Enjoy it While You Can Cannabis Canada, Your Edge is Already Eroding

Article by Vanmala Subramaniam, Financial Post

Enjoy it while you can Cannabis Canada, your edge is already eroding Once America federally legalizes, Canadian producers ‘might as well be growing tomatoes’, insiders say Government regulation could end up costing Canada's cannabis industry big, especially with the legalization in the U.S. market expected in 2019.Christopher Katsarov Vanmala Subramaniam

Green Growth Brands Ltd., a U.S.-based cannabis retailer with a large footprint in Nevada, was all geared up to enter the Ontario market until an unexpected announcement in mid-December by the province placed a drastic cap on the number of retail licences issued for pot shops.

Citing supply concerns, the provincial government changed its rules from handing out more than 1,000 promised licences to a mere 25, which are being be chosen using a lottery system.

“We had hoped to have 25 stores in Toronto. But now, I don’t know if we’re even going to be in Ontario,” said Peter Horvath, chief executive of Columbus, Ohio-based Green Growth Brands. “We have the wherewithal to execute and generate tax revenues for the province. I’m not sure this was the best fiduciary move for them.”

But the changes to Ontario’s retail system are much in line with the federal government’s overall approach to legalizing cannabis, which exerts heavy control over the production and distribution of cannabis.

“This is about as regulated a marketplace as you’re going to find,” said David Phillips, former president of the Ontario Cannabis Store, the province’s sole online retailer and wholesaler.

Those restrictions are not necessarily positive say Horvath and a number of industry insiders who argue that the level of government control and intervention in the cannabis landscape, coupled with the shifting political climate south of the border in favour of federal legalization, will slowly erode Canada’s current place at the top of the cannabis leaderboard.

“It’s probably fair to say that Canadian operators are being hamstrung by policy,” said George Allen, president of Acreage Holdings, a U.S. cannabis investment company listed on the Canadian Securities Exchange. “I respect what my peers in Canada have built in terms of footprint and scale, but in terms of its relevance to the U.S. market, especially once we’re federally legalized, they might as well be growing tomatoes.”

Read the full article here.

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