The most recent numbers out of Colorado suggest big things for Canadian marijuana sales post-legalization, says Echelon Wealth Partners analyst Russell Stanley.
In a weekly update on the marijuana sector called “Cannabis Weekly”, Stanley took note of new data out of Colorado, which began legal commercial sales of marijuana in 2014. For the first time, the state topped a billion dollars in total sales.
“Based on data from the State’s Department of Revenue, total medical and cannabis sales improved 32% y/y to (U.S.) $1.3-billion from just under $1.0-billion in 2015,” notes the analyst. “Medical sales improved 7% to $438-million, while recreational sales topped $875-million, up 49%, following 87% growth the year before. Recreational sales have almost tripled from $304-million in 2014, the first year of legal sales in Colorado, and its recreational market is now 2x the size of its medical market.”
Stanley says some simple math suggests the Canadian cannabis market is about to scale considerably.
“Assuming a similar growth path for Canada, which is almost 7x larger than Colorado by population (36.5-million v.5.5-million), implies that Canada could generate annual sales of (C) $11-billion+ in year 3 of a legalized recreational market,” he said.
One expert says the estimated $200-million the state of Colorado generated in taxes can be earmarked for programs and services it simply could not afford before.
“Marijuana tax revenue is not going to cover the state’s budget, but it is going to cover important programs and services that would otherwise be left out of it,” says Mason Tvert, a spokesman for the Marijuana Policy Project. “This money is just the tip of the iceberg.”
Tvert recently told Huffington Post that the benefits extend to society in other ways, as well.
“The state is also reaping the invaluable public health and safety benefits of replacing an underground market with a tightly regulated system,” he said. “The system is working.”
Many believe the legalization of cannabis for recreational use is in Canada is imminent, and these suspicions were fanned by a government task force document that contained 80 recommendations, includeing setting a legal age of 18 for marijuana use and restricting public possession to under 30 grams of marijuana per person. Still, an official timeline does not yet exist, and at least one expert thinks it could be longer than expected, for political reasons.
“I believe Canada’s politicians are going to do one of two things,” Viridian Capital Advisors analyst Harrison Phillips told Benzinga recently. “Either they are going to try and push it through this term Trudeau can essentially keep it as a feather in his cap, because they have this task force document making recommendations on how to establish a legal market,” said Phillips. “Trudeau could push for it and continue to support it, but essentially back off and say, ‘Look, we want to do this right. If you want this, vote for me again and I’ll be sure to pass it on my next term.’ So, it’s going to come down to what they want to do politically within the country.”
But Canadian Health Minister Jane Philpott has already gone on the record as saying that kind of delay won’t happen. On April 20 of last year, she told the United Nations General Assembly that the Canadian government’s timeline was specific.
“We will introduce legislation in spring 2017 that ensures we keep marijuana out of the hands of children and profits out of the hands of criminals,” she said. “While this plan challenges the status quo in many countries, we are convinced it is the best way to protect our youth while enhancing public safety.”