New data from the Canadian government shows that less than 10% of federal marijuana license holders have left the market since the plant was legalized in 2018. This data suggests that industry forecasts of a decrease in marijuana producers in the market has not occurred, as new entries into the hypercompetitive market surpass those exiting by a wide margin.
The new data was released as part of the Canadian government’s engagement paper for the Cannabis Act review. The public engagement paper also asks questions relevant to the industry to help gather feedback; that feedback will be used by the government to inform the legislative review of the law.
Since October 2018, about 95 marijuana license holders left the burgeoning industry. Of this number, 67 held standard licenses, which face no canopy limits; 13 held licenses for sale for medical purposes only; and the remaining were micro-license holders.
The data doesn’t delve into why the licensees left the market. However, industry experts believe that marijuana businesses suffer from overtaxation, which makes it hard to operate in the increasingly competitive market. In this environment, businesses often have to restructure or find new investors to help them compete, which is easier said than done. At the moment, Canada has only 920 active federal marijuana licenses.
An analysis of the data also shows that the most profitable marijuana businesses in the country are government owned while profits generated from the private sector are uncommon. In addition, the data showed that cultivators in the country produced roughly 618 tons of dried marijuana last fall, which brought the total amount stored by licensed retailers, wholesalers and producers to 1.4 billion grams.
It also showed that about 43% of dried marijuana production in the country in the period between October 2019 and December 2021 was generated by 10 standard license holders. In comparison, less than 1% of all marijuana production in the country was generated from 178 holders of micro-licenses.
These numbers come as the country’s legal market grows and displaces the illegal market. The recently released data also demonstrated that by the fourth quarter of 2021, legal marijuana sales were two times higher than sales in the illicit market.
In figures, combined recreational and medical marijuana sales in legal channels hit C$1.3 billion during the fourth quarter of 2021 while sales in the illegal market declined to C$660 million during the same period. The Canadian government remains committed to combating the illicit market by providing consumers with the ability to purchase marijuana from regulated and legal sources.
It would interesting to see a similar attrition analysis done for the different marijuana markets within the United States, including jurisdictions where established actors such as Advanced Container Technologies Inc. (OTC: ACTX) operate alongside mainstream marijuana companies.
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