Pubdate: Mon, 17 Jul 2017
Source: Hartford Courant (CT)
Copyright: 2017 The Hartford Courant


There's one bummer question haunting all the marijuana businesses
popping up between British Columbia and Newfoundland.

How much do Canucks like weed, eh?

A year before recreational cannabis is expected to become legal in
Canada, there's an explosion in companies cultivating the stuff. At
least 10 marijuana outfits have new listings this year on the TSX
Venture Exchange and Canada Securities Exchange. Some 51 enterprises
have gotten the green light to grow pot, and 815 applicants are in the
queue. All told, it could be enough to raise the country's raw-weed
output more than tenfold.

This is where skeptics see froth. "If you ask people today why they
don't use, it's a small percentage who say 'because it's illegal,"'
said Neil Boyd, a criminologist at Simon Fraser University in
Vancouver. "In many respects there might be an overestimation of demand."

Long-time users and growers insist he's wrong, but investors aren't so
sure. Producer MedReleaf Corp. tumbled as much as 28 percent last
month in the worst debut for a Canadian IPO in 16 years amid concern
pot stocks are overvalued. Shares of Canopy Growth Corp., the
country's first billion dollar marijuana start-up, are down 21 percent
in the past three months.

The North American Medical Marijuana Index, which tracks leading
cannabis stocks in the U.S. and Canada, has plunged 21 percent since
Prime Minister Justin Trudeau's government in April unveiled its plan
to legalize the drug by next July, 16 years after Canada permitted it
for medical use.

Of course, some of the decline may be attributed to the situation in
the U.S. Many in the Trump administration, Attorney General Jeff
Sessions in particular, are no friends to the industry. For Canadian
companies, the risk isn't political.

"There seems to be a little bit of investor fatigue," said PI
Financial Corp. analyst Jason Zandberg. He said they're having trouble
differentiating between the producers, new and old, and what might
give them competitive advantages.

That's to be expected, according to marijuana bulls, in a brand-new
market that hasn't even arrived yet. Parliament still has to pass the
recreational law (though there's little question it'll do so). Then
the federal government will have to write rules on taxation, and each
province will have to decide how to regulate distribution.

"Nothing is going to be perfect right off the hop," said Jon Bent, a
licensed medical marijuana grower who has been cultivating plants on
his 11-acre farm outside Winnipeg for five years. "It's baby steps --
and the industry is moving quickly."

The question is whether it's going too quickly, considering the
variety of estimates about how much recreational weed Canadians will
end up regularly ingesting. Some educated guesses are that about 15
percent of Canadians partake now, legally and otherwise. That's around
5.4 million people, roughly the population of Colorado, which gave the
nod to recreational marijuana in 2014.

Medical and recreational sales there rose 56 percent last year, to
nearly $1 billion, according to Cannabase, operator of the state's
largest market.

One projection, from the Canadian Parliamentary Budget Officer, is
that 4.6 million people age 15 and over will use cannabis at least
once and consume 655,000 kilograms next year, and that 5.2 million
will be doing so by 2021. Other reports peg future recreational
consumption at 420,000 kilograms a year with sales reaching C$6
billion by 2021, Canaccord Genuity Group said in November. For its
part, the government agency Health Canada anticipates a mature medical
marijuana market will be around C$1.3 billion.

That could underestimate the number of Canadians who will refuse to
buy from corporate weed growers, said Chad Jackett, 38, who runs a
medical marijuana dispensary in Squamish, British Columbia, and uses
cannabis oil everyday to treat nerve pain. His concern is that new
regulations will sideline the independent farmers who advocated for
the plant for years, and grow small amounts. "I will definitely not be
using anything" from one of the big outfits, Jackett said. "If I don't
have enough of my own then I'll be getting it from somebody else whom
I trust."

Underscoring how confusing it all is, a few alarms are being sounded
that there won't be enough to pass around on Day One. In fact,
Colorado faced some shortages of legal supplies in the first year. A
similar rush emptied shelves in Nevada, where sales started on July
- ---
MAP posted-by: Matt