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Canada braces for cannabis gold rush
MONTREAL, Oct 17, 2018 (BSS/AFP) – When Canada legalizes recreational pot
Wednesday, market watchers predict the birth of a new industry — creating
thousands of jobs, investor euphoria, a new tax source for governments and
maybe even tourism.
Hundreds of licensed growers have sprouted in anticipation of the end of
pot prohibition, attracting major investment.
In just the past year, the market capitalization of firms including Canopy
Growth and Tilray has increased fivefold, to a total of more than US$10
billion on the New York stock market.
And with significant know-how gained since Canada’s legalization of
medical marijuana in 2001, others including Aurora and Aphria are making
inroads abroad as more and more foreign markets allow therapeutic cannabis
use and research.
Beverage makers and pharmaceutical companies are also partnering in the
sector, hoping to develop new products infused with THC or cannabidiol (CBD).
Constellation Brands, the North American distributor of Corona beer and
Robert Mondavi wine, recently invested about Can$5 billion ($3.8 billion US)
in Canopy Growth for a 38 percent stake in the company.
And soft drinks giant Coca-Cola is looking into using CBD, the non-
psychoactive molecule in cannabis believed to provide health benefits, as an
ingredient in some drinks.
Experts like John-Kurt Pliniussen, a marketing professor at Queen’s
University in Kingston, Ontario, are also predicting a bump in tourism worth
several billion dollars, citing as examples Amsterdam and a handful of US
states where pot is legal.
“The same can happen in Canada, because one of the things we have going
for us and that no other country in the world has, is the name of our country
— it is almost spelled very similar to cannabis,” Pliniussen told AFP.
“And so you could have Canatourism — from a marketing point of view, it
lends itself very well.”
In the meantime, an investor frenzy is fueling mergers and acquisitions,
with 48 deals worth a total of Can$5.2 billion announced in the first six
months of this year alone, according to Price Waterhouse Cooper (PwC).
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The consolidation will continue after legalization, says PwC, as an
“expected oversupply takes its toll and forces undercapitalized players into
bankruptcy” and firms “look to fuel further growth by tapping emerging
foreign medical markets.”
– Economic high –
There are untold economic spinoffs to be had, for sure.
Tokyo Smoke — a reinvention of the classic coffee shop — promotes
cannabis lifestyle, selling pipes, infusers and other pot paraphernalia along
with shots of espresso (but not cannabis itself).
The three-year-old company was purchased for Can$500 million last month by
Canopy Growth and plans to expand nationwide from five locations in Toronto.
“I think Canada will become a world leader in cannabis — it’s exciting
and something we can be proud of,” Tokyo Smoke vice president Josh Lyon told
AFP.
“Legalization will open the doors to a dynamic, sophisticated industry
that will create new jobs, new opportunities for businesses, and new revenues
for government,” echoed Deloitte in a report.
Nearly five million Canadians or 16 percent of the population consumed 773
tonnes of cannabis in 2017, mostly for recreation, paying an estimated
Can$5.5 billion to buy bud, according to the government statistics agency.
The number of consumers is expected to increase slightly after
legalization, but spending is predicted to remain the same, Statistics Canada
said in a recent report.
Further growth is expected from derivative products like edibles,
cosmetics and e-cigarette products containing pot, which will be allowed
starting in 2019.
But there is disagreement among forecasters on just how much of a boost
the new industry could give Canada’s economy.
According to the TD Bank, cannabis will push up economic growth 0.9
percentage points in the fourth quarter to hit 2.9 percent.
But the government statistics agency expects the new cannabis industry to
have at best a “minimal impact” on growth in Canada.
And according to Benoit Durocher, a senior economist with Desjardins Bank
in Montreal, it will be a drop in the bucket for this G7 nation’s massive and
highly diversified economy.
“Given the small size (of the sector) relative to overall GDP (which is
close to Can$2 trillion), the impact on growth will be very small or no
impact at all,” Durocher said.
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