Pot stocks have seen some redemption this week after suffering for most of 2019. Several major players, including Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB) and Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) are seeing double-digit gains.
That’s great news for investors, and it’s an indication that things could finally be looking up. While 2020 could be a much better year for pot stocks, it’s not a sure thing. As Rich notes, the industry is still experiencing some growing pains.
“Despite the fact that we’ve been doing this for a year, Health Canada has made a lot of mistakes,” says Rich. Let’s take a look at some of the big barriers to pot stock growth that companies are currently grappling with.
Pot Stocks’ Problems: A Lack of Retail Outlets
According to Marijuana Business Daily, in September, sales of recreational marijuana in Canada’s eastern provinces declined 5.5% from the previous month to hit $71 million. This is largely being blamed on a lack of retail stores in Canada.
“There just aren’t enough stores right now,” says Rich. “When Canadians can have a store on every single corner where they can get cannabis, edibles, CBDs, and more, it’s going to be a game changer.”
Weed Me is a cannabis company in Ontario. It’s not publicly traded, but its products are available online at CannMart, which is owned by Namaste Technologies (TSXV:N) (OTCQB:NXTTF).
Like the pot stocks in the area, Weed Me has plenty of supply. The company’s founder, Terry Kulaga, told Global News that the the only problem is the inability to sell pot directly to consumers.
“Often, my friends ask how they can get my product. At the moment, they have to get a script from a doctor and sign up as a patient, and then we can sell directly to them. Otherwise, we sell our product quite literally all the way on the other side of the nation.”
Kulga’s company isn’t allowed to sell cannabis directly from its facility, which is overflowing with plants. The only solution is for Health Canada to expedite the establishment of more retail outlets.
“All I can say is I hope that they ramp up their efforts to create brick-and-mortar stores. We’re definitely ready to service the market locally. Right now, we do sell nationwide, and it would be nice to be able to sell in our own backyard, so to speak.”
Pot Stocks’ Problems: Health Canada’s Strict Regulations
Health Canada regulations state that only 10 milligrams of THC are allowed in consumable cannabis products. As many consumers already know, that’s not very much.
People will have to buy more to get the dosage they’re looking for, which will end up costing them. Analysts predict that this will ultimately be will be a financial struggle for many consumers. The result? The market won’t be as succesful as it could—or should—be.
According to the Globe and Mail, Health Canada, “has shown little interest in listening to industry, which could have been a helpful partner in educating Canadians about a product that still lacks reliable science.”
The regulatory body has caused estimates on the national cannabis market value to drop from $5.9 billion USD by 2022 to $5.2 billion USD by 2024.
While this might sound like a lot of bad news for pot stocks, Rich reminds his viewers that there’s a lot working in favor of the industry too.
“I believe with edibles, cannabis-infused beverages, legalization in America, SAFE banking act, MORE act, we have a lot of catalysts pointing to 2020 being a huge resurrection for pot stocks.”
What do you think? How can these problems be addressed? Will 2020 be a better year for the industry? Let us know what you’re thinking.
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