Provincial Distribution

Cannabis will be a highly-regulated industry. The federal government is responsible for regulating the licensing of companies engaged in the production and sale of Cannabis.  The provinces will regulate how cannabis is distributed and sold within their jurisdictions.

Most provinces have opted to regulate cannabis distribution in the same way they regulate liquor. Cannabis legally sold in the respective province will be distributed through a government body (such as the Liquor Distribution Branch of B.C. or the Liquor Control Board of Ontario) which will be the sole wholesale buyers and distributors of cannabis in their jurisdictions. These government bodies will also regulate and grant licenses to retail cannabis stores. In many cases, the provincial regulatory will also operate on the only online portal to purchase cannabis.

There are two key considerations with respect to the model being used in most provinces:

  1. Cannabis pricing will not be based on a free market.

    Licensed producers will have one customer per province which will be the provincial regulator who will also act as the wholesale distributor. Producers will not be permitted to sell recreational cannabis directly to retailers or consumers (including online). is means that the provincial regulator will set the wholesale price for producers.

  2. Legal retailers may be slow to take market share from illegal dealers.

    In order for legal retailers to take over the Cannabis market, their product will have to be readily available to consumers. This will require a certain level of geographic saturation so that consumers will not have to travel far to purchase product. The speed at which the legal market overtakes the illegal market will depend largely on the speed at which the provincial regulators grant licenses. In B.C. there is currently only a single licensed cannabis store in operation. In Ontario, the government won’t start granting private retail licenses until April 2019. Several other provinces are planning on restricting retail stores to those run by the government or limiting the number of private licenses granted.

 

KeyStone’s 2019 Cannabis Report $599

This report provides an in-depth investment analysis of the Cannabis industry in Canada. The report includes a description of the Canadian Cannabis market, the supply and demand fundamentals as well as key risks and opportunities facing the industry over the next several years. Analysis is provided on all 101 individual, publicly-listed Canadian companies that operate in the industry. The industry’s top 3 companies are highlighted in the Monitor List – Top Tier section of the report. An additional 17 companies are highlighted in the Monitor List – Lower Tier section. Information is also provided on the remaining 82 stocks in the Research Notes section which investors can use as reference material when conducting their own research.This report was constructed so our research staff could get a look at each cannabis related public company in Canada. While no company makes our strict fundamental criteria at present for a recommendation due to lack of current cash flow, this will change dramatically in the coming years as business flows in from legal sales. We will continue to monitor each company and update this report as the Cannabis industry begins to take shape.

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