From high flying to burnout, pot industry faces downturn five years post-legalization

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When Abi Roach thinks about the 20 years she spent fighting for Canada to legalize cannabis, she says pot legislation is like a clenched fist.

The analogy, which Roach first heard from a former Toronto councillor, represents the tight grip on the cannabis market that legislators held for centuries. It meant Roach had to exploit a grey area of the law to run her popular cannabis consumption space HotBox, which opened in 2000, and its customers were accustomed to looking over their shoulders for cops before walking through the door.

The biggest companies – Canopy Growth Corp., Aurora Cannabis Inc. and Tilray Brands Inc. – have shrunk their footprints, laid off thousands and grappled with balance sheets that reflect a turbulent market and a longer march to profitability than many once imagined. Canadians wanted more potent products in packaging that wasn’t dull. Others couldn't shake relationships with longtime dispensaries and dealers who could supply pot at a fraction of the price of the legal market.

"Everyone else followed, and so you saw this massive price deflation in the legal cannabis market," Azer said. For edibles, extracts and topicals, the duty is set at one cent per milligram of tetrahydrocannabinol, cannabis' active ingredient, in the product. Following a stint at the Ontario Cannabis Store, Roach became a head of product marketing at St. Thomas, Ont., business Mera Cannabis Corp., where staff recently calculated manufacturing costs for a 14-gram flower product were $15, but taxes amounted to $16.50.

“My dream ... maybe not in the next five years, but in the next decade, is that we can continue to move people from the unregulated market into the legal market to a point where the legal market is the only market.”The morning of legalization five years ago, a share in Canopy traded for about $68 and Aurora opened at $195. Their average stock prices over the past three months have been below $1.

 

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