There's no denying that marijuana has the potential to be a big-money business. Every year, tens of billions of dollars in sales are being conducted in the black market, which provides plenty of hope that these consumers will steadily be transitioned to legal channels over time.

However, this hope didn't translate into positive results for cannabis stocks in 2019. Despite being the first industrialized country to legalize recreational marijuana in the modern era, Canada is viewed as having dropped the ball, with sales and income statements from pot stocks largely underwhelming.

And yet, the Canadian pot industry still managed to eke out a milestone that seemed almost impossible just a few months prior.

Dried cannabis buds lying atop a messy pile of cash.

Image source: Getty Images.

Canada's marijuana sales hit an unlikely milestone

Every month, Statistics Canada, the national statistics office for our northerly neighbor, releases retail sales data from two months prior. Since marijuana sales officially commenced on Oct. 17, 2018, licensed cannabis-store sales have been included in each of these reports. And given the tight regulatory nature of marijuana in Canada, the data is believed to be highly accurate.

Last week, Statistics Canada released sales data for the month of October, showing that marijuana sales in licensed dispensaries hit an all-time high of $128.94 million Canadian (about $97.93 million U.S.). But more importantly, it was the last piece of the puzzle needed to roughly determine how much cannabis Canada sold over its trailing first year since adult-use weed sales began on Oct. 17, 2018.

Here's a look at every bit of retail sales data we've received from Health Canada since recreational marijuana sales commenced (all figures in Canadian dollars, with U.S. dollar equivalency in parenthesis):

  • October (2018): CA$53.68 million ($40.77 million)
  • November (2018): CA$53.73 million ($40.81 million)
  • December (2018): CA$57.34 million ($43.55 million)
  • January: CA$54.88 million ($41.68 million)
  • February: CA$51.66 million ($39.24 million)
  • March: CA$60.94 million ($46.28 million)
  • April: CA$74.58 million ($56.64 million)
  • May: CA$85.81 million ($65.17 million)
  • June: CA$91.46 million ($69.46 million)
  • July: CA$107.36 million ($81.54 million)
  • August: CA$125.95 million ($95.66 million)
  • September: CA$122.93 million ($93.97 million)
  • October: CA$128.94 million ($97.93 million)

Since the very first sale on Oct. 17, 2018 through Oct. 31, 2019, Canada has racked up $1.069 billion ($812.1 million) in aggregate cannabis retail revenue. 

A half-emptied hourglass on a table that's next to a calendar.

Image source: Getty Images.

But you'll note that this estimate factors in all of October 2019's sales, rather than those sales that would have occurred through the 16th (i.e., the end of the first trailing year of adult-use weed sales). If we use an imperfect measure and divide 16 into 31 to account for the percentage of the month we're interested in, and then multiply this percentage into Oct. 2019's total sales, we get CA$66.55 million. Again, this isn't a perfect way of doing things, but it's the easiest method available since Statistics Canada isn't providing a true trailing-12-month breakout.

The point is that once we break out trailing sales data this way, Canadian weed sales ever-so-slightly surpass the CA$1 billion mark over the first 365 days. That's a pretty impressive milestone, all problems considered.

Here's why Canadian pot stocks aren't reaching their potential

Then again, there's no overlooking the fact that Wall Street and investors were expecting so much more than CA$1 billion in first-year sales.

One of the biggest problems for Canadian pot stocks is that the country's most populous province, Ontario, has slow-stepped the rollout of physical dispensaries. Ontario has been using a lottery system to award retail licenses in the province which, as of the one-year anniversary of recreational weed sales, led to a meager 24 stores being open. Do the math, and you'll see that this works out to one open dispensary for every 604,000 people in Ontario. Without a reasonable number of avenues with which to reach consumers, legal product has been bottlenecked in Ontario, while black-market marijuana has blossomed.

For instance, Aurora Cannabis (NYSE:ACB), the projected leader in peak production, somewhat recently announced that it would be halting construction on its flagship Aurora Sun facility in Alberta and its Aurora Nordic 2 grow farm in Denmark. Although this is partly a cost-cutting move designed to reduce cash outlays for Aurora, it's also being made because Ontario doesn't have its act together. Utilizing only 238,000 square feet of growing space at Aurora Sun (a projected 1.62-million-square-foot grow farm), Aurora Cannabis has effectively cut its annual run-rate output by mid-2020 in half. Aurora isn't alone, either, with around 1 million kilos of peak output currently on standby.

A tag that says edibles and a cannabis leaf lying atop an assortment of cookies and brownies.

Image source: Getty Images.

Another problem for the Canadian pot industry is regulatory agency Health Canada. For example, when the year began, derivatives, such as edibles, vapes, and infused beverages, were expected to hit dispensary shelves by no later than October. However, only the regulations concerning derivatives went into effect by the one-year anniversary of recreational weed sales. Actual derivatives didn't start hitting shelves until about a week-and-a-half ago. This delay has proved costly, considering that derivatives are a much higher-margin product than traditional dried flower.

Furthermore, derivatives aren't simply going to flood the marketplace, given that they're subject to the same supply constraints that have plagued dried flower since Oct. 2018.

To a lesser extent, Health Canada has also been to blame for long wait times to grow, process, and sell marijuana. It entered the year with a licensing backlog north of 800. As a result, some growers have had to wait longer than a year to get the green light to plant or sell cannabis.

Suffice it to say, while sales are moving in the right direction in Canada, the maturation of the industry isn't going to occur overnight. This is a work in progress that's going to take numerous quarters, if not a few years, to get right.