Canadian cannabis producers brace for entry of alcohol, tobacco firms

Three-quarters of Canadian cannabis producers expect big tobacco, pharmaceutical and alcohol companies to muscle their way into the marijuana sector over the next three years.

Recognizing there is substantial opportunity in the cannabis sector, established industries are expected to enter the space, such as Constellation Brands’ recent stake purchase of Canopy Growth, according to a survey by EY consultancy firm.

The survey of licensed producers also suggests the recent wave of consolidation is just the beginning of a trend in which the industry is dominated by a few large players post-legalization.

According to surveyed companies, areas that are ripe for heavy investment in the next three years are clinical trials (50%); growing capacity (37%); IT such as automation and e-commerce (37%); human capital (25%) and processing or extract technologies (25%).

Other key takeaways from the survey:

  • Only 37% of licensed producers say they’re focused on scaling up capacity to meet anticipated post-legalization demand.
  • Such low interest in ramped-up production might stem from producers’ struggles to raise capital to support the cost.
  • The two highest barriers to entry are access to capital and the speed at which Health Canada is issuing licenses.
  • An uncertain regulatory environment is impeding companies’ ability to make strategic investments.
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