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It's not Aurora Cannabis, Cronos Group or Tilray) – The Motley Fool

Canopy Growth (NYSE: CGC) has plenty of competition. You must put Aurora Cannabis (NYSE: ACB) high on the list, especially after the company has taken 20% of Canada's marijuana leisure market during the quarter. Cronos Group [19659005] (NASDAQ: CRON) is another important competitor for Canopy Growth. When the big investment from the tobacco giant Altria is finished, Cronos will have much more money to use to compete against Canopy. There is also Tilray (NASDAQ: TLRY) . For a while last year, Tilray and Canopy Growth were neck and neck in the battle for the largest market cap among marijuana shares. But none of these other Canadian marijuana producers ranks as the best rival in Canopy Growth. Who is the company's most serious contender? A new report from Statistics Canada gave the answer. Image source: Getty Images. The biggest competitor Statistics Canada is the national number crisis for the Canadian government. As the cannabis industry becomes more important to the Canadian economy, the agency provides cannabis production and sales updates quarterly. The latest report from Statistics Canada showed that cannabis-related spending amounted to $ 2.2 billion in Canadian (about $ 1.6 billion) in the fourth quarter. That figure represents 0.4% of Canada's gross domestic product in the fourth quarter. A few weeks ago, Canopy Growth announced that it was $ 83 million (about US $ 62 million) in the quarter ending December 31. The company stated CA $ 57.7 million about $ 43.4 million) came from the adult use of the…

Canopy Growth (NYSE: CGC) has plenty of competition. You must put Aurora Cannabis (NYSE: ACB) high on the list, especially after the company has taken 20% of Canada’s marijuana leisure market during the quarter.

Cronos Group [19659005] (NASDAQ: CRON) is another important competitor for Canopy Growth. When the big investment from the tobacco giant Altria is finished, Cronos will have much more money to use to compete against Canopy. There is also Tilray (NASDAQ: TLRY) . For a while last year, Tilray and Canopy Growth were neck and neck in the battle for the largest market cap among marijuana shares.

But none of these other Canadian marijuana producers ranks as the best rival in Canopy Growth. Who is the company’s most serious contender? A new report from Statistics Canada gave the answer.

Image source: Getty Images.

The biggest competitor

Statistics Canada is the national number crisis for the Canadian government. As the cannabis industry becomes more important to the Canadian economy, the agency provides cannabis production and sales updates quarterly.

The latest report from Statistics Canada showed that cannabis-related spending amounted to $ 2.2 billion in Canadian (about $ 1.6 billion) in the fourth quarter. That figure represents 0.4% of Canada’s gross domestic product in the fourth quarter.

A few weeks ago, Canopy Growth announced that it was $ 83 million (about US $ 62 million) in the quarter ending December 31. The company stated CA $ 57.7 million about $ 43.4 million) came from the adult use of the marijuana leisure market. Aurora Cannabis reported that it was $ 21.6 million (near US $ 16 million) in the same quarter in recreation pot sales, with total sales of US $ 54.2 million (US $ 40.7 million).

Neither Cronos Group nor Tilray have reported earnings for the last quarter yet. But in terms of production capacity, Canopy and Aurora are well ahead of the other Canadian marijuana producers. It is a virtual security that Cronos and Tilray will report lower recreational marijuana sales than either Aurora or Canopy Growth.

Who is the mystery rival who has commanded a much larger market share than even Canopy Growth? The black market. Statistics Canada reported that illegal cannabis sales in the fourth quarter amounted to $ 1.4 billion (about $ 1 billion) compared to $ 770 million (near US $ 573 million) in legal cannabis sales.

Closing the gap

Significant levels of illegal sale of marijuana were expected. The Bank of Novia Scotia estimates that in 2019, 71% of total marijuana sales in Canada will be on the black market. Statistics Finland’s Q4 figures were in line with that projection.

But look for Canopy Growth and its comrades to close the gap considerably in the future. By 2020, Nova Scotia considers that the black market will generate only 37% of total marijuana sales.

There are several reasons, Canopy, Aurora, Cronos, Tilray and other licensed marijuana producers will take sales away from the black market in the future. First, there was a problem in time in the fourth quarter. The adult use of the recreational pot market in Canada did not open until October 17, almost three weeks in the fourth quarter.

However, a major factor is that the production capacity of the large marijuana growers will increase in 2019 and into 2020. The main reason for marijuana sales on the black market dwarfed legal marijuana sales in the fourth quarter was that there were not enough pots to accommodate demand.

Another way Canopy Growth and its comrades remove market shares from illegal sellers is to cure their retail outlets in Canadian provinces. This process will extend beyond 2019, but you can probably expect to see an increased ramp-up in recreational pot from stores throughout the year.

A lasting rival

Don’t think that Canopy Growth’s biggest “rival” will give up its market share without a fight. Colorado’s Legal Recreation Market opened in 2014. Since then, the black market has become busy.

There are some important benefits that illegal marijuana sellers have over companies like Canopy, Aurora, Cronos and Tilray. First, they do not have to pay any taxes. Second, they do not have to comply with statutory requirements such as packaging and quality management standards. As a result, the marijuana prices on the black market can be well below the legal prices.

The problem for investors is that the values ​​for the best marijuana stocks depend on expectations of tremendous growth. These growth levels will not be achieved if the sale of the pot on the black market is too high.

Maybe one day, either Aurora Cannabis, Cronos Group or Tilray will be the best rival for Canopy Growth. If that happens, it will probably be good news for all marijuana shares.

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