Ontario Announces 42 ‘Lottery Winners’ Eligible for New Cannabis Licenses

Ontario Announces 42 ‘Lottery Winners’ Eligible for New Cannabis Licenses

Regular readers of The Seed Investor know that Canada’s cannabis industry has already “turned the corner”. Three consecutive months of double-digit growth in cannabis retail sales.

This strong surge in sales coincides exactly with Ontario (Canada’s largest province) beginning to open its own cannabis retail stores. Opening just “a handful of stores” caused retail sales in Ontario to more than double in the first month.

Since that time, Ontario has taken the number of cannabis stores to 22. A mere 22 cannabis stores in Ontario has been enough to propel cannabis sales numbers nationally. Now Ontario has finished the “lottery” phase in the process of awarding 42 additional licenses for cannabis stores in that province.

It won’t happen overnight.

Once the lottery winners officially submit their license applications, Ontario’s Alcohol and Gaming Commission (AGCO) will begin its review process. But it’s a game-changer for the Canadian cannabis industry.

Ontario is in the process of roughly tripling the number of these cannabis stores (from 22 to 64).

For the cannabis industry (and Canadian cannabis companies), the timing couldn’t be better. Phase 2 of cannabis legalization in Canada takes effect in October 2019. New, value-added cannabis products will be legalized: edibles, concentrates, and infused beverages.

It’s estimated that these products won’t actually reach store shelves until mid-December. As these next stores open in Ontario, they will be offering their customers a dramatically expanded menu of products.

Market consultant, Deloitte, has forecast a CAD$2.7 billion market for these products, in addition to a $6 billion market for recreational/medicinal cannabis. But that figure now looks conservative.

In U.S. dual-use markets where these products are already legal, they currently account for 43 percent of total revenues. And that percentage is rising. Going forward, the CAGR for concentrates and edibles is projected to be more than double that for dried flower products.

Cannabis investors should not expect to see the increasing share of edibles significantly reduce sales of dried flower. Rather, these should be additional incremental revenues. Females in particular are much more interested in these next-generation products. Canadian women are twice as likely as men to consume only products other than dried flower.

Meanwhile, Canada’s industry leader, Alberta, is ramping up its own cannabis retailing with a new wave of licenses and store-openings. And other provinces are slowly-but-steadily increasing their own retail footprints.

To date, 2019 has been a disappointing year for the Canadian cannabis industry – because of the disappointing performance of Canada’s provinces in providing retail access to this legal industry.

Those days are now behind the Canadian cannabis industry. Ahead is blue sky – lots of it.

Sales are already now expanding at a very robust rate. That double-digit pace would be expected to accelerate, just from the new stores in Ontario alone. Add in the new consumer demand (and new markets) from Phase 2 of legalization and Canada’s cannabis industry can be expected to close out the year strongly.

In 2020, the full market impact of these changes to Canada’s cannabis industry should flow through to the bottom-lines of cannabis companies. Cannabis shareholders who have endured these difficult months can be expected to be well-rewarded for their patience.

New investors to the sector may be arriving at the ideal time. Cannabis was officially legalized in Canada in October 2018. But as investors can see, this market is only now starting to really materialize.

Published at Thu, 22 Aug 2019 10:00:02 +0000

Posted in: News

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