Y2KThe legalization of MJ in Canada is reminiscent of the whole Y2K non event. For those not familiar, a lot was made about the entire world’s computer systems crashing due to the fact that a lot of basic programming had not factored the “2” replacing the “1” in the year (1999 verses 2000). It seems silly in retrospect, but a lot of ‘consultants’ made a lot of money capitalizing on this fear. As we know now, 2000 came and went without any issues. Some were even claiming anything with a clock in it (microwave, VCR player) would cease to function. They all worked just fine.
It seems that legalization of MJ in Canada turned out to be (in the short term - which is the point) a non event. All the hype got replaced by the warts of a rollout that was anything but monumental. Foremost, severe restrictions on advertising made it next to impossible for companies to gain brand recognition, inclusive of draconian labelling. Then we got a Canada Post strike, Ontario only online, and of course supply issues (in my view because of severe limitations on financing due to it essentially being illegal to invest in these companies prior to legalization).
The skies did not open up on the 17th of October with MJ products raining down on us like Skittles. MJ market became just another business model in the eyes of some. Post 17th has been one heck of a hangover. Ironically, for some reason that escapes me it was seen as an endpoint rather than the starters pistol. Very perplexing. In my view, companies like Aphria are just getting off the ground, yet their stock price suggests it came to an end.
But it isn’t the end, it is the start. Demand is out stripping supply by a large margin. At some point APHA will be putting out post rec financials. Then as medical in Germany and Latin America start to crop up those numbers will get better. Cannabis will replace alcohol. I am about as middle aged average as one gets and I cannot wait for a product that tastes like wine, gives me some relaxation at a dinner or a party...but yet has no damaging effects of alcohol or the calories. Constellation was first to the party, Molson next...but others will follow.
Just like Tesla disrupted the automobile industry (GM shutting down some factories to shift focus, Volvo going all electric, Audi building a Tesla lookalike) cannibus will disrupt pharma. Just like the big three tried to kill Tesla at first, pharma will attempt to suffocate CBD products. However, that Shoppers Drug Mart announcement was a shot across the bow. Once health insurance starts covering CBD products there will be a tipping point.
I sincerely hope these last six weeks were the effects of MJ legalization coming off as an apparent non event. In the meantime, banks are now willing to invest in the growth of this industry, sales avenues are opening up (stores in Ontario, the mail moving) and a second wind is taking shape. I am still not sure why this marathon is seen by some as a sprint that ended in the 17th of October. Sheesh, things are just starting to get interesting!
I do believe APHA will do fine on its own, but given its products it seems inevitable that some alcohol/pharma/tobacco partnerships are inevitable. My only criticism of management is a month of no NRs on the heels of legalization seems unreasonable. This strikes me as a time when a company in a new business frontier should be keeping us abreast of what should be an exciting venture into a rather exciting future. We’ve been talking as though the end is near, when we have not even finished the first inning.