MJBizMag September 2020 - 56

AFFAIRS
FOREIGN
major cannabis producers are increasingly
competing against each other on price.
Retailers say they've observed
growing consumer interest in discount
brands-many priced around
$3.75 (CA$5) per gram or less-giving
them an opportunity to compete
directly against the illicit market.
While those discount products might
help producers unload some of their
surplus, they come at a cost: As average
prices have fallen, profit margins on
dried cannabis have declined even as
sales volumes have grown.
14. MEDICAL CANNABIS
EXPORTS FACE HEADWINDS
Canadian cannabis firms collectively
exported a record amount of dried
cannabis (8,245 pounds) to foreign
medical markets in 2019. That figure
represents a 160% annual increase over
2018 exports.
However, the vast majority of that
exported cannabis (more than 94%) went
to just one country, Germany, which
is the largest medical cannabis market
in Europe. Australia was the No. 2
destination, receiving about 450 pounds
of Canadian flower in 2019.
With Germany's own medical cannabis
cultivation sector slowly coming online,
it's reasonable to assume Canada's biggest
cannabis export market might be less
hungry for imports in the future.
15. MEDICAL MARIJUANA
PATIENT NUMBERS DECLINE
The number of registered marijuana
patients in Canada's federally regulated
medical marijuana program peaked at
nearly 370,000 in September 2019, almost
a year after recreational legalization.
That figure appears to have been a
plateau: By March 2020, the number
had dropped below 330,000. (See chart
" Total Number of Registered Cannabis
Patients in Canada " .)
The decline in patient counts isn't
consistent across Canada, with some
provinces including British Columbia,
Ontario and Quebec seeing increases in
Companies can be delisted from public stock exchanges if share prices fall below a certain threshold.
the number of active medical cannabis
registrations since legalization.
The biggest decline came in Alberta,
which also has the highest per-capita
number of recreational stores of any
Canadian province.
As more cannabis stores open across
Canada, that will raise questions for
producers reliant on medical cannabis
revenue.
16. MICRO COMPANIES
ON THE RISE
The number of micro licenses for cannabis
cultivation and processing in Canada has
grown steadily in the past year.
At the beginning of 2019, Health
Canada had issued only one such license.
By early August 2020, 78 entities held
micro licenses.
For cultivators, a micro license allows
indoor or outdoor growing space of up
to 200 square meters. Micro-processing
licenses similarly allow processing of
a limited amount of cannabis with no
limit on plants grown under a microcultivation
license at the same site.
With new micro-sized cannabis
companies coming online every month,
Canada's regulated adult-use market will
likely become increasingly diverse as
more small businesses enter the space.
17. OUTSIDE FUNDING
DRIES UP
There was a time when investors couldn't
get enough of Canadian cannabis
stocks, resulting in soaring market
capitalizations and consequent spending
sprees by producers flush with cash.
56 Marijuana Business Magazine | September 2020
Much of that investor interest dried
up toward the end of 2019, as Canadian
cannabis firms mostly failed to deliver
on the hype.
The increasing difficulty of accessing
capital helps explain some other trends
in Canada's cannabis sector, especially
downsizing, layoffs and creditor
protection.
18. FEWER COMPANIES GO
PUBLIC; DELISTINGS BEGIN
In light of those capital market
challenges, it has become increasingly
rare for Canadian cannabis firms to
go public.
In one case, a Canadian producer
was actually delisted from stock
exchanges: Scandal-struck CannTrust
got booted from both the Toronto
Stock Exchange and the New York
Stock Exchange in the spring.
Aurora Cannabis consolidated its
shares in April to avoid being removed
from the New York Stock Exchange, and
the NYSE warned Hexo in April that its
shares could also be delisted for falling
below $1.
The shifting market conditions are
a reminder of an uncomfortable truth
for the industry: Investors just aren't
as excited about cannabis as they used
to be.
Solomon Israel is a reporter
for Marijuana Business
Magazine. You can reach
him at solomon.israel@
mjbizdaily.com.

MJBizMag September 2020

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