While Cannabis 2.0 is now upon, most consumers will not see the various edible products on store shelves or through provincial online stores any time soon. In fact, most people won’t see any new product until at least
late 2019.
It’s been over 13 months since recreational cannabis was legalized for adult use in Canada, and with the edibles, extracts, and topicals category recently legalized by Health Canada, the market is moving into what many envision as a brave new wave of consumption. Now, the big question remains – just how will the introduction of these new products impact the market and is there huge demand for these products?
Well, the numbers say so. Some 60 percent of cannabis users, and
an eyepopping 80 percent of non-users want to try out infused beverages. With the drinks offering a low-THC buzz, they could be an alternative to alcoholic beverages like beer and wine.
Of course, there’s no way to get the exact numbers at this point, but the speculators have taken aim at guessing how lucrative cannabis beverages could be.
Arcview Market Research, the California firm that collects data on the cannabis industry, estimates that the edibles market in the U.S. and Canada could top US$4.1 billion by 2022. Last February in a conference call with industry analysts, Molson Coors Brewing Co. president and CEO Mark Hunter predicted that the Canadian cannabis drinks market would eventually be worth, at the very least, $1.5 billion.
A
Stockhouse article from May 2019 detailed how big beverage was betting big on cannabis. Case in point was the large Joint Venture (JV) with
Sproutly Canada Inc. (
CSE: SPR,
OTCQB: SRUTF,
Forum) and New Brunswick-based
Moosehead Breweries Ltd. – one of several JVs between the alcohol and spirits industry with cannabis companies.
Organigram Holdings Inc. (
TSX-V.OGI,
OTC:OGI,
Forum) is focusing on high volume areas with
vape pens and a range of chocolates becoming available in Q1 2020. OGI is also looking to differentiate itself through dissolvable powders for beverages to “deliver an experience that’s novel.”
Let’s go back to the beginning with Cannabis 1.0.
Canada legalized adult-use cannabis in October 2018 with the
Cannabis Act, becoming the first G7 nation to do so. Legalization was met with much fanfare and investor excitement which, in turn, translated into a hyper-bullish outlook for operators in the space. In stage one, cannabis consumers got access to dried flower and oil extracts. However, consumer purchases have been more tepid than initially expected.
Many pot biz analysts point to the plethora of regulations as the reason why the financial numbers for the first year have been sobering, with some highly valued, publicly traded companies watching their stock prices tumble in recent months. Limited product offerings and iffy quality have not been attractive enough to entice all consumers away from the illicit market. Brands have found it difficult to connect with consumers because there are not enough retail outlets in the country and because of the Cannabis Act’s heavy restrictions on the promotion and marketing of cannabis and cannabis-related products.
Ontario has a population of 14.5 million people. Yet the province has issued only 75 cannabis retail licences to date. Once all locations are actually open, there will be roughly one store for every 193,000 people. On the other hand, Alberta currently has the most retail stores in the country with about 300, which is about one store for every 14,500 people. To compare, there are almost 3,000 liquor stores in Canada, with 739 in Ontario and 874 in Alberta. You do the arithmetic.
Canada’s second round of cannabis legalization means a new range of choices for buyers. Retailers will soon be able to stock shelves with:
- edibles: foods and beverages
- extracts: other ingestible products, such as capsules and tinctures
- plus, topicals: products applied to hair, skin, and nails.
These new items will give consumers far more options in addition to simply inhaling the plant. Although legislation has been in effect since October 17, actual sales won’t be seen until mid-December, according to Health Canada, because the regulator is requiring a 60-day review period for new products.
In keeping with the objective of mitigating health risks, these new products will have THC content limits imposed by Health Canada. Each edibles package will be restricted to 10 mg of THC, extracts will be limited to 10 milligrams per capsule or 1,000 mg per package, and topicals will be limited to 1,000 milligrams per package. Restrictions on advertising these new products have been reiterated, specifically the rule that products should not be “appealing to minors.” Edibles packaging will be child-resistant and plain, and it will include mandatory health warnings.
Stay tuned to Stockhouse for more developments in the Cannabis 2.0 space in the coming weeks.
FULL DISCLOSURE: Sproutly Canada Inc. and Organigram Holdings Inc. are clients of Stockhouse Publishing.