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Companies will adjust. Again, I don't get too granular, but the ability to grow good cannabis is underestimated in my opinion. I think there will be a turning point, where some premium cannabis will generate better pricing. Craft like.

BTW, I was in a craft beer bar in Rome, and found a wonderful 2008 beer, De Dolle Oerbier Special Reserva. IIRC, I paid $35 Euro's for what I think was 12OZ bottle. So, there are those who pay up for a nice vintage.



Yes, this might be true. However, I think there has been an implicit assumption that there might be $1 or 2 of profit per gram as an average profit margin for the whole industry, so $1-2 billion for the Canadian industry (at its present size, assuming the legal market eventually takes the whole market). That might make the whole industry worth $10-$40 billion. In Canada, at the peak, the Canadian pot producers were worth about $60 billion, which is counting a lot of chickens before they were hatched - they are all losing a lot of money, and they only have about 30% of the total market.

By my count, the total market cap of the biggest 9 Canadian producers is just under $18 billion, which seems more reasonable, but not if pot eventually goes to, say, $1 or $2 a gram, with maybe 20% margins on that. Using $2/g prices and a 20% margin, and 1 billion grams sold, $400 million a year is not much profit to be shared around by companies worth $20 billion (50x future earnings). And that is if they ever get to 20% after tax margins, which I very much doubt.

You raise the question of premium products, and to the extent that some company is able to persuade customers that it is worth paying a lot more for a higher quality product, that might add a fair bit of profit to that $400m figure. Beer is maybe a good comparison - the big volume producers, like Budweiser and Coors and Anheuser Busch surely do make a little more on premium products, but I doubt it's a large part of their total profit. The 2008 De Dolle Oerbier Special Reserva you were prepared to pay $35 for is probably very low volume, and I am guessing that the company that makes it is not rolling in money.

It is also not easy to guess who will be able to charge higher prices for premium products. It may depend on the kind of regulations that are set up in countries that have legalized. I am proud of Canada's legalization, and think it is very good policy, but it is accompanied by very strict limits to advertizing, marketing, and even labeling. So the kinds of strategies that might allow companies to establish premium brands would be difficult in Canada and I think you can not assume that differentiation will be easy in the US, either, assuming legalization eventually comes (which I do). Perhaps the West coast USA experience is different.

Regards, dt
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