Analyst: Cannabis Companies Cautious About The First Half Of 2020

BofA Global Research last week published an analysis forecasting its view of the possible future for Canadian-based cannabis companies in the first half of 2020.

The firm met with representatives of Canada’s most valuable cannabis companies, including Aphria APHA, Aurora Cannabis ACB, Cronos Group CRON, Flowr FLWPF, Sundial SNDL and Tilray TLRY, during the ICR conference held in Orlando, Florida Jan. 13-14.

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First Half of 2020 Doesn’t Look So Good for Canadian LPs

The delayed rollout of "cannabis 2.0" products in Ontario is one of the main reasons behind the big players' dissatisfaction for the next six months.

Canada’s most populous province, where over 38% of the country’s population resides, had announced a plan to build 50 new cannabis stores (taking the total number up to 75), while licensing 20 new stores each month starting April. This intention has yet to be confirmed, and according to the report, some actors have expressed a more pessimistic prediction, in which no new stores would be built until April, and then only 10 new licenses would granted each month.

Flower To Go On Dominating The Market

Slow orders for edibles are another reason for discontent.

Cannabis 2.0 products entered the Canadian market last October, one year after flower became legal throughout the country. Edibles are the most successful category of 2.0 so far, but still got off to a slow start.

BofA analysts said stores prefer to be understocked than overstocked and are routinely running out of edible cannabis products. Reasons behind this are the fact that demand is higher than anticipated, and most retailers in provinces are ordering small batches - only enough for one or two weeks - to test which products do best.

The vaping category presents more uncertainty, as temporary bans due to concerns about vaping illnesses pose a threat on sales. BofA predicts retailers will need to drop down prices in order to drive sales.

As a consequence of 2.0’s slow start, flowers are expected to dominate the market in the short term.