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Canada’s Cannabis Cartel – Cannabis News, Lifestyle

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Canada’s cannabis cartel is here. And they’ve always been here – big LPs like Canopy and Aurora. They’re just being patient, playing the waiting game. It may appear as if Canada has a robust craft cannabis sector. After all, there are over 800 licensed producers in this large but thinly populated country. And consumers prefer top-quality buds to subpar discounted brands.

But like with money and banks, telecommunications, oil, uranium, or even maple syrup – there is no free market. Canada is cartel country.

Legalization Hype

To understand Canada’s cannabis cartel, we have to return to 2018. To the eve of legalization. Bill C-45, the Cannabis Act, was more hype than substance. 

Legalization was a public health initiative taken to keep kids safe and profits out of the hands of organized crime. No word on liberty or ownership of your body. Nothing about the immoral and disastrous failings of the drug war. The same people who opposed cannabis all these years were now in a position to regulate its legality.

On the heels of C-45, investors rushed into the cannabis space. Some companies received billion-dollar valuations. Before cannabis was even legal, these companies were hiring thousands of employees.

Take Aurora, for example. On the eve of legalization, they had a $2-billion market cap. Aurora Cannabis began as a licensed producer under Stephen Harper’s now unconstitutional medical cannabis regulations. With recreational legalization, they were in the right place at the right time.

They sold investors with a vision of a 75,000-square-metre greenhouse called Aurora Sky. If completed, it would be the world’s largest indoor cannabis facility.

And they weren’t the only ones. Cannabis in Canada became more about investing in pipe dreams rather than the reality of Canadian cannabis. And that was precisely the point. Inflate the potential for a later payoff.

How Health Canada Regulations Created Canada’s Cannabis Cartel 

Canada's Cannabis Cartel

Health Canada regulations helped create Canada’s cannabis cartel. Despite moving from medical to recreational, Canada’s cannabis regulations still demand LPs produce pharmaceutical cannabis. That is, irradiated cannabis deprived of moisture and flavour. Then, throw in the cost of wasteful plastics and government taxes, and Health Canada’s strict zero-tolerance on marketing. And what you’ve got is a Soviet-style cannabis industry in Canada.

LPs have had to rely on THC percentages to distinguish themselves from the competition with no legal advertising. Aurora did this initially, but as other LPs and craft producers have improved their yields, Aurora’s share of the market (at the beginning of 2022) has dropped to 3 percent.

And that gets the crux of what’s happening in Canada, why Canada’s cannabis cartel is already here and just biding its time.

How It Happened

LPs began by inflating the potential of the cannabis market. Before legalization, it was apparent there wasn’t enough demand in the Canadian market alone. That’s why exports of BC Bud to the US were routine. There was a supply gut in the underground market.

But that didn’t stop LPs from forecasting record numbers. Canada’s top LPs, like Canopy and Aurora, indicated sales more than triple what the government was predicting. Aurora claimed it would grow a third of Canada’s cannabis. And despite the supply gut in the legacy market, Aurora kept building greenhouses.

But was it simply a mistake to overestimate the cannabis market? Was this a case of LPs getting high off their own supply?

When the first post-legalization sales earnings were made public, investors pulled out. Canadian pot stocks dropped in the spring of 2019, and Aurora reported losses of $26.6 million. 

The pandemic may have led to a spike in sales, but overall the effect has been negligible. Given the industry’s original estimation of how much cannabis they expected Canadians to buy and consume.

How Canada’s Cannabis Cartel is Inevitable

You can blame the excise tax if you want to know how Canada’s cannabis cartel is forming. 

The government claims its moral authority over free people and deems specific actions immoral, thus subject to taxation. If this sounds like something a secular liberal democracy shouldn’t be doing, join the club.

Nevertheless, Canada’s cannabis excise taxes take $1 per gram off wholesale flower. And that’s regardless of the production costs or the retail price. So if your wholesale price is $8 per gram, and your competitor is producing cannabis at $4 per gram, he’s essentially paying a higher tax for being more productive.

Large companies like Aurora can absorb excise taxes more than smaller craft companies. And that is how the cannabis cartel is forming. They know all they have to do is sell cannabis at a gross margin loss and wait for the craft competitors to starve. That is what is happening right now.

It may appear as if small craft growers are increasing their market share. They are, but they don’t have the volume to increase their margins. The group Stand for Craft says the only thing keeping the craft industry alive are the tax breaks and “flexibility” offered by Canada Revenue Agency.

The Canadian Cannabis LP Index has lost 88 percent of its value since legalization in 2018. Very few companies are profitable, and all the large ones are cash-flow negative.

The legacy market still accounts for 35 percent of cannabis consumed in Canada.

Canada’s Cannabis Cartel: An Inevitability? 

Canada's Cannabis Cartel

Was this all on purpose? Harper’s medical LPs were in the right place at the right time. They over predicated the market size, aggressively bought competitors, and gobbled up greenhouse companies and manufacturers.

The LPs had too much capital and applied it as quickly as possible in as many sectors as possible. They came in fast, made their money, then made out like bandits.

And the result? A struggling craft industry unlikely to survive beyond this decade. Especially if the US legalizes and cross-border trade becomes a thing.

The result will be a cannabis cartel in Canada consisting of the large LPs who were able to sell at a loss while waiting out the smaller guys. 

Was this the plan from the beginning? Or just an inevitable result of too much government interference in the marketplace? Another example of government regulators causing what they claim to protect consumers from?

Cannabis in Canada: A Lost Opportunity  

All the government had to do was remove cannabis from the criminal code. That’s it. Canada was already the world’s top cannabis producer. All the infrastructure and knowledge existed, especially in British Columbia, where their “BC Bud” cannabis was world-renowned for its quality and potency. 

All the government needed to do was legalize this $5-billion underground market.

But Health Canada’s regulations created the conditions for a cannabis cartel. Far from “protecting” consumers, all Health Canada’s rules did was increase the costs of doing business. 

To become a licensed producer, individuals had to form a company. And then, this company had to build a grow facility and wait for approval before it could begin growing. Many waited over a year.

No underground BC farmer would forgo a year of production and take on unnecessary costs, including tax forms and government applications running over 1,000 pages.

Canada’s cannabis cartel was inevitable. Even if that wasn’t the regulations’ intention, that was the consequence. Legal cannabis was accessible to only those with deep pockets. 

Or, as one former senior Aurora employee put it, on conditions of anonymity, “They [Aurora] weren’t selling cannabis – they were always just selling equity.”





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Has the Cannabis Bubble Popped? – Cannabis News, Lifestyle

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Has the cannabis bubble popped? Stocks are down, funds are drying up, and balance sheets are messy. Assets managed by cannabis funds are down by 45% in twelve months. They’ve reportedly lost $2.6 billion from $4.6 billion the previous year.

Morningstar, an investment research firm, provided the data.

What Happened?

Investors blame a popped cannabis bubble on several factors. First is the repeated failed attempts to pass federal legalization legislation in the United States. But funds focused on legal cannabis markets have also dropped. Data shows that 23 ETF funds have lost between 44.2% and 72% over 12 months.

Investors are seeing inflows dry up as well. In the first three months of 2022, they invested $95.6 million into cannabis funds, compared to $1.7 billion the year before.

However, last year’s activity may have had to do more with new listings on the London Stock Exchange. In the first five months of 2021, Oxford Cannabinoid Technologies, Kanabo Group, and MGC Pharmaceuticals doubled the size of the cannabis market.

Of course, like the rest of the sector, shares in these groups have dropped by 60% and 80%. Canadian LPs have faired a little better, but they’re still down over the same period. Aurora Cannabis is down 57%, Canopy Growth is down 74%, and Tilray is down 68%.

Putting Their Faith in Joe Biden 

cannabis bubble popped
Photo by: Gayatri Malhotra

Performance for cannabis funds doesn’t seem to follow any fundamentals, however. At the tail-end of 2020, cannabis funds picked up when media conglomerates declared Joe Biden the winner of the US presidential election. Funds rose further toward the inauguration when investors assumed the Democrats would make cannabis legalization a top priority. As well as passing legislation to make it easier for cannabis companies in the US to access the banking sector.

“Everybody is watching that one data point right now,” says Nawan Butt, manager of the Medical Cannabis and Wellness ETF. “Whether or not the Senate can pass the SAFE Act, which is expected to go through the Senate. If the SAFE Act gets passed, that will allow financial institutions to start helping the industry. This essentially means that industry participants will get better access to financing and better access to financial services. As well as, we’ll finally have investors in this space who aren’t afraid to be persecuted under federal laws for holding cannabis stocks.”

Blaming Consumers for A Popped Cannabis Bubble?

According to Morningstar figures, Global X is the worst performing cannabis ETF. Alec Lucas, research analyst at Global X, blamed consumers for pursuing “cheaper cannabis options sourced from illicit markets, which has contributed to slowing sales in markets such as Colorado, Illinois, Massachusetts, and Pennsylvania.” Adding, “Canadian companies have been unable to lift prices so as to remain competitive with illicit markets, leading to disappointing earnings.”

However, the truth may be more complex than consumers preferring legacy markets over pharmaceutical-grade cannabis.

Ethanol prices are up 35%, and this affects entrepreneurs using ethanol as a solvent for cannabis derivatives. Higher gas prices also strain margins for cannabis delivery services, including wholesale supply.

Easy Money At Fault for Popping the Cannabis Bubble?

The cannabis bubble may be popping because the era of easy money is coming to an end. Central banks worldwide are attempting to lift interest rates after over twenty years of keeping them near zero. Many economists suggest this manipulation of interest rates acts as an unnatural price control on the money supply. The result is a capital market that divorces itself from consumer demand.

In other words, market interest rates reflect consumer demand and the relative scarcity of capital. A central bank lowering interest rates below its market rate creates an illusion of more prosperity and, thus, the funds to realize long-term projects. However, as we’re discovering now, printing more money doesn’t create more resources. Banks and governments can blame supply chain disruptions on COVID or the Russians, but evidence points to monetary policy, namely easy money, being at fault.

An economy flush with easy money explains how Canada’s cannabis bubble grew to unprecedented heights. Large LPs are cash flow negative, and they have trouble competing with the legacy market and smaller craft producers. Despite their popularity in the financial world, the fundamentals are not there to support their business model. And with large LPs shutting down facilities and firing employees, it’s becoming more apparent every day that the cannabis bubble has popped.





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Terrapharma sells out to Aurora for $38M, Greybeard and Being swallowed

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Craft cannabis on Canada’s shelves in the legal hemisphere is an arguable term due to the inevitable fate much of the product undergoes. Corporate companies skip costs which sadly undermines quality as well as viability in the long run. In a $38M deal, Terrapharma, parenting Being Cannabis and Greybeard under Thrive, sells out so Aurora can make profit.

Aurora saving themselves, again

But is dissolving more brands of cannabis under Aurora and Big Bud in Cannada, such as Greybeard and Being, a necessary move?

In the press release, Aurora admits premium quality and innovation are keys to a successful horizon. After stocks crashed to pre-legalization value, the deal is Aurora’s hopeful reach for profitability by the desperate language of the news release. As Terrapharma sells out, their main subsidiary, Thrive, will take control of Aurora’s portfolio.

Aurora will acquire all issued and outstanding shares of Terrapharma Inc. The tentative date of closure for the deal is within Q4 2022 according to Aurora’s fiscal year.

Dealing genetics

Thrive will gain access to Aurora’s deep production output. In return, Aurora will absorb Terrapharma and it’s subsidiary, Thrive’s two main brands, Greybeard and Being Cannabis. Following this, genetics will be transferred to Aurora’s wheelhouse.

In the press release, the genetic line comes with promises, including a greater than 24% average THC output. Additionally, Thrive’s cultivars are allegedly disease resistant and high yielding which means lower production costs. The news release, however, made no mention of terpene production, genetic stability, or consistency.

In return, Terrapharma will receive two direct earnount bonuses if it can achieve set revenue goals after it sells out to Aurora. Even with Thrive at the helm of operational controls, though, will the bonus guarantee that Thrive’s production standards survive a shift to Big Bud ownership?

Thrive Farmgate.

Greybeard and Being Cannabis

Greybeard is an ‘award-winning’ brand that offers flowers and concentrates in Canada’s legal sector, a snail’s race. Whereas Being Cannabis sells sublingual cannabinoid strips. Thrive also managed to open one of the first farm-gate cannabis stores in Ontario, a retail model sorely lacking everywhere else in Canada.

But as the Canadian cannabis story goes, more craft cannabis sells out to one of few corporate giants. Aurora will simply swallow yet another smaller fish with a multi-million dollar deal.





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Holiday shopping made easy with festive cannabis gifts from Aurora

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Presented ByAurora

November 22, 2021

Find the perfect gift for every weed lover on your list this holiday season.


With the holiday season upon us, it’s time for people to start their annual bustling to find the gifts the loved ones on their lists will love. How better to spread some holiday cheer than by giving the gift of ganja?

Wrapping up some festive cannabis is a sure-fire way to win the holidays. Good weed is the gift that keeps on giving and with limited-edition holiday specials from your favourite Canadian brands, you can find something special for every cannasseur in your life.

Read on to find holiday highlights from Aurora and prepare for some very happy (and delightfully stoned) recipients.

For someone with a sweet tooth

cannabis gifts from Aurora
Courtesy of Aurora

Canna Cane Mints from Aurora Drift make for a sweet treat that’s everything you’d want in a stocking stuffer: They’re pocketable, approachably priced, and ultra-cute with two festively flavoured mints per pack. A limited-edition release for the holidays, each Canna Cane Mint contains 5mg THC per piece and provides a minty sweet flavour that’ll have any sweet-toothed recipient smitten.

Available in Manitoba on November 18th and Alberta on November 25th.

For the classic cannabis head

cannabis gifts from Aurora
Courtesy of Aurora

If you’re shopping for an OG smoker of discerning taste, someone who always shows up with the dankest strains in hand, you’re going to want to stick the landing with some excellent flower. The newest premium dried flower strains from San Rafael ‘71 were cultivated with the utmost care to create three impressive results: Stonefruit Sunset, Lemon Rocket, and Driftwood Diesel.

These special cultivars are the first to be bred and commercially released out of Aurora Coast, Aurora’s state-of-the-art research facility dedicated to cannabis breeding and the home of one of the largest genetic libraries in the world. After developing and screening over 7,000 individual plant genetics to find the most exciting combinations of high potency levels and rich terpene content, the Aurora Coast breeding team is ready to offer these three heavy-hitting gems.

Like all San Rafael ‘71 premium dried flower products, the new strains have been cultivated under the highest quality standards and are always hang dried and hand bottled.

Stonefruit Sunset is a hybrid derived from Gelato and Fuel cultivars, clocking in with 19-25% THC and giving off aromas of berries, sherbet, and gas. Lemon Rocket, a Fuel and Cake cross, is a 20%+ THC hybrid strain with impressively pungent aromas of gas with hints of lemon. Created from a mix of GMO and Fuel cultivars, Driftwood Diesel is an indica strain with 21-27% THC that gives off a memorable, strong gas and chem aroma and hits with earthy, nutty notes. Set someone up with any of these seriously beautiful buds and you’re primed to make anyone with a real love for good weed feel seen.

Available across Canada.

For the on-the-go giftee

cannabis gifts from Aurora
Courtesy of Aurora

This year, Daily Special has just the thing for your friend who never leaves the house without a 510 thread battery pocketed. The limited-edition Cranberry Sauce vape cart is hot and fresh for the holidays with an ~80% THC potency that packs a punch. The festive cranberry flavour is sure to be a crowd-pleaser around the holidays and the simple 1g 510 vape cart format and value price seals the deal for this being a no-brainer gift to add to your shopping list.

Available in Manitoba on November 18th and Alberta on November 25th.

For flower enthusiasts with class

Courtesy of Aurora

For the person in your life who only wants the finer things, look no further than this classic cultivar from Whistler Cannabis Co., Bubba Kush. Whistler Cannabis Co. was the first brand in Canada to earn the designation of certified organic cannabis growers. Each batch is grown in living soil, fed with glacier water, and hand harvested.

An indica-dominant hybrid, Bubba Kush is famed for its unforgettable scent and shows off a heavy frost of trichomes. From its deep purple and vibrant green leaves to its earthy, subtle-sweet flavours, Bubba Kush comes dressed to impress and will leave even the pickiest of flower enthusiasts more than satisfied.

Available in Alberta, British Columbia, and Ontario.


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