In a research report to clients, GMP Securities analyst Martin Landry addressed his estimates for the size of the Canadian recreational cannabis market. He says a couple of factors have him thinking it will be bigger than he first estimated.
“We are revising upward our market size estimate for the Canadian recreational cannabis market,” the analyst says. “This revision stems from the probable addition of cannabis edibles and concentrates to the list of products legally available on July 1, 2018 and also from recent data emanating from the US which suggests our previous forecasts were too conservative. “We are also changing our assumption on the timing of implementation of legalization to July 1, 2018 vs our previous estimate of January 1, 2019.”
Landry says he expects edibles could comprise a total of forty per cent of all cannabis cosumed in Canada, noting that this is the mix in Colorado since 2016. He says the HESA amendment to Bill C-45 that ensures the availability of edible and concentrated forms of cannabis was the other development that changed his estimate on edibles from 30 per cent of the total market to 40.
“This has increased our visibility on the timing for which these products could enter the market,” he says. “In addition, since our last assessment of the potential Canadian recreational market, there has been greater availability of comparable data quantifying the evolution of legalized recreational markets in the US. The combination of the above has prompted us to update our Canadian recreational market forecasts…”
Landry believes recreational market demand will reach 500 tons in 2021, 600 tons the following year and 700 tons in 2023. But the analyst believes a potential oversupply consition could emerge after 2020, due to several large industry capacity expansions and greater production efficiences from LPS. Beacuse of this, the analyst has dropped his estimate for the price of dried cannabis from $5.00 per gram to $4.00.