Why the World Is Watching Canada’s Pot Legalization
All eyes are on Canada as it prepares to legalize recreational marijuana in October, becoming only the second country to do so after Uruguay. The pending change has touched off an investment boom and pushed up valuations of Canada’s cannabis producers. They’re enjoying a first-mover advantage as medical and recreational pot gain traction from the U.S. to Germany. Canada’s industry will also be the litmus test for whether governments can stamp out illicit sales, transfer billions of dollars in revenue to an emerging industry, generate taxes and create jobs.
1. What is Canada’s plan?
Fulfilling an election promise by Prime Minister Justin Trudeau, legal sales of certain forms of cannabis begin on Oct. 17. Fresh or dried cannabis, cannabis oil, and plants and seeds for cultivation will be allowed initially. Edible products and concentrates will be legalized later. Federal regulations put the minimum purchase age at 18, allow people to grow up to four plants at home and set strict rules on packaging and branding. The law also bans marijuana exports and imports, except for medical or scientific purposes, which require a permit. It’s up to Canada’s provinces to determine rules for retail sales and distribution. Provinces also have the power to lower possession and personal cultivation limits, increase the minimum age and restrict where marijuana may be used in public.
2. How will provinces handle legal sales?
They differ. Alberta is allowing privately run retail stores and the government’s liquor agency will operate online sales. Quebec plans to set up government-run pot shops that will be operated by its alcohol agency. Ontario, which is expected to account for 40 percent of the legalized cannabis market, has delayed plans to open retail stores until 2019 after newly elected Premier Doug Ford decided to switch to a private model, like Alberta’s. For now, legal pot will only be available online in Ontario.
3. How’s the cannabis business doing?
The promise of legalization has spawned a so-called green rush. The industry is now worth more than C$80 billion ($60.6 billion). On the Toronto Stock Exchange, the market value of Canopy Growth Corp. (ticker symbol: WEED) alone is almost C$15 billion, more than major producers of conventional commodities, including U.S. aluminum giant Alcoa Corp. Many companies are scrambling for production licenses and financing. Existing growers of medical marijuana are looking to build bigger and better facilities to acquire sought-after supply agreements. Optimism has waned in recent months, however, amid concerns that market valuations have become too rich. The BI Canada Cannabis Index, which tracks the shares of 74 Canadian cannabis-focused companies, has slumped this year, after surging 172 percent in 2017.
4. Who else is investing?
Major firms outside the cannabis industry, especially from the drinks sector, are getting involved. Constellation Brands Inc., the brewer of Corona beer, is spending $3.8 billion to boost its stake in Canopy Growth. BNN Bloomberg TV reported that the giant U.K. spirits maker, Diageo Plc, is in discussions with at least three major marijuana producers in Canada to make cannabis-infused beverages. Molson Coors Brewing Co. is starting a joint venture with Hydropothecary Corp. to develop cannabis drinks in Canada. Companies such as Canopy Growth, Aurora Cannabis and Cronos Group are also actively securing deals to supply countries like Germany with medical marijuana.
full story at https://www.bloomberg.com/news/articles/2018-09-06/why-the-world-is-watching-canada-s-pot-legalization-quicktake
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