‘Absolutely horrible’: Cannabis industry expectations sliding after slow start to legal era

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‘Absolutely horrible’: Cannabis industry expectations being tempered after slow start to legal era

Soaring expectations for Canada’s cannabis industry are being tempered in some quarters after licensed producers reported what for the most part were underwhelming financial results in the first post-legalization period.

The firm now expects the Canadian cannabis industry to grow to US$5.2 billion by 2024, whereas in January it had forecast that the industry would be worth US$5.9 billion by 2022. But in the fourth quarter of 2018, which ended Dec. 31, 2019, it brought in revenue of just $5.6 million while operating expenses tripled from the previous quarter to $29.4 million.

On a conference call with analysts, Cronos’ chief executive Mike Gorenstein attributed the company’s lower-than-expected revenues to “complications” in the supply chain each time a supply agreement with a province is made. “There are a number of reasons for these low margins. First, the effect of the excise tax, which the LPs are trying to absorb. Then you have increased packaging costs associated with the recreational market, and producers are spending lots of money on getting around marketing prohibitions,” Rosen explained.

 

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