Cannabis Stocks’ Dilemma: Rising Black Market Sales
Cannabis stocks have been on a roller coaster ride in 2019. The marijuana industry continues to evolve. Regulations play a vital role in the industry. As a result, ups and downs are common. There have been more headwinds this year, which makes investors’ question if their money is in the right stocks. Canada has been flourishing since it legalized marijuana in 2018. The country completed the second phase of legalization on October 17. However, thriving black market sales are still a challenge for the cannabis sector.
Cannabis sales in Canada’s black market
Canada legalized recreational marijuana a year ago. Statistics Canada said that licensed retail outlets sold more than $100 million worth of marijuana in July. However, industry analysts think that the number would have been higher witCanadian consumers still purchase cannabis illegally. Data from Statistics Canada’s National Cannabis Survey showed that close to 42% of cannabis consumers still buy products from an illegal source. The strict and strenuous regulation process is an issue. Also, a licensing bottleneck makes it difficult to have more legal shops.
A Quartz article stated that Statistics Canada data shows that Canada saw 79% of the black market cannabis transactions in the fourth quarter of 2018. The data shouldn’t be a surprise. Although Canada legalized cannabis in October 2018, it takes time for licensing. There would have been fewer legal shops in 2018.
However, a lack of variety in legal marijuana products and cheaper prices at illegal shops catch consumers’ attention.
Can Cannabis 2.0 reduce black market sales?
Canada completed Cannabis 2.0 on October 17. The country legalized cannabis edibles, beverages, vapes, and concentrates. Cannabis 2.0 introduced a new variety of products. Notably, the products should hit the stores by December. Deloitte projections show that the market opportunities for edibles and concentrates are 1.6 billion Canadian dollars and 140 million Canadian dollars.
Cannabis 2.0 could help deter illegal sales. On Monday, CBC reported that licensed cannabis producers in Canada think that legal edibles will help tackle black market sales.
Rising black market sales have impacted many Canadian cannabis companies’ revenues. Many of the companies have struggled with revenues and profitability this year. As a result, the stocks suffered. In the past few weeks, the cannabis sector has fallen. There has been pessimism that the sector’s revenues could fall this year. The Horizons Marijuana Life Sciences ETF (HMMJ), which tracks the North American cannabis industry, has fallen 8.2% in October.
Cannabis stocks have lost money in 2019
Aurora Cannabis (ACB), a prominent player in the cannabis space, reported a negative EBITDA in its last quarter. The company is launching a variety of edibles including chocolates, gummies, and vaping products. The company has submitted its products to Health Canada for approval. The products could hit the stores by mid-December. So far, Aurora Cannabis stock has fallen 16.4% in October.
Aurora Cannabis’s CCO, Cam Battley, said, “Canadians are purchasing edibles from the black market because they’re interested in alternative ways of getting high.”
https://articles2.marketrealist.com:443/ticker/hmmj/
Cannabis stocks have been on a roller coaster ride in 2019. The marijuana industry continues to evolve. Regulations play a vital role in the industry. As a result, ups and downs are common. There have been more headwinds this year, which makes investors’ question if their money is in the right stocks. Canada has been flourishing since it legalized marijuana in 2018. The country completed the second phase of legalization on October 17. However, thriving black market sales are still a challenge for the cannabis sector.
Cannabis sales in Canada’s black market
Canada legalized recreational marijuana a year ago. Statistics Canada said that licensed retail outlets sold more than $100 million worth of marijuana in July. However, industry analysts think that the number would have been higher witCanadian consumers still purchase cannabis illegally. Data from Statistics Canada’s National Cannabis Survey showed that close to 42% of cannabis consumers still buy products from an illegal source. The strict and strenuous regulation process is an issue. Also, a licensing bottleneck makes it difficult to have more legal shops.
A Quartz article stated that Statistics Canada data shows that Canada saw 79% of the black market cannabis transactions in the fourth quarter of 2018. The data shouldn’t be a surprise. Although Canada legalized cannabis in October 2018, it takes time for licensing. There would have been fewer legal shops in 2018.
However, a lack of variety in legal marijuana products and cheaper prices at illegal shops catch consumers’ attention.
Can Cannabis 2.0 reduce black market sales?
Canada completed Cannabis 2.0 on October 17. The country legalized cannabis edibles, beverages, vapes, and concentrates. Cannabis 2.0 introduced a new variety of products. Notably, the products should hit the stores by December. Deloitte projections show that the market opportunities for edibles and concentrates are 1.6 billion Canadian dollars and 140 million Canadian dollars.
Cannabis 2.0 could help deter illegal sales. On Monday, CBC reported that licensed cannabis producers in Canada think that legal edibles will help tackle black market sales.
Rising black market sales have impacted many Canadian cannabis companies’ revenues. Many of the companies have struggled with revenues and profitability this year. As a result, the stocks suffered. In the past few weeks, the cannabis sector has fallen. There has been pessimism that the sector’s revenues could fall this year. The Horizons Marijuana Life Sciences ETF (HMMJ), which tracks the North American cannabis industry, has fallen 8.2% in October.
Cannabis stocks have lost money in 2019
Aurora Cannabis (ACB), a prominent player in the cannabis space, reported a negative EBITDA in its last quarter. The company is launching a variety of edibles including chocolates, gummies, and vaping products. The company has submitted its products to Health Canada for approval. The products could hit the stores by mid-December. So far, Aurora Cannabis stock has fallen 16.4% in October.
Aurora Cannabis’s CCO, Cam Battley, said, “Canadians are purchasing edibles from the black market because they’re interested in alternative ways of getting high.”
https://articles2.marketrealist.com:443/ticker/hmmj/
