Marijuana plants grow at a Bonify facility in Winnipeg, Manitoba, Canada.
If there’s one thing that’s still hazy in Canada’s nascent marijuana market, it’s how wide the margins are on that dime bag.
With less than nine months left before recreational cannabis becomes legal in the country, analysts and investors are still unclear who the big winners and losers will be. Some publicly traded pot companies don’t report how much a gram of dried bud costs them to make and if they do, the numbers aren’t uniformly calculated. Moreover, producer margins could start to shrink as provinces start to purchase pot wholesale.
Selling prices “will certainly cut in half perhaps from what they are now, and cost of production will matter,” said Mike Gorenstein, chief executive officer of Toronto-based Cronos Group Inc. “It’s not going to be 80 or 90 percent margins forever.”
The pending margin squeeze comes as investor optimism over recreational sales has sent valuations soaring. Canopy Growth Corp., the country’s first marijuana unicorn with a market cap of more than C$3 billion ($2.36 billion), has seen its share price rise more than 70 percent in the past 12 months, while Aurora Cannabis Inc. more than doubled. MedReleaf Corp. is up more than 70 percent since its June debut.
On Tuesday, shares of MedReleaf fell as much as 15 percent to C$15.67 in Toronto, while Canopy declined 5.4 percent and Aphria Inc. fell 5.6 percent. Aurora Cannabis gained as much as 16 percent to C$6.90, touching the highest intraday price on record.
Medical marijuana is currently sold direct to consumers for about C$7 to C$12 a gram, depending on quality. Prices for recreational pot could probably drop to C$4.50 to C$5 as provinces such as Ontario and Alberta plan to purchase marijuana wholesale, said Jason Zandberg, an analyst with