Market experience, cultural differences might prove to be the decisive factors
While Canada has grabbed headlines with its large-scale legalization of recreational marijuana last week, investors might want to hold on to their funds as U.S. pot companies still have much to bring to the table, observers said.
“The Canadians have a first-mover advantage in large-scale production, large-scale farming, large-scale commodity input, but the U.S. has an edge in brands and the consumer experience,” Green Thumb Industries Inc. CEO Ben Kovler told Bloomberg.
“[U.S. firms are] not growing the hops or the barley, we’re making the beer; we’re not tomato farmers, we’re making Heinz ketchup,” Kovler boasted.
Also, while Canada has so far proven to be a market leader on both sides of the border due to the illegal status of the plant in the U.S., such a head start will not last for long, according to Afzal Hasan, president and general counsel at the Ottawa-based pot investment company CannaRoyalty Corp.
“There is literally no industry in the world that we have an advantage in,” Hasan explained. “‘Our most prolific companies, Nortel, BlackBerry, Bombardier -- we’re not good at running businesses, period, and it has to do with our culture. We’re not as aggressive and competitive and capitalistic as the folks down south.”
“The people that for whatever foolish reason thought Canada was going to dominate the world of cannabis, they need to disabuse themselves of that notion because it was never founded on any reality.”
Read more: Major U.S. cannabis company prepares to trade in Canada
Earlier last week, market observers advised the Canadian cannabis sector to temper its expectations, as shifting investor viewpoints in next few quarters will prove to be the real gut check for the nascent industry.
“These have all been concept stocks and they’re going to actually have to be real companies in another few months, which I think a lot of guys are terrified about,” Purpose Marijuana Opportunities Fund manager Greg Taylor stated.
Taylor added that companies trading at “more realistic valuations” like CannTrust Holdings Inc., Hexo Corp. and Organigram Holdings Inc. will be the most reliable bets, and that low production costs will become a major factor in their success.
