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How Canada Is Adjusting To Legalized Cannabis

Canada is now the largest country in the world to have a federally sanctioned marijuana marketplace, making the Canadian cannabis market one of the most significant in the world. And although reliable figures are not available, some estimate that Canadians spend about as much on cannabis as they do on wine, which is approximately $6 -7 billion, according to a Statistics Canada report, as reported by High Times. And soon, it could be worth billions more.

“According to a Statistics Canada report, Canadians spend almost as much on the green as they do on the grape, consuming C$6.2 billion worth of marijuana in 2015—a relatively conservative estimate, the agency admitted, stating that actual consumption could “reasonably” be as low as half that amount, or as much as double. By comparison, Canadians spent C$7 billion on wine in 2015.” wrote High Times.

The legal weed industry will be a massive payday for all of those already involved, especially the Canadian government, with an estimated $400 million generated in taxes annually, according to High Times. The Canadian cannabis industry will create many thousands of new jobs says Forbes. “Some of the latest estimates show that the Canadian cannabis trade needs to fill as many as 150,000 positions in order to keep the business of recreational reefer cranking away like a well-oiled money machine.”

In fact, crunch time is now. "It's crunch time," Jordan Sinclair, vice-president of communications for Canopy Growth Corporation (TSX:WEED)(NYSE:CGC), told CBC News, adding that the company is on the lookout for people to fill administrative positions, IT, accounting and a variety of production jobs ranging from seasoned growers to entry-level bud trimmers.

"This is probably the peak insanity for the HR team," he added. But money and job growth are not the only measures in which the Canadian cannabis industry are going crazy. Stock prices are showing promise as well.

Although Prime Minister Justin Trudeau announced that the launch of the cannabis market wouldn’t occur until October, to allow each province to set up regulatory frameworks, the most intense period of hiring is happening now. "This hiring blitz that is happening right now in all the retail and all the sales is going to be the most intensive that we'll have," said Sinclair. "There's an art to it because there's lots of information. We're acutely aware if people have a bad first experience, they might not have a second experience, so we have to nail that," he added.

Meanwhile, Canadian regulations are restricting cannabis from looking ‘fun,’ which High Times said could limit the appeal somewhat. Packaging is required to carry health warnings, and many things are banned, like testimonials from consumers and celebrities. Finally, “Packaging could be mandated to look as plain and unglamorous as possible if officials have their way: no bright colors, fun fonts or trippy designs,” wrote High Times.

The Illegal Marijuana Market

After cannabis legalization, will there still be an illegal cannabis market? Likely so, says High Times. Sure, not many people may produce their own bathtub gin anymore, but cannabis is different. It looks like a de-facto government monopoly in some areas could squeeze out the little guy.

“In many cases, provincial governments are choosing to contract with large-scale growers to fulfill their legal cannabis quota, leaving little to no room for smaller operations growing high-quality bud. It may be difficult to find top-shelf nugs in retail pot shops if the supply is primarily from huge industrial grows “ reports High Times. Plus, it’s legal to grow four plants of any size at home, so there will be a supply.

One dealer, who sells premium stuff to his clients via text, said “[The government is] effectively granting a quasi-monopoly to a few corporations—and some of those corporations are run by former police officers who have been directly involved in the persecution of those who love the herb. A lot of people have a negative reaction to that...’”

The distributor, named Steve, continued, “Also, mass production like that is the Walmartizing of weed. It’s McDonald’s weed. It’s not artisanally crafted, well-grown varieties. It’s going to end up being the most commercially cost-effective varieties. Because of that, I think we’ll be able to outcompete the big producers, both regarding quality and regarding service. From a customer standpoint, they take out their phone, they send a text, and somebody knowledgeable and polite shows up—that’s going to trump going to a store and buying some pre-packaged whatever.”

The Future of Legal Cannabis

The market itself will likely take years to develop, however, and will become highly corporatized. The Cronos Group (NASDAQ:CRON) is developing “the largest purpose-built indoor facility in the world” its COO David Hsu told High Times. They are planning on taking a major share of the legal pot market in Canada.

Hsu added, “We have over 19,000 seeds. Our ultimate goal is to find cultivars that are targeted for therapeutic relief. The main advantage of having such a large facility isn’t just for production. I think a lot of people in Canada are narrow-sighted for the recreational market. The rec market is exciting, but we’re very focused on the medicinal market and creating further intellectual property [in strains], better bioavailability, and then to get our genetics into clinical trials.”

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