Marijuana Stocks Jump on Friday After Successful Reading of Canada’s Legalization Bill, but Still Down for the Week
Global marijuana stocks got a late week pop from the successful second reading in the Senate of Canada’s retail legalization bill C-45.
The bill only needs to be approved one more time during the third reading on June 7th and Canada will officially be the first country to legalize recreational marijuana use. Even with this good news, stocks were down 4% for the week following the global stock market lower driven by fears of a coming global trade war.
WEEKLY PERFORMANCE OF THE TOP 75 MARIJUANA COMPANIES
Canada Releases Restrictive Packaging Guidelines for Retail Marijuana
Grizzle released a report on Friday detailing the government’s retail packaging guidelines.
Bottom line: If you are a producer looking to set your product apart from competitors, good luck.
Producers have very little room on packaging for branding or to explain their product to consumers. We worry that without differentiated branding a rational consumer will buy the lower priced option leading to a race to the bottom for prices.
Legal Producer Tilray Forms First Strategic Partnership With a Major Pharmaceutical Company
Tilray signed a letter of intent with Sandoz Canada, the Canadian subsidiary of Novartis AG, a global healthcare giant.
Tilray will supply the raw materials and rely on the medical manufacturing expertise of Sandoz to create marijuana products such as patches, gels, sprays and tablets for sale to Canadian hospitals and pharmacies.
Sandoz did not make an equity investment into Tilray so the deal will likely be structured as a revenue split on each sale.
What This Means for Canada
Margins are much higher for pills and edibles than flower, but as more companies get into the business of making edibles, pills, creams, patches and sprays margins will fall just like we are seeing with dried flower.
Canadian Producers Continue to Sign Export Agreements
Marathon Global, a private Canada grower and MedReleaf, a publicly traded grower, signed additional export deals to send Canada grown marijuana to Europe. Neither deal mentioned the volumes involved which means they were likely small.
Germany seems to be the big prize for the Canada growers with most export and international expansion deals focusing on servicing this market. Demand in Germany is growing rapidly, but with a majority of the population against legalization compared to widespread support in Canada, recreational marijuana is likely years away in Europe.
What This Means for Canada
As we mentioned in our Marijuana Export Mirage report, Canada could be oversupplied by 850,000 kg in 3 years which would require demand in Europe to grow twice as fast as demand growth in Canada leading up to legalization.
READ THE MARIJUANA EXPORT MIRAGE FOR AN IN DEPTH REPORT ON THE STATE OF DEMAND FOR MEDICAL MARIJUANA OUTSIDE OF CANADA