This is a copy of the September 8th edition of our weekly Newsletter, which we have been publishing since October 2015.
Having watched closely the evolution of the Canadian cannabis industry since 2014, we are in a great position to observe how much more rapidly the American legal cannabis companies are scaling their operations.
Despite an abundance of capital for the sector over the past few years, Canadian LPs on the whole have been generally slow to ramp up substantial revenue, something we blame on the regulator to some degree but also the structure of the market until just recently as well as challenges like limited retail distribution. Initially, all LPs had to pursue the same model of cultivation and sale of dried flower to end patients. Of course, the market has evolved, and we are certainly seeing many points of differentiation, including a focus on the medical or non-medical markets, the pursuit of non-Canadian markets, whether global or the U.S., and even an emphasis on certain parts of the supply chain. These important developments are something LP investors are following closely.
While most of the larger multi-state operators (MSOs) are newer companies than the larger Canadian LPs, many are generating revenue at higher levels already. MSOs are able to participate generally in a wider range of activity, including a substantial emphasis on retail, a part of the market that is not available to Canadian LPs. In contrast to the early days in Canada’s medical-only market, MSOs have the ability to participate in many different markets, ranging from medical-only to adult-use. Even within these markets, there is considerable diversity in terms of market structure, with some having very limited licensing and requiring vertical integration.
While the MSOs have scaled impressively in the early days, we note that access