Licensed v. Funded Capacity.
Funded capacity is definitely something to consider when evaluating the long term prospects of a Canadian LP, but licensed capacity is where the rubber meets the road. As we have seen in Colorado, three or fours years into recreational legalization the price of marijuana starts to drop as massive scales begin to drive down prices.
LICENSED CAPACITY (as of February 16, 2018):
Canopy: 20,650 KG
Organigram: 16,500 KG
Aurora: 8,800 KG
Aphria: 9,000 KG
MedReleaf: 12,600 KG
Of course, all the big players will point to early 2019 as when they are anticipated to finish building their massive grow operations. To believe that these dates are attainable, one would have to dismiss the thought of construction delays, permit delays, inspection delays or weather delays. Its not easy to build in the winter in Canada. Even if they are able to overcome these obstacles, what we are left with is waiting for Health Canada to approve these facilities for licensed capacity. It has taken Health Canada, on average, at least two months to license a facility that sends in their application and videos for expansion approval. So, if all the big players are able to get their applications and videos into Health Canada by January 1,2019, that means that they will be licensed to grow by March 1,2019.
After the companies are licensed to grow, then they will start to plant their crops to harvest in 3-4 months. So, we are looking at around June 15, 2019 before these big players are bringing in these massive quantities into the market. Estimating that the recreational market is up and running on August 15, 2018, that means it will be 10 months before any of the large players are able to bring scale to the market.
Moreover, Organigram’s expansion plans are to increase to 25,000 KG by the end of May 2018. With a 2-3 month wait time for Health Canada approval, in August of 2019 Organigram will become the largest licensed capacity producer in Canada.What does the first mover advantage bring to the table? It makes sure that the provinces or private retailers that decide to sign Letters of Intent with Organigram will have sufficient supply to satiate the market.
