Report boosts pot producers
Federal task force recommendations support commercial free market
The recreational market for marijuana should allow for a “diversity” of companies to sell through storefronts and mailorders, but limit advertising and marketing of brands, suggested a federal task force report released Tuesday.
Canadian marijuana stocks moved higher after the federal task force on marijuana legalization released its 106-page report of 80 recommendations for the government’s planned end to cannabis prohibition.
“We are the largest developed country to ever move on legalization,” task force chair and former Liberal cabinet minister Anne McLellan said.
The five-month long process included visits to legal markets including Colorado, Washington and Uruguay.
“Now is the time to move away from a system that for decades has been based on prohibition of cannabis into a regulated market.”
The recommendations were broadly supportive of a commercial free market for recreational marijuana, suggesting the larger market rollout be based on the backbone of the existing licensed cannabis production regulations.
“They got it,” said Cam Battley, executive vice-president at Aurora Cannabis Inc.
Shares in Aurora Cannabis climbed 6.09 per cent to close at $2.44 in Tuesday trading.
“They took a comprehensive and mature approach and ensured the protection and maintenance of the medical system. And they provided a multitude of distribution channels which will mean better access and more choice for consumers.”
Shares in Canopy Growth Corp. — the largest Canadian producer, considered the bellwether for the industry — gained 7.9 per cent to close at $10.79, while Aphria Inc. shares rose nearly 5.33 per cent to $5.34 as investors digested the industry implications of the framework.
McLellan said the task force would like to see a “diversity” of producers of all sizes — and even bring in some who are currently growing illegally if they can meet the standards of the new regime.
“The government needs to understand the value of a diverse market with growers of diferent sizes and, arguably, diferent expertise,” McLellan said.
The report also advised the government to control the size of the market to prevent oversupply, by limiting the number of licences doled out or the total amount suppliers are allowed to produce — another piece of good news for those already licensed under the medical system.
The recommendations are a big win for the fewer than 40 existing licensed marijuana producers, said Jason Zandberg, an analyst at PI Financial.
“I would expect that the big producers that are in the market today are the big producers that would be in under a recreational model.”
The report also advised allowing the product to be sold at retail outlets in addition to expansion of the mail-order system, the only legal channel currently available.
Retail outlets will provide easier and faster access for customers, while including the mail order system will enable the recreational market to function even if provinces take a while to figure out exact distribution models, Battley said. It also allows them to cut out the middle man.
“That will have zero impact on communities, so while the provinces decide on retail solutions, customers will still be able to get product.”
Industry insiders appeared unfazed that the task force rejected the idea of allowing marijuana to be sold at outlets that also carry alcohol or tobacco.
The Ontario government has suggested it would like to see cannabis sold through the LCBO.