Arguably the best piece of news for cannabis stocks today came when Deloitte issued a report on the future of the Canadian market. In their annual report on the cannabis industry they published recently, Deloitte said that it expects the consumer market to surge to new heights backed by Canada’s upcoming legalization of CBD-edibles.
While the country already legalized recreational cannabis usage, this only applied to the plant itself. Edibles, beverages, and other types of products were postponed to October 2019, where the government will issue new regulations regarding their use.
Since then, many companies in Canada have been taking the time to prepare, developing new products and developing partnerships with other companies better equipped to handle this new market.
Deloitte’s report, Nurturing new growth: Canada gets ready for Cannabis 2.0, went on to say that the CBD-edibles market in Canada alone will be worth $2.7 billion during the first year, not considering regular cannabis sales in the country. Overall, the global cannabis market is estimated to be worth around $100 billion, so the $2.7 billion added by CBD-edibles in Canada is fairly small in comparison.
However, edibles have a number of advantages in terms of a marketing perspective in comparison to plant use. The main one is that it’s easier to market edibles to non-typical cannabis consumers, who would have less of a stigma to trying a CBD-beverage, for example, as opposed to going to a dispensary and trying some weed.
“The edibles market alone is estimated to be worth at least $1.6 billion a year in Canada, with cannabis-infused beverages adding a further $529 million,” said Jennifer Lee, a partner and Deloitte Canada’s Cannabis National Leader. “According to our research and stakeholder interviews, much of this economic boost will be on top of current cannabis product spending. The introduction of cannabis-infused edibles will clearly threaten the alcohol industry as consumers are using the product for similar usage occasions.”
The report also goes on to mention that alcohol and tobacco companies were looking to move into the new market, especially since CBD-edibles are expected to take away some market share from these industries. Pharmaceutical companies have also been entering the market as well, as a number of consumers look at CBD for the health benefits, such as managing chronic pain, inflammation, and other ailments.
There have already been a number of major investments made in preparation for Canada’s second legalization. Constellation Brands (NYSE: STZ) is the first that comes to mind, having invested $4 billion dollars into Canopy Growth Corp (TSE: WEED)(NYSE: CGC). Molson Coors (NYSE: TAP) is another major brewing company, which also invested heavily into another smaller Canadian cannabis upstart, HEXO Corp (TSE: HEXO).
Canada’s second legalization will be another major opportunity for cannabis stocks. Analysts and investors are keeping a close eye out on companies like HEXO, which are smaller than their competition but have room for exponential growth once CBD-edibles hit shelves across the country in October.
It’s worth noting, however, that last year cannabis companies took a surprising nosedive after marijuana was first legalized in Canada. While that was a different situation, it seems a safe bet that cannabis markets will be extremely volatile come October.