Canadian based cannabis firms are set to ramp up supply after the country is reportedly experiencing a shortage. After the recent legalization of recreational cannabis in Canada, it has been reported that dispensaries were experiencing a shortage from the huge influx of consumers looking to get their hands on some legal recreational marijuana.
Local authorities were called to a number of dispensaries struggling to handle the long queues and frustrated consumers unable to buy cannabis. Bill Blair, former Toronto police chief, who has been at the forefront of the government’s legalization program, told public broadcaster CBC the country was unprepared for the huge surge in demand.
“We had anticipated, you know, certain strains might run out and there would be a bit of a run on supply,” he said, “But, you know, they have got a good infrastructure in place and I’m confident it will work.”
On October 17th, Canada became only the second country in the world to fully legalize recreational marijuana use, as part of a somewhat controversial experiment in their drug policy. Under the new law Canadian citizens can legally carry up to 30 grams of cannabis in public and each household will be able to grow up to four plants.
According to a spokesperson for Cronos Group “With the recent legalization of recreational marijuana, we had increased our output considerably” he said, “We did not expect the demand to be so large, however, we now know we need to increase our supply further, to make sure we can keep up with the increased demand.”
Medical marijuana has been legal in Canada since 2001, and the government has spent over two years working to expand that to include recreational usage. Based on the results of their survey 5.4 million Canadians will buy cannabis from legal dispensaries in 2018, that is over 15 percent of the population. Around 4.9 million already medicate.
Supply and demand economics dictate that this shortage in the marijuana supply, will lead to an uptick in the price, which will no doubt have a knock on effect with the revenues generated from the industry. This will likely have a positive effect on the share price of one of our top stock picks for this quarter Cronos Group (CRON) and as a result, we have issued a strong buy recommendation for our clients, here at Asia Associates.
Chief Analyst, Dennis Chu – Asia Associates