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On this week’s episode of Free Lunch by The Peak, we sat down with Jay Rosenthal to discuss the challenges facing major cannabis players, and what’s next for the industry.
Why have the stocks of some major players plummeted?
“It’s affecting all the major players. Back in 2016-17, the ability to grow lots of cannabis directly impacted your stock price. But then when cannabis was legalized, a ton of supply flooded the market, and there wasn’t enough demand to justify those valuations. So the stocks tanked. People are buying more cannabis than ever, but it has not evened out to a successful and profitable business for everyone—this is a natural shaking-out process.”
Are people still buying cannabis on the black market?
“It's hard to pinpoint. In Ontario, I’d say over 50% of cannabis is bought legally. In California, that number is starting to trend downward. For starters, it’s hard to bring in legacy market growers from a regulatory perspective, but they grow the unique strains consumers want. And if the industry is too hard on the retail, grower, or producer level in terms of both taxes and regulations, everyone involved stays on, or starts reverting back to the legacy market.”
How could policy changes help the industry thrive?
“The additional excise taxes are burdensome on just the product itself. Also, the fact that provinces are the intermediaries in this scenario as the wholesaler brings in a whole lot of people to take a cut before it gets to the consumer. So these markups and taxes add to the price, but many consumers are price inflexible. New Brunswick has gone back on this and has introduced private-owned stores, which is the best way to drive down the black market.”
This interview has been edited for clarity and length. Listen to the full conversation here.