With cannabis legalization around the corner in Canada, more companies than ever are lining up to be licensed producers (LPs).
On top of the 115 companies that have already been granted licenses, 588 applicants were waiting in the LP pipeline as of early August, according to data provided by Health Canada.
Ontario leads the way with 198 applicants, followed by British Columbia (173), Alberta (76) and Quebec (69).
The breakdown of the 115 companies that have been issued licenses (companies may hold more than one type of license) includes:
- 111 cultivation licenses
- 62 dried sales (four sales-only locations)
- 51 oil production licenses
- 25 oil sales licenses (three sales-only locations)
With recreational cannabis sales set to begin Oct. 17, interest in marijuana cultivation licenses has soared. The number of applicants to cultivate cannabis in Canada rose 150% on-year in the first quarter of 2018.
And in July, facilities licensed by the Canadian government to cultivate cannabis surpassed 1 million square meters (11 million square feet) for the first time, according to data from Health Canada.
Experts predict serious competition in the licensed producer space in the coming years, with some forecasting significant consolidation. Others believe companies that fail to distinguish themselves will follow a different path.
“I think there’s going to be disintegration,” Canopy Growth CEO Bruce Linton told Marijuana Business Daily at MJBizConINT’L in Toronto.
“Disintegration happens when people make promises at valuations that can’t possibly be fulfilled, because they have no off-take agreements, they have no chance of doing anything potentially other than building inventory, and probably a third of the money that’s being doled out isn’t actually ever going to turn into any inventory.”
Canadian cannabis companies have gone on a buying spree this year, as capital continues to pour into the sector.
There were 48 deals in the first half of 2018 for a total disclosed value of 5.2 billion Canadian dollars ($3.9 billion), according to a recent report by PricewaterhouseCoopers Canada (PwC).
A report from New York-based Viridian Capital Advisors, which monitors merger and acquisition activity in the marijuana market, Canada-based cannabis companies raised CA$3.2 billion to fund domestic and international expansion plans in the first half of this year.