In the last 6 months fortunes have been made in the cannabis stocks trading in Canada and on October 17, cannabis became legal in Canada. In an article by David Ebner titled As Canada ramps up for legalization of cannabis, Colorado sales growth slows.
The writer examines the Colorado sales data and offers ideas of what will happen in Canada. The legal sale of recreational cannabis in Colorado began in January 2014. It took a year but recreational sales outsold medical cannabis. The next year sales went up 50% to $996 million and in 2016 went over the billion dollar mark for $1.31 billion. In 2017 the sales slightly increased to $1.51 billion. In 2018 the sales are still very good, but the market is mature. The trends according to Professor Paul Seaborn of U of Denver is a consolidation of players and a for those who tend to smoke more to look for specific brands or brand loyalty.
The market in Colorado moved from a national curiosity where people travelled to the state to buy legal cannabis to a more mature market similar to the beer, wine and spirits markets. It is important to note just because cannabis is legal, 80% do not use it.
Research from the Marijuana Policy Group estimates about 1 million used cannabis in 2017, or roughly 1 in 6 people. People who smoke at least once a day or 340,000 people or 6% of the state’s population were responsible for 90% of cannabis demand.
Linking to dividend paying stocks, in most industries it is a minority which drives the sales. However that minority uses the products extensively. Only a few industries such as utilities which are mandated by law everyone has to have will there be a wide number of users. This is why investing in monopolies or near monopolies as an investor is a good thing. When reading about any new market, figure out how many will be frequent users before repeating how big the potential market could be if everyone used the product once – you will save money.
There are more questions than answers, till the next time – to raising questions.