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Marcy Nicholson, Mark Rendell and Jameson Berkow look back on a tumultuous first year of legal cannabis in Canada.


April

Forgotten, but not gone: Why convertible debentures are a ticking debt bomb for underperforming pot co.'s

Among the most popular fundraising methods in the cannabis space has been, and continues to be, convertible debentures. Unlike traditional debt, companies have the option of repaying debenture-style loans with stock, but only if the company’s share price has risen beyond a pre-determined level by the time the debt becomes due. Thanks to the recent collapse in cannabis valuations, dozens of companies in the cannabis space now find themselves in a precarious position: they have millions of dollars in debenture-based loans coming due, but the lack the cash to pay them back and their stock is not worth enough to force their debenture holders to accept equity instead. That situation has set the stage for 2020 to include widespread bankruptcies, bargain-basement acquisitions, or both. –Jameson Berkow

Forgotten, but not gone: Why convertible debentures are a ticking debt bomb for underperforming pot co.'s


Empty shelves in the vault at at NOVA Cannabis, on April 4, 2019.

Ryan Jackson/The Globe and Mail

Sold out: Legal marijuana producers aren’t offering enough of the strains consumers want most

When licensed cannabis stores in Alberta started placing items on sale amid a nation-wide supply shortage in the early days of recreational pot legalization, Cannabis Professional asked why. Customers quickly learned the delivery days of individual stores and were lining up to buy small quantities of high-THC flower before the sought-after product sold out, often within hours. Meanwhile, low-THC items sat on shelves for months so stores offered discounts to clear out this unwanted inventory.

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This showed that, as growers strove to increase production quantities and varieties, they failed to harvest significant volumes of the products that many consumers sought. At a busy Nova Cannabis store in Edmonton’s freezing winter temperatures on that store’s delivery day, Cannabis Professional talked with lined-up customers and observed from the belly of the inventory vault, where empty shelves were briefly filled by new products that sold within minutes and boxes of unwanted products sat untouched.

To date, licensed producers hold large volumes of finished inventory, which has raised speculation that they continue to struggle to produce high-THC flower and other sought-after cannabis items at scale. – Marcy Nicholson

Sold out: Legal marijuana producers aren’t offering enough of the strains consumers want most


Highly patentable: how pot companies are staking claims on legal cannabis

The notion of filing a patent on a new strain of pot is novel to say the least. Yet 2019 was a record-breaking year for companies seeking legal protections for cannabis-related intellectual property. This story explains the history of cannabis IP being allowed in the United States despite ongoing federal prohibition, how the field is rapidly expanding beyond the plant itself to include related technologies and even software as well as the rise of cannabis patent litigation. In 2020, the number of courtroom clashes over cannabis IP is expected to rise dramatically. – Jameson Berkow

Highly patentable: how pot companies are staking claims on legal cannabis


May

Micro madness: How B.C.’s craft cannabis industry is losing out on legalization

When the Cannabis Act came into force in October 2018, there was hope among legacy growers that the new micro-licence categories would provide an entry-point into the legal market. It quickly became apparent, however, that grey-market growers looking to transition face a range of challenges: zoning and land-use restrictions, lack of access to financing, high start-up and compliance costs. Cannabis Professional went to Nelson, B.C., the heart of B.C.’s incumbent craft cannabis industry, to hear how growers are navigating these challenges and how governments – federal, provincial and municipal – could do more to support the craft industry, rather than competing with it.

By the end of 2019, 10 micro-cultivators have been licensed, with many more expected to be approved in the coming months. Despite the slow start, the micro space will be one to watch in 2020, as consumers continue to demand high quality cannabis that is not always available from industrial-scale grows. – Mark Rendell

Micro madness: How B.C.’s craft cannabis industry is losing out on legalization


June

A plague on profits: Mould, pests thrive as industry struggles to grow pot at scale

In 2019, most of the large publicly traded LPs missed their production forecasts in a dramatic fashion. Some of this had to do with licensing delays. But a lot of it had to do with more quotidian agriculture problems that pot CEOs seldom talk about: pests, diseases and crop loss. Cannabis Professional spoke with pest specialists, cannabis breeders and agriculture scientists about the pervasive growing problems in the industry that are driven by a combination of poor greenhouse retrofits, underdeveloped genetics and lack of expertise in industrial scale agriculture. Some of these problems should improve through 2020 as growing spaces are dialed-in and workforces become more skilled. But it will take years of breeding and genetic modification before cannabis plants are as resilient in an industrial-scale greenhouse as a tomato or poinsettia. – Mark Rendell

A plague on profits: Mould, pests thrive as industry struggles to grow pot at scale


October

Product lays on a card at the Dosecann manufacturing plant in Charlottetown, PEI.

JOHN MORRIS/The Globe and Mail

The verdict is in, and Year One of legalized cannabis in Canada was a dud

After 23 days spent driving nearly 8,000 km across Canada, the consistent message from people in every province involved in every aspect of the legal cannabis supply chain was one of disappointment with the first year of the country’s post-prohibition era. This story highlights the most significant issues cannabis industry insiders believe held them back from eroding more of the illegal players’ market share and details what would make the legal industry more competitive with their criminal rivals in 2020. –Jameson Berkow

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The verdict is in, and Year One of legalized cannabis in Canada was a dud


Alberta’s pot retailers take the lead on sector competition, pricing

Canada’s burgeoning cannabis retail scene has been anti-climactic in many regions as regulators in several provinces have been slow to grant permits. Despite the setback of a six-month moratorium on retail licences due to the national supply shortage in early 2019, Alberta – which privatized adult-use cannabis retail but placed a government agency in control of the wholesale market – has issued more than 375 permits. This makes Alberta the province with, by far, the most recreational pot stores and retailers here have consequently taken the lead on the young sector’s competition, pricing and emerging loyalty programs. These techniques, which signal a quickly maturing industry, make Alberta’s legal pot scene a harbinger for what is expected to take place in the country’s biggest consumer market Ontario in 2020. Starting in April, the Alcohol and Gaming Commission of Ontario will award around 20 new licences a month with no cap on the province’s total number. –Marcy Nicholson

Alberta’s pot retailers take the lead on sector competition, pricing


November

With little access to fresh cash, Canada’s licensed producers now face a new reality.

GEOFF ROBINS

All dried up: How Bay Street cashed in on the cannabis frenzy before the carnage

Poor financial results; Bruce Linton’s firing; the debacle at CannTrust — these all added fuel to the brutal sell-off in cannabis stocks over the past nine months. The roots of the market rout, however, are deeper. Mark Rendell and Tim Kildaze looked at the way stock promotion, easy money, wild speculation and financial engineering created a bubble that was bound to burst. Bay Street made a killing in the process; retail investors were often left in the lurch. There’s no end in sight for the capital markets crisis gripping the industry. Companies premised on access to easy money are having to abandon projects and some are struggling to survive. The first LP bankruptcies began near the end of 2019. Watch for a shakeout in 2020.

All dried up: How Bay Street cashed in on the cannabis frenzy before the carnage


Alberta to raise indoor pot growers’ tax as non-agricultural businesses

More than one year after Canada legalized recreational cannabis and licensed producers (LPs) set up costly indoor cultivation facilities across the country – many building their operations in lower-costing rural areas in Alberta where significant portions of their buildings were tax-exempt due to their agricultural status – these companies were hit with an unexpected financial headwind that could raise prices in 2020.

In November, the Alberta Municipal Affairs minister said that pot growing facilities will be taxed as commercial businesses rather than tax-exempt agricultural operations starting in 2020. This was an unexpected blow to many LPs that have yet to turn profits and expectations are that this increased cost will be passed along to consumers. We will be watching to see if this extra expense results in sticker shock at the retail level, as the legal market struggles to compete with the lower-priced black market that dominate pot purchases in 2019. – Marcy Nicholson

Alberta to raise indoor pot growers’ tax as non-agricultural businesses


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