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Merger madness: Canada’s marijuana industry enters consolidation phase
Canada’s cannabis industry is shedding its wild adolescence and maturing into adulthood as it prepar..

The proposed CanniMed and Aurora deal is a great example of that, he said. CanniMed is well established as a medical player looking to diversify into the lifestyle side of the sector. On the opposite side of the coin, Aurora wants to broaden by acquiring something more medically focused.
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In the Ernst & Young report, Canada’s licensed producers said that sort of consolidation is bound to continue.
“The majority of respondents believe that the cannabis industry will continue to consolidate,” the report said. “Inorganic growth is expected to persist, leaving a few large players.”
And no one, it seems, is immune. Even the country’s largest publicly traded cannabis producer is trying to navigate a quickly changing landscape.
Bruce Linton, the CEO Canopy Growth (formerly known as Tweed) told Ernst & Young he expects the field to narrow considerably.
Experts say the industry will consolidate to a few big growers and a bunch of “craft” producers making smaller amounts. (Seth Perlman/Associated Press)
“Over the long term, I see an industry with two or three major, relevant players and bunch of craft producers,” he was quoted as saying in the report.
New players
This is all happening against the backdrop of a quickly changing regulatory landscape. Rules are being written on the fly and the provinces aren’t necessarily all moving in the same direction or on the same timeline.
Another X factor is new players that haven’t jumped in yet but are no doubt readying to behind the scenes. Existing companies have carved out a toe-hold from which they can build a business. But those unknowns have forced them to guess how regulations will come down.
There are no sure bets, but when it comes to survival, size matters. Hence the mergers.
“It’s still a craft industry, even though you have people that have non-craft valuations.” Rifici says.
Canada’s next cash crop has pushed the industry into a mergers and acquistions phase. (Robert F. Bukaty/Canadian Press/Associated Press)
With the floodgates about to open, many firms are facing a looming capacity crunch. So producers who are licensed now are spending money hand over foot trying to maximize production. Canopy doubled its revenues in its second-quarter results but still lost more than $1 million. Linton told Ernst & Young that’s just part of the process at this stage.
Growing up fast
“You’re spending four times as much as you would normally in order to be ready for a year from now,” he said.
Many of these companies are likely just trying to stick around long enough to get bought out once the new laws are in place.
Much like adolescents , all companies grow up eventually. With a marijuana industry that Deloitte recently pegged as being worth almost $23 billion, perhaps we shouldn’t be surprised to see these recalcitrant teenagers don a suit and tie and start acting like grown-ups.
