Canadian CANNAINVESTOR Magazine April / May 2018 | Page 240

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Basic economics dictate that transition from alcohol to cannabis will increase if the price of cannabis falls and this creates demand pressure. Please refer to our December article that focused on demand and supply if you want to learn more. A falling price has benefits as well because it will push out more of the black market who are unable to compete on price, quality, or consistency at the price points. That black market demand will transition to the legal market. We also know that from all reliable sources that domestic demand will outstrip domestic supply for quite some time. If you do not believe that, then even more reason to do due diligence to ensure you pick those that will survive that phase of the consolidation curve. Domestic demand does not factor in domestic supply for export or increased tourism and does not factor in the looming legalization of edibles and beverages. Vertical integration also mitigates some risk of falling prices of cannabis and in fact as costs of production also fall, profit margins of value added finished products increase. Think of a name brand chocolate bar. The base ingredients have fallen in price yet the price of the chocolate bar rises each year.