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Big Pot inevitable?

A new report suggests that 87 per cent of Canadian cannabis companies believe that consolidation is inevitable over the next three years, leaving only a few large players post-legalization.

Consultancy firm EY's survey of 11 licensed producers with varying size and scale — among the approximately 50 licensed producers in the country — also shows that 75 per cent of the respondents believe the market will be dominated by the entrance of big players such as tobacco, pharmaceuticals and alcohol.

The report says these established industries recognize that there is substantial opportunity in cannabis and are expected to enter this space and try to leverage their existing competencies and assets.

The majority of the study's participants also believe craft or niche players will grab a smaller share of the market through innovation, namely by creating new products or derivatives.

Speculation that a wave of consolidation is coming to Canada's marijuana industry, in which larger players buy smaller ones to build scale, was sparked last Wednesday when Saskatoon-based CanniMed Therapeutics Inc. (TSX:CMED) said it needed time to review an unsolicited takeover offer from Aurora Cannabis Inc. (TSX:ACB), a rival marijuana producer in Vancouver.

That same week, CanniMed announced it had reached a deal to acquire Toronto-based Newstrike Resources Ltd. (TSXV:HIP), a producer endorsed by members of rock band The Tragically Hip.

Aurora announced earlier today that it's proceeding with a hostile all-stock takeover attempt for CanniMed after failing to reach an agreement with the company's board by last Friday.



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