"Given the elevated inventory level currently held by provinces, we believe provinces and retailers will likely implement price markdowns to accelerate product sell-through"

Cannabis users will be able to spare leaving Santa a few grams with his milk and cookies according to analysts at BMO Capital Markets.

Tamy Chen and Peter Sklar told Yahoo Finance Canada they predict discounts near the end of the year, with price slashes on mid-range flower as new cannabis products rollout.

“Given the elevated inventory level currently held by provinces, which we have anecdotally heard is largely the ‘mid-range’ flower category, we believe provinces and retailers will likely implement price markdowns to accelerate product sell-through,” they told Yahoo in a written statement, noting that provinces and retailers may re-price wholesale products to licensed businesses.

“We are forecasting that prices received by licensed producers for recreational dried flower begin to decline in Q1 of 2020.”

The government has grappled with lower prices in the underground market.

Statistics Canada shows illegal cannabis sells for almost half the price this year, though the national average price is reportedly only about a dollar more.

Chen and Sklar think sales will continue to drop until Q4 this year, with 50 new stores opening in Ontario.

“Our industry forecast does not anticipate an acceleration in growth until Q2 of 2020, when we believe there will be meaningful store roll-outs in Ontario and some Rec 2.0 sales,” Chen and Sklar told Yahoo.

“Our near-term estimates reflect our view that market shares, and revenues, for licensed producers growing in large-scale facilities (Aphria, Aurora, Canopy, and Tilray) will be flat to down sequentially until more retail stores open.”

It may also allow smaller competitors a chance to capitalize on the market.

“We believe their flower products should have some quality differentiation relative to the over-saturated ‘mid-range’ flower segment,” Chen and Sklar said.

Though Yahoo reports the analysis assumes Ontario scraps its current wholesale model and Health Canada continues to roll out vape products despite the current crisis in the U.S.

• Email: bhristova@postmedia.com | Twitter: bobbyhristova

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