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Canadian marijuana firms say illegal rivals costing them customers

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OTTAWA (Reuters) – Canada’s medical marijuana growers say a jump in the number of illegal marijuana dispensaries as the federal government decides how to regulate the drug is costing them customers.

Prime Minister Justin Trudeau promised during last year’s election campaign that his Liberals would legalize recreational marijuana, following Washington and Colorado in the United States.

While there are no official figures, industry experts say the pledge has encouraged illegal store fronts that compete with licensed producers to provide marijuana to Canadians with a medical prescription.

“They’ve definitely been emboldened with the election and you’ve seen a huge growth,” said Aaron Salz, analyst at Dundee Capital Markets who follows licensed producers including Mettrum Health MT.V and Aphria Inc APH.V

Licensed producers, who distribute marijuana by mail, note they must comply with rules set by the former Conservative government, increasing their relative costs.

“We’re basically competing against a store that buys their product from whoever is growing it in their basement,” said Denis Arsenault, CEO of producer OrganiGram OGI.V.

Former Toronto police chief Bill Blair, the government’s point man on legalization, emphasized the current laws remain in effect, but dispensaries have multiplied.

A Canadian court decision that medical marijuana patients have the right to grow their own cannabis is seen further encouraging dispensaries, which often buy their product from such growers.

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