Manitoba’s Plans for Marijuana Could Create Significant Growth Opportunities

Canopy Growth Corp. (TSX:WEED) and other pot producers could see tremendous opportunity under Manitoba’s cannabis-friendly rules.

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Manitoba was the latest province to unveil its plan for marijuana sales and distribution, releasing details Tuesday on how the new industry will operate.

Province to use a hybrid model

The province will be responsible for obtaining the supply of marijuana through the Manitoba Liquor and Lotteries Corp. However, when it comes to actual sales, that will be done through private retail stores.

The framework is much less restrictive than what is planned for neighbouring Ontario. The goal for the province is to squeeze out the black market, and by being less restrictive on selling marijuana, that might make the result more feasible.

Applications to be taken for retail stores

Cannabis companies can already start applying for the right to open stores in the province. However, stores will have to meet certain restrictions, such as keeping a certain distance from schools. The ruling on where stores can set up shop will ultimately be up to individual municipalities to decide.

Online sales to be allowed

Unlike other provinces, Manitoba seems more inclined to allow pot to be sold online, as Premier Brian Pallister pointed out that “people don’t go to stores unless there’s a competitive service or product being offered there.” The province is focused on having cannabis widely accessible to the population.

No word on minimum age

Although the province did not specify a minimum age, we can assume it will likely follow suit with what we have seen in other provinces, where it has been either 18 or 19 years of age.

Only one licensed producer in Manitoba

Delta 9 Cannabis Inc. (CVE:NINE), a recently listed TSX Venture stock, is the only producer that currently has a licence in the province to sell medical marijuana. Canopy Growth Corp. (TSX:WEED) has recently partnered with Delta 9 as the two plan to work together to meet demand in the province and already have a distribution agreement set up.

Canopy Growth is trying to secure a supply deal with Manitoba similar to what it has in place with the province of New Brunswick.

With a lack of supply in Manitoba, we could see more new entrants try to get into the province. Aurora Cannabis Inc. (TSX:ACB) and MedReleaf Corp. (TSX:LEAF) are two big stocks that we’ve seen listed on the TSX this year, and more could be on the way.

Sales will be charged PST

Although rules around taxation were not unveiled, the premier did say that pot sales wouldn’t be exempt from PST. This will drive up the cost of cannabis, but it will also give the province an incentive to help the industry grow quickly in order to maximize revenue from sales taxes.

What this means for investors

Manitoba has made itself much more inviting to cannabis companies, and investors should be on the lookout for more producers trying to enter the province and take advantage of the relatively lax rules, especially compared to what we’ve seen in other parts of the country.

With restrictive rules expected to be in place in Ontario, we could see a lot of demand make its way to Manitoba, which could mean significant growth opportunities for cannabis companies operating in that province.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any stocks mentioned.

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