Questions raised by the first days of legalization in Canada

The whole world is talking about nothing else (although in France we're too busy talking about Mélenchon), Canada has just legalized cannabis And there’s widespread euphoria: endless lines, people who’ve been camping out since 3 a.m. to be the first to buy legal cannabis, and overjoyed cannabis enthusiasts indulging in a full-blown celebration. Nevertheless, beyond the initial euphoria, the legalization of cannabis in Canada raises a number of questions.

Will supply meet demand?

According to Alain Brunet, president of the SQDC, said the company is receiving 50 orders per minute, whether in-store or through its website. Demand is surging at a similar rate everywhere else, and some provinces are already experiencing stockouts on certain products: in Ontario on its website, as well as in Alberta and Manitoba. Some, such as the mayor of Montreal, Valérie Plante, attributes this surge in demand to the euphoria surrounding legalization. She refers to a «novelty effect» that «will fade.».

However, growing cannabis, like any agricultural product, takes time, and supply chains are not immediate, which means that shortages are likely to be prolonged. According to official statistics, 16 % of the Canadian population smoked in 2017, which amounts to nearly 6 million people, with only 120 producers. It will take some time for these producers to be able to meet the demand, especially since it is likely to increase.

Will the black market disappear?

Since it is currently impossible for Canadian producers to grow enough cannabis to meet demand, the black market will continue to exist for some time. Bill Blair, the minister in charge of reducing organized crime, plans to capture 25 % of the black market share by the end of 2018. This is quite ambitious given the current shortages—which began as early as the second day of legalization—and the ease of turning to a local dealer. Dealer networks are already well-established, and their prices are adjusting to legalization. Furthermore, there are no age restrictions on buying cannabis from a dealer, even though the penalties dealers face are quite dissuasive.

Is investing in cannabis still a good idea?

Investors have clearly understood that the sector is going through a period of adjustment. Since legalization took effect, cannabis company stocks have fallen by about 15 % on the stock market. However, they had increased by a similar amount in the days leading up to the legalization. Investors who benefited from a very strong run before legalization withdrew their money, both for profit and out of caution.

Investing before legalization and investing after legalization are not part of the same strategy at all. Before legalization, it was purely speculation, but now the cannabis sector will have to adapt to the realities of the industry and the market. The slow pace of this adaptation means that investing in cannabis now is a long-term strategy. Dramatic stock market movements are likely to reoccur as legalization approaches. edibles.

Will legalization backfire on Justin Trudeau?

Even though legalization gives the impression that everyone is satisfied, a survey shows that only a small fraction of Canadians (2 out of 10) are interested in legal cannabis. While the legalization plan is politically bold, it is also highly controversial. Perceptions of its success or failure will be a major issue in next year’s Canadian federal elections. It is still too early to tell how things will turn out. Justin Trudeau will surely go down in history as the prime minister who legalized cannabis in Canada, but he may pay a political price for it.

The conservative opposition condemns a «process [that] was rushed through for purely political reasons in order to meet a deadline he himself had set.» «Justin Trudeau is ignoring the very serious concerns raised by those who will have to deal with the consequences of his decisions,» said Pierre Paul-Hus, a Conservative MP. His colleague Gérard Deltell even donned mourning attire to underscore what he described as a dark day for Canada. He denounced the trivialization of cannabis and highlighted public health concerns.

Not a great day for Canada…
A sad day for Canada
A Sad Day at the Office pic.twitter.com/0qLEwxKdzn

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— Gérard Deltell (@gerarddeltell) October 17, 2018

Doctors, too, say they are concerned about the legalization of cannabis. The Canadian Medical Association Journal denounces «an uncontrolled national experiment that will pit the profits of cannabis producers and tax revenue on one side against the health of Canadians on the other.» Ms. Kesall, the newspaper’s editor-in-chief, points out that if there is increase in consumption, legalization will be a failure, and adds: «We cannot expect the cannabis industry to scale back its growth ambitions and set a goal of reducing consumption.» On this point, in fact, the cannabis industry is already lobbying for more lenient regulations.