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Thursday, September 28, 2023

Lift Expo 2023: It’s All About Survival for Canadian Cannabis

The Canadian cannabis industry continues to face a roadmap of survival in 2023, as flagship Lift Expo makes its return to Toronto.

The event dedicated to all things business of cannabis up north, rounded out a variety of experts to discuss the current landscape for the industry and whether there is a light at the end of the tunnel.

Here the Investing News Network (INN) presents some takeaways from throughout the show.

Canadian cannabis faces reality as five year anniversary of legalization approaches

Cannabis was legalized for adult use in Canada back in 2018. Since then the industry has had a bevy of ups and downs while attempting to establish a safe and commercially successful marketplace.

Unrealistic expectations have eaten away at the optimism and excitement from the early days, and now it’s all about survival.

“If I go back to the cannabis user survey, the theme of the year for 2022 was just, I just want to survive, I’m not looking to win, I just want to survive… There was a lot of recognition that 2023 is going to look very much like 2022, but it’s going to be more intense in terms of pressures,” Rami El-Cheikh, EY Americas Cannabis Centre of Excellence Leader, tells me on the sidelines of the show floor.

The expert has reviewed the ins and outs of the current version of cannabis business in Canada and is desperately looking to feature some signs of hope for the industry.

“I’m looking to see how cannabis companies are going to fare and whether they’re going to be able to raise money or drastically change their business models,” he said.

When asked about the role of mergers and acquisitions in the immediate future for the cannabis industry in Canada, El-Cheikh said these options are still on the table but companies are becoming more surgical when deciding.

“I see more people making decisions based on business fundamentals, because cash is tight. Raising money is very, very difficult,” El-Cheikh said. “So they’re very careful.”

The expert is glad to see this strategy take over but only wishes it had been more popular from the start.

“I think if we had applied these principles and this discipline from the early days, probably we wouldn’t be in this position,” he said.

panelists on stage at lift expo

show floor at lift expo

show floor at lift expo

show floor at lift expo

Financing still difficult for cannabis operators

The topic of financing and how gridlock the capital raising aspect of running a cannabis business took center stage as the industry continues to struggle with capital.

David Goldstein, CEO of Stoke Inventory Partners, told the audience investors need to get off the sidelines and look for the opportunities in what he described as a down market.

“You’re an investor, so invest,” he said while propping up the role of financiers such as Stoke.

He pledged support to the cannabis industry players willing to engage with his firm and said operators should aim to find an “optimal mix of equity and debt.”

Similarly Mike Schilling, CEO of Community Savings Credit Union, said his firm is looking to establish a national footprint for cannabis businesses to bank with.

​The role of Lift amid cannabis chaos

Lindsey Roberts, senior vice president at Lift Events & Experiences, told INN events like Lift are still essential in bringing people from within the community together.

“In my opinion, people need events like this and at times like this (even) more than when things are good,” Roberts said.

The executive explained she views some of the conversations happening at this critical time in the industry more meaningful than if there was a boom in the space, as there used to be in the past.

“I think this is sad, but I think people know that some of the industry is going to have to fall before we can be healthy and profitable again,” Roberts told INN.

Last year’s Lift Expo in Toronto had a distinctly political flavor, as many calls to action were launched by industry stakeholders. When asked if that’s been the same this year, Roberts said she certainly sees an upheaval in the conversations around what has to change for the industry to survive.

“Something has to give,” Roberts said. “I will say the past six months have been the first time where people were a little hopeful that some of the government entities are starting to get it.”

Whether that leads to meaningful policy change in Canada, where operators have lamented the high costs attached to excise taxes and the restrictions in advertising, remains to be seen.

One sign of hope, as Roberts indicated, is a recent report by the Canadian Competition Bureau giving specific recommendations to the Federal Government about what can be done to incentivise a return to form for the industry and unlock its potential.

Amid common changes asked by the industry, the government agency also suggested for the limits of product THC dosing to be reconsidered and increased by the regulators.

​Investor takeaway

The Canadian cannabis industry isn’t the most desirable landscape for investors. Players in this space have struggled for years to survive and this trend is set to continue.

The latest edition of the Lift Expo offered another snapshot of how despite the dire reality of the industry, stakeholders are still looking to a better tomorrow. But for now, the name of the game remains survival.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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