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Cannabis and the Greatest Tailwind



June 11, 2018

As we approach the final destination in Canada’s journey toward legalized recreational cannabis, it’s important to recognize that we’re about to experience a big moment. After all, it’s not every year that prohibition ends for a controlled substance! The steps taken have been significant and brave, but as they say, every journey begins with a first step – what was once thought almost unthinkable is almost upon us.

There are obvious and immediate beneficiaries in the cannabis production and distribution space, but the biggest tailwind for this industry will be something that people don’t think about as much – changing sentiment towards something that has held a stigma for so long. I think you have to see past the short-term to see the real potential. Yes, there will be immediate adopters in a country that already has a lot of pot smokers – in fact with some of the higher usage rates in the world1. But a real opportunity also lies in grabbing fresh market share and addressing cannabis as a product with varied and distinct benefits that could replace some existing drugs – including opioid painkillers, sleep aids, anti-inflamatories, etc. I have spoken to people who haven’t smoked in 20 years but are taking another look at it as it starts to get de-stigmatized, in large part by the act of decriminalization itself.

I believe the next wave in removing the stigma will be within the medical industry. Some cannabis seekers are currently being turned away by their family doctors who admittedly know little about it. I think this tide will turn as doctors slowly embrace the variety of marijuana strains and their potential applications. There are types of marijuana that have virtually no THC in them, instead containing CBD – giving the user no high but potentially effective for muscle aches, insomnia, anxiety, etc.

Where’s the fun in that? Well, that’s really the point – the recreational market will be about fun and social lubricating. The ‘un-fun’ side will blossom slowly and surely as the benefits of marijuana are better understood and exploited. The potential for cannabis to take the place of opioids and other drugs for pain and discomfort is yet to be fully understood. No longer do you have to meet some guy in a back alley. Now, you can visit beautiful websites offering products with nice packaging and very detailed descriptions. And you can get those products discreetly shipped to your home. Alcohol doesn’t really have a recreational and medical crossover, whereas cannabis does. As producers find new ways to engineer and position it, I believe cannabis will eventually become very well accepted by society.

In fact, it’s happening already. Within the U.S., national pollster Gallup notes that nearly two-thirds of all respondents in its October 2017 poll favoured the idea of legalizing weed2. That's up 39 percentage points from where support stood for legalization in 1995. The existing user base may lead the way – but time, education and understanding will work for the long haul. The greatest tailwind to cannabis will be a changing attitude and acceptance. As the stigma and judgement dissolves, that could bode very well for long-term cannabis investors.

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The views/opinions expressed herein may not necessarily be the views of Horizons ETFs Management (Canada) Inc. All comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.

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