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It has been a year since Canada legalized the use of recreational marijuana, and most cannabis stocks in the country have lost their value by approximately 50 per cent. While investors are hoping that the introduction of new products such as pot-infused drinks with greater profit margins will help to boost share values, the road ahead is more likely to be bumpy.
Cannabis 2.0 or the legalization of marijuana derivatives such as vape pens, edibles, extracts, and beverages, has now come into effect. While this development is expected to help in bolstering the falling prices of shares, most investors, analysts and companies in the field believe that the major issue with the industry is the massive requirement for increasing the number of stores selling these products.
Cannabis analysts, producers, and investors have laid the blame on Canadian regulations, which are dragging the opening of new retail outlets, imposing higher expenses and setting constraints on sales.
Lack of National Standardization Hits Distorts Market
According to analysts Canada currently requires around 1,000 stores to realize the true potential of the cannabis market. However, only around half this number exist, with most of them situated in Alberta, which has far more relaxed regulations in comparison to the rest of the country. Other provinces such as Quebec and Ontario are still lagging far behind.
The slow rollout of retail stores is a major issue for licensed cannabis producers in the country, as they expanded their production capabilities rapidly, but do not have sufficient means of distribution. Consequently, results are potentially expected to worsen in the near future.
Major cannabis companies such as Aurora and Canopy Growth have reported larger losses than expected, and have changed timelines for profitability. With every province in Canada holding responsibility for its own taxes and retail regulations, the lack of standardization on a national level for regulating the cannabis industry is expected to continue increasing expenses and generating distortions in the market.
This issue is driving up the prices for consumers seeking to purchase legal weed, and is instead benefiting the black market operating around the country.