Why the U.S. cannabis industry is better positioned than Canada to go national
By Lauri Kibby of Kings Garden.
The optimism of the cannabis industry in the United States rises along with rising expectations for national legalization.
However, skeptics point to the Canadian experience and suggest that we temper our enthusiasm. However, most marijuana producers in Canada are still reporting losses years after being legalized in 2018.
Cannabis has considerable potential in Canada but has been a bumpy ride so far. Manufacturers were initially not prepared for sufficient supply to meet demand. The backlog was significant and manufacturers weren’t sure which products or varieties would be popular where.
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There is too much on offer now. Rosy projections have been slow to materialize in a strictly regulated sales system that largely bans advertising and marketing. This government intervention has hampered sales and made it difficult to balance supply and demand.
In addition, the coronavirus disruption slowed retail store growth, increased inventory levels and led to price deflation.
The US is much better prepared, however, and Canada’s difficulties are part of the reason: we have learned from the experiences of our northern neighbors. We know we don’t have to repeat the same mistakes. Equally important, we have extensive experience in California, the largest state in the country and a major cannabis market on the world stage.
California cannabis producers have been developing legal marijuana products since 1996, longer than anywhere except Amsterdam.
Driven by California and other states in recent years, legal marijuana growers in the United States have built a reputation for creating the best products in the world that are scientifically grown and strictly regulated for quality and safety. They also master the analysis needed to predict consumption trends and allow farmers to adjust production in anticipation of shifts.
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The genetics and sophistication that underlie the U.S. cannabis industry have resulted in better quality flowers, higher prices, and ensuring that they can meet the taste needs of a diverse consumer base. Similar to wine, cannabis use is driven by a desire for a particular taste and experience that is directly related to the composition of a strain.
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US companies also have robust production and distribution systems in place to efficiently and profitably meet demand. They can be enlarged as demand increases.
Several cannabis companies, including Kings Garden, are consistent and increasingly profitable.
The U.S. marijuana industry is valued at more than $ 18 billion, according to the Marijuana Business Factbook. The legal market in California generated sales of $ 4.4 billion in 2020, compared with $ 2.8 billion in the previous year.
Additionally, national legalization is becoming more likely due to the increasing dynamism at the state level in the US. New York, New Mexico, New Jersey, and Virginia all passed recreational cannabis laws this year. According to the Marihuana Policy Project, 18 states have legalized recreational cannabis and 36 allow cannabis for medical reasons.
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A national law to legalize it was passed in the U.S. House in late 2020, and support in the U.S. Senate will build this year. Should such legalization be successful, sales could boom not only because of wider demand, but also because American companies are prepared for the eventuality.
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With the legalization of the federal government, international markets will open up. BDS Analytics estimates cannabis sales outside the US and Canada could grow to $ 8.3 billion by 2026 at an average annual growth rate of 38%.
International sales would further boost demand for US crops.
U.S. cannabis companies are now preparing for full demand potential to avoid Canada’s pitfalls. Smart investors should take note of this.
Conditions in the debt market are already improving steadily as competition for loans to cannabis companies increases. This signals investor expectations for a bright future characterized by growing market opportunities, higher sales and constant profitability.
I confidently share the same outlook.
Lauri Kibby is the co-founder and chief financial officer of Kings Garden, California’s premier cannabis growing, processing, distribution and manufacturing company.
This article originally appeared on Benzinga and was republished with permission.