A Tale of 2 Cannabis Markets: The US vs Canada
These markets are heading in different directions fast, and there’s plenty of evidence to prove it.
LET'S UNPACK IT
Investors, funders, and industry professionals take note.
📊 Canada
More than a few LPs reaching profitability behind focused strategies, improving quality and lower production costs.
Rising B2B prices, albeit from basement levels.
Increasing exports with rising global market share.
Going through necessary consolidation.
Wholesalers taking a smaller mark up, paying faster.
Some government action: recent reforms on packaging & education.
Mark Merritt is an experienced, data-driven American investor always hunting for overlooked value in cannabis:
“This is a fledgling global industry that will be massive. Canada’s survivors have a six-year head start and, led by great, hands-on operators, are poised to leverage their capabilities globally as international demand begins to build.”
🤷 US
S3 and SAFER are put off. STATES 2.0 is a fantasy. FL and PA not happening till 2026 (if at all).
Slow growth in mature markets like CO, AZ, and IL. CA is going the wrong way.
Hemp THC product is cannibalizing/outflanking cannabis in some States.
Well-established illicit and counterfeit markets buoyed by illegal interstate trade.
Missing the boat on international opportunities (save a few companies).
Too little consolidation underway.
WHY THE MARKET DIFFERENCES?
Besides regulations and federal legalization….
📊 Canada's place on industry learning curve
💪 Years of hyper competitiveness does matter in terms of growing quality product and minimizing COGS.
😴 American myopia
Hoping for regulatory change and new market openings is not a strategy. In fact, it’s a distraction to the real operational and strategic work that needs to be done, fast.
⚕️ Taking your medicine
LPs accept they are in a mature market. Prudent operators have made necessary, big cost reductions and inventory write offs, plus downsized capacity.
↔️ One step backwards to go two steps forward
Sector leverage is not sustainable in a 280e world and not much better even if you aren’t paying the tax. MSOs need to re-equitize.
Comparing countries is a bit of an apples & oranges comparison; each geography has major issues including high taxes and fatuous regulations.
Yet, there is no denying the divergent medium term trajectories and their implications.
Merritt concludes: “I’m bullish on Canada. While there’s no capital and barely an audience, a handful of Canadian LPs have survived by staying lean, product-focused, and carving moats. Its time US firms started heeding these lessons.”
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