* Canada's relatively new microclass
business licenses.
Entrepreneurs should not write off
opportunities related to the micro
licenses merely because of their
limitations. These licenses provide
entrepreneurs with lower-cost entry
points to the regulated industry.
Matt Lamers is the international editor
at Marijuana Business Daily. Reach
him at matt.lamers@mjbizdaily.com.

MJBizMag September 2020

Table of Contents for the Digital Edition of MJBizMag September 2020