The Canadian Imperial Bank of Commerce (CIBC) released a report Tuesday titled, Cannabis: Almost Showtime, which provides a very positive outlook on the pending legal cannabis industry in Canada.

However, some of the information presented in the report might make the booze industry a little wary.

The CIBC analysts predict that the Canadian cannabis industry will eclipse the alcohol industry with an expected $6.5 billion in legal rec sales by 2020. Canadians spent $5.1 billion on spirits and $7 billion on wine in 2017. Another $16 billion was spent on tobacco. 

According to the report, alcohol companies may “begin to buy and build their own cannabis facilities, racing to catch up to the existing LPs and bidding up asset prices to triple their current market caps,” if consumers quickly begin swapping alcohol for cannabis.

The report predicts a demand for 810,000 kilograms of cannabis grown by LPs with 95 percent being for non-medical adult use.

Of course, the report acknowledges that most of the revenue from these sales will benefit the provincial governments, and not private companies.

“The bulk of the value generated from this industry will accrue to Canada’s provinces. In fact, we estimate that provinces will generate over $3 billion of income, either in the form of earned profits or taxation revenues,” the CIBC analysts John Zamparo, Prakash Gowd and Mark Petrie wrote in the report.

“The provinces will hold all the cards when it comes to distribution… In fact, we estimate that provincial governments will capture a stunning 70 percent of industry profits.”

Private companies comparatively “will generate nearly $1 billion in EBITDA (earnings before interest, taxes, depreciation and amortization),” the report estimates, “as part of the shadow economy becomes legitimate business.”

The report also mentions that retailers will have to keep prices fairly low to get the industry going, else lost potential customers to the existing black market.

“Retailers who think $20/gram cannabis is attainable will quickly find consumers walking out of their stores, pulling out their phones, and DM-ing their previous dealers to see if they can still get that deal on Bruce Banner at $8/gram.”

The report also warns of the potential risk for investors who have invested in companies who have been enthusiastic in getting started, but are late to the game and have yet to build their facilities or sign deals with wholesale producers.

“We suspect some of the jobs that are “in progress” likely won’t ever see the light of day. It’s our view that for producers who are only now getting started, they probably will not secure supply agreements with buyers, and the capital required to complete these projects will disappear,” the authors write.

“There will be many losers along the way, and likely some industry titans that will be around a century from now.”