Cannabis Corner: No More Commodity Models

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street.

Aurora Cannabis Corp. (NYSE:ACB) remains a drag on sentiment throughout the cannabis industry after reporting a $1 billion loss. While this is not the closing bell for the company, it is a wake-up call.

The commodity sales model is simply broken. Too many opportunistic growers have flooded the market with low-quality plant product and gotten Canadian consumers habituated to the cheapest buzz possible.

That’s a bad business because until the giants can consolidate enough of the small suppliers and enforce discipline, everyone is in a race to the bottom. And that’s where ACB and its peers are now.

These companies need to entice consumers with higher-end merchandise and price points to match. People have talked for years about recombinant strains and tailored edible products. They just haven’t gotten any traction.

Part of the problem is that Canada was slow in approving sales of anything beyond basic “Cannabis 1.0” plant material and extracts. There just wasn’t an outlet for innovation or added value.

And in the meantime, consumers got used to fixed prices. Maybe they weren’t euphoric about the experience, but it was legal and met their needs.

Unfortunately, ACB says Cannabis 2.0 buying patterns are volatile. Consumer tastes are fickle. There’s no breakout hit yet, and until someone finds the lucky formula, new product development will be expensive.

Someone will find that formula. Until then, it looks like the 1.0 market has matured. ACB is one of the top players in the industry and its revenue growth has stalled.

When the giants stall, smaller competitors can seize market momentum with differentiated products that stand out from the status quo.

I’m watching those companies as the key to the next wave of investable cannabis stocks. But unless ACB or one of its big rivals step up fast, I’m writing them off for the time being.

share on:

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE


img
share on:

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader
LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader
LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener
LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program
LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader
LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor
LEARN MORE HERE