Canada Cannabis Business Skyrocketing to Billions

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As impressive as the electoral victories for cannabis legalization in the U.S. have been, if not the expansion of California’s recreational market, America is actually behind its neighbour to the north on all fronts of market development.

This is because next year, given all the political indications, marijuana will become legal for recreational users at the federal level. It will officially make Canada the largest first world economy which has legalized pot completely – and the repercussions if not dollar signs are large.

A Big Boost to Canada’s Economy

Early estimates, including from the consulting firm Deloite estimate the overall market boost to the economy to the tune of $22.6 billion annually. According to the report, even initial sales would be at least as large as hard liquor sales ($5 billion) or even total wine sales ($8.7 billion).

The retail market for marijuana itself would also be worth between $4.9 and $8.7 billion. With marijuana products and services (including everything from testing labs, lighting and security systems) would bring the total value of the market to the upper range that Deloitte is currently estimating. Factoring in taxes, licensing fees and weed-related tourism, the market could be even greater than this. And that is still not counting real estate.

That said, despite all the hype, including a dramatic rise in public pot stocks, others believe that the business will increase, but do so on a slower trajectory after the federal government introduces legislation in the spring of 2017. The Parliamentary Budget Office has projected legal sales will probably begin the year after. However many experts believe that the industry will not get into full swing until potentially even 2020.

The Transition

The delays involve the transition of the legal system – starting with regulation covering the creation of legislation itself to what it would cover – to labor regulations and retail outlets. It is also expected that recreational regulatory models will build on the infrastructure created by the medical market. That said, there is a great deal to do.  The best comparative, in Uruguay, for example, legalization was a five year process.  

Market development in a place like Canada will also be similarly complex simply because domestic firms and those with an international focus will be able to operate at a much bigger scale than they can in the U.S. – and in fact everywhere else right now. In fact, Canadian companies can not only operate on a federal level but on a global one – which is what makes federal recreational reform here so significant. Canadian marijuana companies are leading the way right now in creating international partnerships in other countries where medical reform – in particular – is growing new markets globally. This includes export opportunities in countries like Germany, Brazil and Australia. Beyond that, there are additional opportunities in terms of the export of intellectual property associated with market growth – starting with but not limited to growing techniques and IT solutions.

Everyone Gets To Benefit

From a business perspective, the development could not be better for entrepreneurial growth in many ways – from people directly engaged in the process of growing the plant itself and testing the product to manufacturing into something else (pharma products to food) are just the first layer of this. On top of this add lawyers, accountants and other professionals necessary to servicing the needs of the fast-growing industry, not to mention professional managers to run these endeavours.

Schools are also getting into the act. Universities in Ottawa, Toronto and London (Ontario) have begun offering classes.

Cannabis in Canada

The one place that still may be leery of a booming, multi-billion dollar business on the horizon is the banks. Scotiabank and Royal Bank, the country’s two top financial institutions, have kept their distance so far. Credit unions, however, seem to be signing up for the business. Unlike their neighbouring business associates in North America, however, there will be, once recreational reform is passed, no specific ban on banking for such businesses.

One of the other growth areas that will certainly generate business in the form of turnover and payroll, even if it does not generate extra cash are the non-profits that also operate in the industry – primarily in the medical dispensary sector.

Beyond this of course, there are the IT implications of the cannabis revolution here – which range from increased efficiency in grow operations themselves, to sophisticated systems to manage and audit the entire process.

That said, despite the fact that the industry is set to boom here and on multiple levels, the entire industry itself right down to the individual companies and entities that plan to enter and operate in it, face new challenges almost as big as the potential of the market itself.

What do you think of Canada’s move to legalize marijuana for recreational use next year?

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