What to Expect From the Launch of Cannabis Edibles in Canada

With January 1 comes the arrival of a new year, and a new decade, and it promises to be a watershed moment for the Canadian cannabis market. 2020 will see the long-awaited arrival of legal cannabis edibles and other ingestible forms of marijuana, products that customers have been crying out for since it was first announced that Canada was to legalize cannabis.

While legalization 2.0 technically came into effect on October 17, Health Canada implemented a 60-day waiting period while it ensured that 2.0 products were safe for general consumption and the necessary paperwork was filed. This meant that December 16 was the first day that these 2.0 products were allowed to hit shelves; however, supply has been limited as companies wait for the new year to fully launch their extensive range of cannabis ingestibles.

Here, we’ll take a look at how some of the big hitters in the Canadian cannabis space have prepared for the 2.0 market and what sort of products we can expect to see hit shelves over the coming weeks.

Canopy Growth (TSX:WEED) (NYSE:CGC)

Canopy has one of the most extensive ranges of 2.0 products on the market, which includes chocolates and infused beverages. Canada’s most prominent cannabis company teamed up with chocolate maker Hummingbird Chocolates to produce a range of products at its Smiths Fall facility, previously known as the ‘Chocolate Capital of Ontario.’ Utilizing Hummingbird’s chocolate expertise, the company will soon begin selling a couple of types of dark chocolate.

Bean & Bud is 70% dark chocolate “crafted from beans grown in a bird sanctuary in the Dominican Republic,” with two “medallions” per pack, each containing five mg of THC. Its Tokyo Smoke brand will also offer a dark chocolate bar containing five pieces with two mg of THC per piece, while its Tweed milk chocolate bar is made with Canopy’s Penelope strain with four pieces per bar containing 2.5 mg of THC and 1.8 mg of CBD.

Canopy has also invested heavily in producing infused beverages, leveraging the expertise of its parent company and alcohol heavyweight Constellation Brands (NYSE:STZ), which also produces Corona beer. Canopy’s range of beverages is named in part after the strains from which they are derived, such as Penelope & Tonic and Houndstooth and Soda. All drinks produced under the Tweed label will include 2 mg of THC, and some will also contain 1.5 mg of CBD.

Canopy has also produced a line of mixers that you can use to make your own drinks, with each 150 ml bottle containing 10 mg of THC while the Penelope flavor will also have 7.5 mg of CBD. The Houseplant Grapefruit and Lemon drinks have been developed in cooperation with renowned Canadian cannabis connoisseurs Seth Rogen and Evan Goldberg and will contain 2.5 mg of THC per 355 ml can. Deep Space will be Canopy’s strongest beverage, described as a “carbonated beverage, dark-colored with a bold, full flavor” containing 10 mg of THC, which is Health Canada’s limit.

>> Organigram Stock Shapes Up For Big Gains in 2020 With New Licenses

Aurora Cannabis (TSX:ACB) (NYSE:ACB)

Canopy’s closest rival, Aurora Cannabis, has an equally impressive range of cannabis edibles but has not bet so heavily on infused beverages. The company will release three varieties of chocolates all containing two mg of THC. These include sea salt and caramel milk chocolate, 64% dark chocolate, and half-spheres chocolate. The company will also produce 10 mg gummies in five flavors, including blue raspberry, red raspberry, grape, pineapple, and peach. Each packet will contain five gummies.

Interestingly, Aurora is also set to release two flavors of weed-infused mints in spearmint and peppermint, each containing two mg of THC and coming in packets of five.

Tilray Inc (NASDAQ:TLRY)

Tilray will launch its edibles portfolio through its High Park subsidiary and the various brands under that umbrella label. One such brand is Goodship, already well-known for its range of cannabis-infused baked goods, chocolates, and confections. Goodship will roll out its first cannabis collection in Canada with a baking oil followed by cannabis-infused chocolates and mints. Another brand, Chowie Wowie, will release cannabis-infused chocolates and gummies in the coming weeks.

Tilray has also partnered with AB InBev to create the Fluent Beverage Company. Fluent plans to commercialize non-alcohol, CBD-infused beverages in Canada, and further its research on non-alcohol, THC-infused beverages. High Park has partnered with leading confectionary firm Cannfections Group to further build its product and manufacturing capacity of confectionery cannabis products for the 2.0 market.

The Takeaway

The launch of such 2.0 products couldn’t have come at a more critical time for the cannabis market. 2019 saw pot stocks across the board take a hammering as the black market continued to dominate legitimate sales. Shares in what were Canada’s 10 largest pot producers by market capitalization lost an average of more than half their value, stinging many investors. According to auditing firm Deloitte, the market for cannabis edibles and other 2.0 products is expected to be worth more than $2.5 billion CAD.

For consumers, impatience with the bumpy rollout of legal pot drove many to the black market, where cannabis products can be purchased online and delivered on the same day at reduced prices. With products as innovative and exciting as the ones mentioned above, pot firms and consumers alike will be hoping the next few weeks will see the idealized vision of the legal market finally come to fruition. Are you excited?

>> Read More Legislation News

Featured Image: DepositPhotos © Evgeniy_Bobkov

New Cannabis Products to Follow Edibles Legalization

Regulations would influence new products

Deloitte expects the market for edibles and alternative cannabis products to be worth 2.7 Canadian dollars. It expects cannabis extract products, including edibles, to contribute 1.6 billion Canadian dollars to this estimated business.

A Deloitte survey indicates that gummies were the most preferred edibles among current cannabis users. Notably, 26% of the current consumers indicated gummies as their preferred edible while 23%, 22%, and 16%, respectively, showed interest in cookies, brownies, and chocolates.

Plus, the survey indicates that among the likely consumers of cannabis edibles, the top preferred edible formats were cookies (50%), brownies (49%), gummies (48%), and chocolates (48%).

However, Health Canada’s regulations could be the key factor influencing the edibles that licensed cannabis companies can sell in Canada. On June 14, Health Canada issued guidelinesabout the legal production and sale of edibles, cannabis extracts, and topicals. Notably, the THC (or tetrahydrocannabinol) limit for edible cannabis (including drinks) is 10 mg per package. THC is the primary psychoactive component in cannabis.

Also, labeling guidelines require the product packaging to specify THC and CBD (or cannabidiol) content and other information, including a health warning message. One of the most important guidelines is that edible cannabis products should not appeal to young people. Also, the products should not make any health, dietary, or cosmetic claims.

What cannabis companies are planning

Several cannabis companies are increasing their production capacity to gear up for opportunities in the edibles and cannabis-derived products market. In June, Canopy Growth (WEED) (CGC) provided an update about its enhanced production capacity in Canada.

The company has an estimated monthly capacity to produce over 850,000 chocolates at its Smith Falls facility in Ontario. Also, Canopy Growth disclosed that once licensed, its new beverage facility can produce over 5 million beverages in a month.

Also, beverage giant Constellation Brands has a significant stake in Canopy Growth. Constellation Brands’ investment in Canopy Growth could provide the required resources to expand in new growth areas.

Hexo (HEXO) formed a joint venture (called Truss) with Molson Coors to develop nonalcoholic, cannabis-infused beverages for the Canadian market. During its third-quarter conference call, Hexo indicated that it is gearing up for the second wave of legalization. Aside from developing cannabis-infused beverages through Truss, Hexo is developing gummies and a premium vape product line.

In July, Aurora Cannabis (ACB) received the Health Canada processing license for its Aurora Air facility. This facility would develop edible products such as gummies and chocolates. ACB would introduce these edible products to the Canadian market in December. Also, the company plans to increase its production capacity to gear up for the demand for vapes, concentrates, and edibles.

OrganiGram (OGI) has invested $15 million in a production line, which can produce about 4 million kilograms of chocolate cannabis edibles annually.

Why companies need to exercise caution

Recently, there has been significant concern and investigations surrounding the use of marijuana products for vaping. Adherence to safety and other regulations are crucial factors for cannabis companies preparing to enter the Canadian edibles and beverage market following legalization. Health Canada is adamant that cannabis edibles and other products should not be targeted at youth.

CannTrust (CTST) has been investing in its production capacity with plans to enter the Canadian edibles market once legalized. However, the company is currently under fire for violating Health Canada regulations. On September 4, CannTrust stock was down 67.1% year-to-date.

Canopy Growth stock has declined 11.1% so far, and the company’s weak performance in the first quarter of fiscal 2020 disappointed investors. In contrast, OrganiGram, Hexo, and Aurora Cannabis’s respective stock prices have risen 18.8%, 20.0%, and 9.1% year-to-date.

For more insight, please read OrganiGram Lower Target Price and Valuation Multiple and Aurora Cannabis: What’s the Word on the Street.

Canada’s cannabis edibles, topicals market could be worth $2.7B a year after legalization: study

The market for cannabis edibles could be worth roughly $2.7 billion a year, according to a new report.

A study by Deloitte found the next phase of cannabis legalization — which will include edibles other alternative cannabis products — could generate higher profits for retailers.

The report estimates that more than $1.6 billion will be spent annually on edibles and $529 million on cannabis-infused drinks, while topicals, concentrates, tinctures and capsules would combine for more than $400 million in sales.

Jennifer Lee with Deloitte says the company’s research indicates that much of that economic boost “will be on top of current cannabis product spending.”

READ MORE: Questions remain as edible cannabis legalization in Canada looms

The report says the legalization of edibles could lead to new products that would appeal to novice “cannabis-curious” consumers.

“The introduction of cannabis-infused edibles will clearly threaten the alcohol industry as consumers are using the product for similar usage occasions,” Lee said.

Last month, a study out of Dalhousie University found Canadians have become less willing to try cannabis-infused edibles.

Over the last year, Canadians have seen a series of stories about children being exposed to edibles in appealing forms like candy. Several have been hospitalized.

In 2017, before legalization, 46 per cent of respondents said they’d be willing to try edibles presented as food. But in a new poll, that number had fallen to 36 per cent.

Large cannabis companies say they are preparing for the legalization of edibles.

Edmonton-based Aurora Cannabis Inc. says it is building up inventory in anticipation of the legalization of edibles and vaping products next fall.

READ MORE: Marijuana edibles — Is Canada on track to legalize them?

Production is expected to grow to 25,000 kilograms in the current quarter ending on June 30, but an unspecified portion will be held out of the market, Aurora chief financial officer Glen Ibbott said.

“What we’re trying to do is learn from the challenges of the industry last year and the initial launch of consumer legalization,” Ibbott said. “We absolutely have to have sufficient inventory to launch these products properly.”Ottawa has indicated that edibles containing cannabis and cannabis concentrates would become legal for consumers in October, but the exact timing of product approvals and sales is still unknown.

—With files from Patrick Cain and the Canadian Press

Scientists Are Racing to Make Weed As Easy to Drink as Beer

People who drink alcohol typically learn the hard way how much is too much—usually in their teens or early 20s. As adults, they’re not interested in learning the same hard-knocks lesson about cannabis.

This is the challenge for an industry seeking to win over new or inexperienced users as legalization spreads through North America and around the world. It’s a particularly daunting one for makers of cannabis-infused beverages, which are keen to participate in a category that researcher Canaccord Genuity Group Inc. expects will be worth $600 million in the U.S. by 2022.

That market potential has attracted several big alcohol companies that are seeking to offset declining beer consumption with the next big thing. The best-known partnership is Constellation Brands Inc.’s 38 percent stake in Canopy Growth Corp., the largest cannabis firm by market value, for which it paid about $4 billion. Budweiser brewer Anheuser-Busch InBev NV formed a research partnership with Tilray Inc., with each company investing up to $50 million in the venture, and Molson Coors Brewing Co. has  teamed up with Quebec-based Hexo Corp.

All these companies are working to develop consumer-friendly cannabis drinks that can compete with alcohol but there’s one problem: Pot is nothing like booze.

Alcohol is water-soluble and cannabis is not, meaning alcohol is absorbed into the bloodstream quickly whereas pot edibles and beverages are metabolized much later in the digestive process. This leads to the classic edible effect, when inexperienced users consume a weed bonbon, feel nothing, have a second, and then find an hour later that they’re far higher than they wanted to be.

The problem of onset time (and the related problem of how long the effect takes to wear off) is one of the biggest challenges facing makers of cannabis beverages and may be one of the reasons the products currently make up a tiny portion of the overall legal pot market—less than 0.5 percent of total U.S. sales, according to BDS Analytics.

Many in the industry believe that the key to mainstream acceptance is creating a “sessionable” beverage, where one can have two or three drinks over a few hours, perhaps with friends drinking alcohol, while enjoying a steady, moderate high.

“We think onset time is going to be one of the critical factors in the next stage of cannabis-infused beverages, and the investments being made by consumer-packaged goods companies and by big alcohol are going to dramatically move that needle,” says John Kagia, chief knowledge officer at New Frontier Data, a Washington-based cannabis research firm.

Making cannabis compounds water soluble so they act more like alcohol will be key to improving onset time, but most in the industry agree there is no technological magic bullet.

“We’re not betting on one horse,” says Canopy Chief Executive Officer Bruce Linton. The Smiths Falls, Ontario-based company is experimenting with ways to improve onset time and taste in cannabis-infused beverages, but believes there’s no “perfect answer.”

“The technical steps are half the battle, and then there’s who wants what, when, where, and why,” including decisions like bottles or cans, size, color, brand and taste, Linton says.

To solve the problem of onset time, many companies are experimenting with nano-emulsification, which uses a blending agent that attaches to the cannabis molecules, enabling them to better mix with water. Done correctly, the process should allow the active ingredients to evenly disperse in the beverage and absorb into the bloodstream much faster than if they’re digested.

This is the process used by San Diego-based Cannabiniers, a beverage, technology and brand management company that owns Two Roots Brewing Co., which makes non-alcoholic, cannabis-infused beer. Cannabiniers says it has achieved a 10-minute onset time with its products, and they wear off in about 90 minutes.

“We really do emulate the bell curve of consumption for traditional alcohol products in that we do have a rapid onset and quick offset,” says Kevin Love, vice president of market activations. “It takes a brave person to make that jump.”

Province Brands of Canada is taking a different approach—replacing barley and brewing beer directly from the stalks, stems and roots of the cannabis plant.

Trait Biosciences Inc., meanwhile, is using glycosylation, which mimics what the body does when it metabolizes cannabis by attaching a glucose molecule to the substance. This patent-pending technology, currently being tested on humans in clinical trials in Israel, improves onset time and avoids the “salad-dressing effect,” where the oily cannabis compounds separate from water, according to Ronan Levy, chief strategy officer at Trait. The company has also filed a patent for a second process that binds the cannabis compounds to water-soluble proteins rather than glucose molecules.

Levy is optimistic about the market potential for cannabis beverages but acknowledges it’s still early days for the industry. “There’s a strong sentiment that beverages are probably going to become the leading mechanism for ingestion,” Levy says. “They just haven’t yet because the truth is that most products out there are kind of terrible.”

The rigorous restrictions on pot research in the U.S. don’t help. Because the plant remains illegal at the federal level, researchers must apply to the Drug Enforcement Administration to get a license and then secure a legal supply, most of which comes from a 10-acre farm at the University of Mississippi. Even in Canada, which legalized recreational marijuana use in October, edibles and beverages won’t be available until later this year at the soonest.

“Given that cannabis has been illegal for much of the past century, you’re seeing the industry now making up for almost a century’s worth of innovation and investment in a two- to five-year period,” says Kagia at New Frontier Data. “We would argue that we’ve still barely scratched the tip of the iceberg around where product innovation in cannabis is going.”

But progress should happen quickly now that big alcohol companies are investing significant time, money and resources into research, says Spiros Malandrakis, head of alcoholic drinks at market-research firm Euromonitor International.

“With the know-how that these companies have already in creating all kinds of beverages, I honestly have little doubt that these kind of products will be upon us and the onset effect will be resolved by the end of this year,” he says.

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