Lots of smoke

The distribution issues that have plagued the cannabis industry in the first 12 days of legalization are threatening to significantly impact the financial performance of major licensed producers, predicts GMP Securities analyst Martin Landry.

“The extremely limited distribution network in many provinces, fulfillment challenges in Ontario, inventory shortage in Quebec and LPs coping with limited availability of excise stamps may take several months to be resolved,” Landry wrote in a Monday morning note. “It becomes increasingly clear that recreational cannabis sales in 2018 will be much lower than previously expected.”

The LPs have been under tremendous financial constraint for the whole year since they have had to build up inventory for legalization. Plus, they have to deal with the legal lunacy of ten provinces. New Brunswick and Newfoundland were ready on day one. British Columbia has one store and the largest province of Canada has exactly zero retail stores!

Of course, the LPs aren't going to meet the lofty expectations in the short run. The analyst ought to take the blame for his dumb forecast.

Because of these logistical hiccups, GMP has downgraded its forecast of four major cannabis companies — Canopy Growth, Emblem Corp., Cronos Group and CannTrust Holdings.

Canopy Growth in particular, according to Landry, could see its FY19 sales affected not just because of distribution issues, but also because of a market strategy that involved only selling one strain of product on the OCS website.

"One strain"? On October 17, Canopy had eight different products in stock.

Today, Canopy has the following four products in stock:

• LBS Palm Tree CBD.
• LBS Moonbeam.
• Plain Packaging Balanced.
• Plain Packaging Balanced Milled.

They had two from DNA Genetics and two Tweed-branded for sale earlier but now those are out of stock. I would be very surprised to learn if they all count as "one strain".