With Canada poised to be the first G-7 country to fully legalize cannabis, investors have been actively seeking to capitalize on the unique opportunity.
Canadian companies can export products internationally, dramatically increasing the size of the potential consumer base beyond the country’s 36 million residents.
The export opportunity, coupled with a clearer regulatory environment when compared to the U.S., has propelled Canada’s top LPs to stratospheric valuations.
Despite the enthusiasm, there are significant potential long-term risks to the Canadian market including:
Overcapacity:It will take months, if not years, to fully operationalize the planned capacity, but with over 100 approved LPs, the domestic supply capacity will far exceed demand, making the export market key to long-term success.
International competition:As more countries begin to develop export capabilities (including Colombia, Uruguay, Jamaica, and Thailand) Canadian LPs will, over time, face greater competition from low-cost producers.
