What Does This Recent Milestone for Canadian Pot Companies Mean for Investors?

Canada updated its quarterly sales numbers for the nationwide cannabis industry on Sep. 4. During the second quarter, which lasted from April to June, household spending on unlicensed cannabis totaled 785 million Canadian dollars and was down 4.7% from the previous quarter. This number has declined in every period since the recreational market opened in Canada on October 17, 2018. In the legal market, CA$648 million was spent on recreational pot and CA$155 million was spent on medicinal marijuana, combining for a total of CA$803 million.

At first glance, this sounds huge for Canadian cannabis companies. It's the first time the legal marijuana market has come out ahead of the illicit market in terms of sales. But the win is coming at a cost: Much lower margins. Here's a look at why, despite a shrinking black market for marijuana, things may not get better for Canadian pot stocks.

The legal market's win in Q2 is proof that Canadian cannabis companies' focus --lowering prices for consumers -- is working. Original Stash is a value brand that pot producer HEXO (NYSE: HEXO) launched last October, specifically targeting the black market and boosting licit sales by offering goods at prices as low as CA$4.49 per gram, including tax. In January, Statistics Canada estimated the average price of illegal cannabis to be CA$5.73 per gram.

Source Fool.com