Investors poured money into Canada's marijuana market, but one year after legalisation, the euphoria has evaporated.
When Canada became the first major industrialised nation to legalise recreational marijuana, visions of billions of dollars in profits inspired growers, retailers and investors, sending the stock market soaring in a so-called green rush.
A year later, the euphoria has vanished.
"No one wants to invest in it now," said John-Kurt Pliniussen, a professor of marketing at the Smith School of Business at Queen's University in Kingston, Ontario.
That is because those who have invested have generally lost money. During the first year after legalisation, the value of shares in Canada's six largest marijuana companies tumbled by an average of 56 per cent, according to stock price data.
The marijuana companies said a turnaround is only a matter of time, hoping a big step along the way will come December 16, when marijuana-laced drinks and foods will arrive in the legal market.
But the problems that plagued the first year remain.
One is that the provincial governments in Ontario and Quebec, whose residents account for about two-thirds of Canada's population, have opened or licensed legal pot shops at a glacial pace — despite a clear demand. Potential customers are still underserved with just 24 legal marijuana shops for Ontario's 17.5 million residents. So many are still buying on the black market.
And freed from taxation, the black market is generally cheaper across the country.
Another problem, many in the industry said, is that the elaborate regulatory structure for legal cannabis has been an impediment to sales. Canada's regulations were designed only to decriminalise marijuana use, not necessarily encourage it. The result is a system that mimics the country's approach to tobacco and largely blocks marketing and advertising.
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"This last year has been very painful," said Eric Kirzner, a professor emeritus of finance at the University of Toronto's Rotman School of Management, who compared the fate of marijuana stocks to earlier technology share crashes. "Marijuana is hardly the technology industry, but to me the stories are similar in the sense that we had all kinds of hype."
Pliniussen doesn't see the opening of the market to edibles as a turning point.
"I expect this to be just like slow ripples on a pond as opposed to a tsunami of excitement," he said. "What we have now is what we're going to have; this is it."
Despite the crushing business disappointments, there has been a bright spot: Prime Minister Justin Trudeau's experiment in legalising cannabis has not turned Canada into a stoner nation, as was widely feared.
Marijuana-impaired motorists are not menacing the nation's highways, and workers are not getting high on the job. There has not even been much change in marijuana use, except for a small rise among people over 65, according to Statistics Canada, the government census agency.
"It kind of fell flat," said Michael Amlung, a professor of psychiatry at McMaster University in Hamilton, Ontario, who studies marijuana use. "The overwhelmingly expected response has not happened."
For companies, the economic growing pains have been tough. Take Canopy Growth, the biggest Canadian grower.
Canopy's business has its headquarters in Smiths Falls, Ontario, once the home of Hershey Canada. A sprawling complex of marijuana growing and processing rooms replaced the assembly lines that once spat out thousands of chocolate bars and peanut butter cups each day.
These days, construction is booming at the plant, with new additions being built on either side of the former chocolate factory. Inside, along with the marijuana growing and processing rooms, chocolate making is back — on a vastly smaller scale and with a new added ingredient. Across the street, technicians are doing the final tweaks to equipment inside a brand-new, 150,000-square-foot bottling and canning plant that will soon make marijuana-infused drinks.
But during the first six months of its current fiscal year, Canopy lost 1.6 billion Canadian dollars. Bruce Linton, the company's founder, former chairman and chief executive who was once the industry's de facto spokesman, was fired earlier this year.
Among its problems, Canopy struggled with converting greenhouses in British Columbia and Quebec that once grew vegetables into ones producing something to smoke. It built costly systems in Smiths Falls to turn lower-quality plants into oil, only to find that Canadians overwhelming prefer to smoke the plants' dried flower buds.
And costs spiralled upward as it rushed to meet the new market's demands.
Constellation Brands, the U company that is Canopy's largest shareholder and also the owner of Corona beer and Robert Mondavi wine, has cut off further investment. It will install one of its executives in Linton's former place next month.
Canopy's shares, which hit CA$70 during the lead-up to legalisation are now down by about 66 per cent.
Rade Kovacevic, Canopy's president, is still optimistic.
"It's been a very exciting ride," said Kovacevic, despite the "short-term pain points."
He added that the "more exciting part" will come as edibles and other products become more widely available.
"We're not a company that's in this for the next three quarters; we're a company that's in this for next three decades," said Kovacevic, who started in the industry as a lobbyist for medical marijuana dispensaries.
Variations of the Canopy scenario have played out at most of its major competitors. Some have suffered worse problems.
For example, the growing license of CannTrust Holdings was suspended after Health Canada, the federal regulator, learned that the company used a false wall to hide an illicit cultivation area from inspectors.
The company's chief executive, a former banker, was fired, and the company is now under police investigation. Its stock is in danger of being removed from the TSX exchange in Toronto.
A major problem for growers generally is that it's still not easy for many Canadians to legally buy marijuana, particularly in Ontario.
Not long before legalisation, a Conservative government took power in the province and swiftly canceled a plan by the Liberal government it replaced to sell through government-owned stores.
But Amlung said research showed that Canadians overwhelmingly preferred buying marijuana in stores.
"Online they can't actually see the product," he said. "They can't smell the product — a lot of those things that are part of purchasing cannabis."
On Thursday, Ontario announced that it was lifting its limits on store licenses and will issue about 20 licenses monthly starting in March 2020. But for now, the lack of stores in Ontario as well as in Quebec help keep the black market afloat.
Surveys by Statistics Canada have found that only 28 per cent of cannabis buyers meet all of their marijuana needs through legal sources.
There is no legal marijuana shop in Smiths Falls; Canopy was not allowed to replace Hershey's factory outlet with one of its own. But nearby in Ottawa, population 1 million, Mimi Lam, a former investment banker, owns one of three legal shops in the national capital.
Strict marketing restrictions mean that passersby can't see into her store, Superette. But once customers pass through an ID check to prove that they are at least 19, they enter a shop that's a pastiche of a 1950s diner — one where marijuana buds sit in displays that would otherwise hold doughnuts and muffins.
One recent evening, most shoppers leaving Lam's shop, which is on the busy shopping street of an upper middle-class neighbourhood, declined to talk about their purchases.
One of the few people who would talk did so on the condition that she be identified only by her given name, Shauna. A university student, she said she feared using her full name might harm her employment prospects after graduation.
She said there was still stigma attached to using marijuana, adding that she used it to focus while studying. She said she switched to Superette from the illegal market over concerns about the safety of street drugs.
Unlike many people in Canada's marijuana trade, Lam is making money, although not as much as she had hoped. She said that for the industry to really succeed, the government needed to loosen regulations.
"This is a real opportunity for players in this country to really shine and show the rest of the world what we can do and push the boundaries of cannabis integration in society," she said.
Written by: Ian Austen
Photographs by: Chris Wattie
© 2019 THE NEW YORK TIMES