More than one year after the first wave of legalization, Canadian cannabis lovers now have legal access to a broader range of cannabis products—well, almost. It will take some time before you see these products in store; but it’s still a landmark moment for the industry.
Those who haven’t been paying close attention to the Canadian cannabis market might have thought the legalization saga was sorted out last year, but legalization 1.0 only covered the basics like dried bud, pre-rolls, and oils.
Now, with the launch of new products like edibles, extracts, and topicals, the Canadian cannabis industry has more potential than ever to grow and expand. This development in the industry spells benefits for various parties in the sector. It offers more avenues for businesses to enter the legal market, increased opportunity for wholesale producers to sell their product to manufacturers, and more investment options for individuals eager to diversify their portfolio.
Adding to Canada’s cannabis product list
Canada’s second wave of cannabis legalization has opened the door to three new product categories—but because of Health Canada’s rule that retailers need to give 60 days notice before selling a new product, we won’t see these hit the market until December at the earliest.
However, as people start seeing these products pop up in their local cannabis stores there’s still room for them to explore and find the right one that fits their lifestyle. For retailers, that means more variety in the market, and more streams of revenue.
When extracts didn’t make the cut in October 2018, consumers and retailers alike were disappointed to say the least. A year later, savvy customers will now be able to pick up shatter, rosin, or distillate. Because of their high potency and efficacy, extracts have been favoured by experienced consumers. At the same time, however, it’s expected that vape pens will lead 40% of the extracts market in Canada. This could mean an entry point to the market for consumers who aren’t comfortable with traditional smoking methods but want to inhale cannabis.
Cannabis also just got a whole lot tastier. With so many snack trends, people are ready for just about any type of edible cannabis companies can dream up. However, manufacturers will have to get creative within the restrictions outlined by the government. Edibles must have a maximum 10mg of THC per plain, unadorned package and can in no way be appealing to children. That leaves cannabis-infused gummy bears out of the question.
Despite these limitations, it’s expected that 13% of Canadians will look to buy cannabis-infused products like edibles and beverages because they offer a more discreet way to consume the plant. These products alone could spell up to $1.6 billion in revenue for the industry.
Cannabis-infused balms, creams, and lotions are one of the fastest growing cannabis categories in the market. Because of their product variety (they can be used for cosmetic purposes or to relieve sore muscles, for instance), topicals are an easy way for the cannabis curious to get their foot in the door. They also provide an alternate application method that might better suit the needs of existing customers.
What legalization 2.0 brings to the table
Legalization 2.0 has the potential to be a valuable breath of fresh air for the Canadian cannabis market. Beyond the variety it offers new and established consumers, it also opens the door to businesses and investors alike.
No limit to business opportunities
According to a report by Deloitte, products like edibles, extracts, and topicals could inject an additional $2.7 billion into the Canadian cannabis market. A recent survey also suggested that these products would add another 3 million cannabis consumers. This is particularly important for retailers, as they can diversify their product base to capitalize on this influx.
Cannabis product manufacturers stand to benefit as well. Edibles, topicals, and extracts are all value-added cannabis products. This means that they are worth more than the sum of their parts and product makers are able to bring in higher profit margins from these categories than with standard bud alone. For growers, that translates to added demand and a growing opportunity to sell their bud wholesale to manufacturing businesses.
Where investors stand to win
New activity in the cannabis space means new channels for investors. Public companies in the space—both big and small—are exploring avenues for growth in this segment of the industry. Added to that, manufacturers and retailers that had the foresight to plan for this wave of legalization are likely to see additional growth in the near future as more customers enter the market. Cannabis producers that are capitalizing on partnerships with established retailers in other sectors, like chocolatiers or granola bar manufacturers, will also have a strong foothold in existing consumer markets. For investors that might feel like they missed their shot to get in early, this could be a second chance to see significant returns on their investment.
The launch of a new segment of Canada’s cannabis industry doesn’t come without its restrictions—but that doesn’t mean there aren’t opportunities to capitalize on. As the industry grows and develops, businesses, customers, and investors alike are bound to see the benefits.
Interested in learning more about the Canadian industry? Check out more of our blog.
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