California’s cannabis industry has fallen short of expectations — does it hold any lessons for Canad

https://globalnews.ca/video/rd/1416069699826/?jwsource=cl
It’s been a year since California legalized recreational cannabis, but questions on regulations and licences — as well as a thriving black market — have left the state’s industry floundering.

Experts predicted the large market available could generate lots of revenue, but expectations have fallen short.

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Sales of legal pot in 2018 fell to an estimated US$2.5 billion, down half a billion from the previous year, when there was only a medical industry, the New York Times reported.

“The demand is definitely there,” said Tom Adams of BDS Analytics, which released the sales forecast.

However, he said, strict regulations, heavy taxation and bans on pot shops in many of California’s cities have weakened the industry’s ability to become the alternative to the illicit trade.

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More than 80 per cent of cities have banned pot shops and only 547 stores have been granted licences (either permanent or temporary) when there are 6,000 available, The Los Angeles Times reported.

Some of the concerns California is facing are mirrored — albeit to a lesser extent —here in Canada, which legalized cannabis on Oct. 17, 2018.

An Ipsos poll conducted a month after legalization found that one-third of Canadian marijuana smokers still used the black market.

READ MORE: Legal marijuana had an exceptional year in 2018 — and not just in Canada

Licencing of pot shops has also been slow. Several provinces have government-run online retailers, whose main concern was keeping the virtual shelves stocked.

Adams said typically, both producers and governments underestimate demand in the beginning.

“No one can believe how much people like cannabis,” he said with a chuckle.

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Allan Rewak, executive director of the Cannabis Council of Canada, said that growing pains on the supply side are being addressed, but not overnight.

“We still have a few road bumps we’re overcoming and those just relate to the creation of an entirely new, highly regulated supply chain for adult consumer-use cannabis,” he said.

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He said that while California is a different market than Canada, with its own regulations and conditions, the example shows Canada is on the right track.

“The Canadian system is tightly controlled, highly regulated and requires seed-to-sale tracking,” he said. “I think our system is the best in the world and it prevents the overcapacity that we see in California where there are a little bit looser rules in terms of micro bacterial testing and production controls.”

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Late last month, Statistics Canada revealed that Canadians bought $43 million of marijuana products in the two weeks following legalization. The agency has yet to publish additional sales data, but Rewak said there are indications that products are selling “remarkably well.”

“I think that we will see a very different end result than California,” he said.

Adams said that Canada is doing two things right in order to divert sales from the illegal market — setting the minimum age at 18 (though most provinces have opted for 19) and allowing online sales and postal delivery.

“To be able to deliver it through the mail is a huge difference,” he said.

READ MORE: Canadians spent $43M on cannabis in first two weeks after legalization: StatCan

He described the California market as confusing and messy, and he suggested that the sales forecast figures don’t tell the whole story of what happened.

Prior to recreational legalization, California’s US$3-billion medical market was very loosely regulated, and with legalization came a much stricter regime, he said. After additional rules kicked in part way through the year, the market really never recovered.

“A big asterisk needs to go next every headline on what’s going on in California,” he said.

The only thing we can learn is more restrictions in storefront numbers doesn't help. Barrier to entry in the market does the same.

“I think our system is the best in the world and it prevents the overcapacity that we see in California where there are a little bit looser rules in terms of micro bacterial testing and production controls.”

But it won't on a longer timeline. Only because the rec market was accessible to LP herb only and all the med has been excluded and micro-grows have not got access yet.
They cut out outdoor and greenhouse production to prevent immediate flooding, but there are no restrictions on the number of micro or regular grows. Once the small grows get access the market will get flooded, the growers get stuck with the leftover product and the bills they paid to grow it. Same as Washington state, where there are a restricted number of licenses.
The reason Rec is failing is because the Government keeps trying to make an oligopoly of large business, like in the telecom and banking sector.
It was proof positive that the small grows and small retail worked well with the med spillover and compassion clubs. The prices were down to $100 an ounce for high-grade here in BC. So, the Gov't shut them down to install their new inefficient system where most of the money involved becomes taxes and license fees.
Since Prairie Plant Systems the Gov't has been set on big business dominating an industry where Micro just works better.
They should shut down the Giant LP disaster. They fail to deliver the product. The valuations on the stock market are a fiasco. All they are doing is creating speculator bubbles which benefit no-one besides high beta traders.