The legalization of recreational marijuana in Canada took place in October 2018, and since then, the country has been facing a lot of issues, many of which offer valuable insights to entrepreneurs and government officials. Forewarned is forearmed; countries such as the United States and others looking for national legalization of adult-use marijuana should learn from Canada.
Discussed below are the lessons other countries should learn from the legalization of marijuana in Canada.
- Marijuana Stocks were not Trading on Fundamentals
Investors looking to invest their money in marijuana stocks should be careful. According to the BBC, marijuana stocks in Canada have gone through several overwhelming changes, and the slow marijuana sales have led to a 17% drop in wholesale prices, which has, in turn, caused a dip in the prices of pot stocks for publicly traded cannabis companies.
Speaking to the BBC, the CEO of New Leaf Data Services, Jonathan Rubin, said that it was evident that the stocks were trading on fantasy, not fundamentals. He further said that there are frustrations that come with legalization, but marijuana legalization was not a failure.
According to the data which was quoted in the New York Times, marijuana stocks in the five major marijuana companies in Canada had a 56% drop in price in the first year of legalization. US entrepreneurs can learn to make investment decisions based on fundamentals rather than market sentiment.
- Delay in Dispensary Approval by Governments
Since October 2018, Canada has been experiencing a stable increase in marijuana sales, but the stock has been rising at a rapid rate, which led to the oversupply of the product.
Besides, the government has been slow to approve dispensaries in the densely populated areas such as Ontario and Quebec; instead, they have been awarding the permits at a glacial pace, according to local media. This has forced customers who would have bought their cannabis products from the legal market to turn to the black market because the products are cheaper (no taxes) and readily available.
Here the entrepreneurs can learn about supply and demand. Cannabis business is about more than producing quality marijuana, but also about having suppliers who are good at packaging their products. They should also be good at marketing and managing the stock as well as setting smart prices.
- Lack of Edibles
Canadian officials legalized marijuana before allowing the sale of edibles because they wanted time to establish rules around cannabis edibles, and this limited the potential for marijuana market growth because in the U.S., marijuana edibles saw an increased sales by 900 percent. They also give consumers additional ways to consume marijuana other than smoking.
According to the Financial Times, Canadian authorities are expecting a wave of insolvencies this year, but many are hoping that the introduction of marijuana-infused drinks and edibles will help the stocks to bounce back.
These challenges being faced by Canada should be a lesson to U.S. government officials and entrepreneurs, and other countries looking to legalize marijuana. Experts are sure that pot companies like Willow Bioscience Inc. (TSX: WLLW) (OTCQB: CANSF) are carefully taking note of all those issues and making adjustments so that they can thrive in these challenging times for the industry.
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