The following content is excerpted from Deloitte 2019 Cnnabis Report "Nurturing new growth: Canada gets ready for Cannabis 2.0".
Overview
The next stage of cannabis legalization in Canada is expected to create a consumer market for edibles and other alternative cannabis products worth more than C$2.5 billion a year and generate higher profits for retailers than cannabis products that are already legal, according to Deloitte's latest annual report on the country's cannabis industry.
With the global cannabis market worth an estimated US$100 billion combined among the top 13 cannabis markets, these new products will create valuable growth opportunities for the Canadian cannabis sector and help maintain the country's leadership position.
The report, Nurturing new growth: Canada gets ready for Cannabis 2.0, says the legalization on October 17, 2019, of edibles containing cannabis and cannabis concentrates will create new product mixes that will reach consumers who may have been reluctant to try traditional cannabis consumption methods that are currently available. Many of these novice or "cannabis-curious" consumers will be older, often female Canadians who will prefer more familiar consumption formats, notably edibles such as baked goods.
The report notes that alcohol and tobacco companies are looking for opportunities to enter the legal cannabis industry to avoid losing market share, which could continue to fuel an already strong market for mergers and acquisitions in the cannabis sector. Pharmaceutical companies are also entering the market, as a growing number of consumers looking to manage various health and wellness issues are expected to turn to alternative cannabis products, including cannabis-infused topicals, upon legalization in October.
Deloitte says Canadian cannabis companies currently enjoy significant advantages over their US and global counterparts, including government support, access to capital markets and the banking system, and a unified market that is more scalable than the fragmented one in the United States. But the introduction of the US Farm Bill will be a game-changer; Canadian companies will need to continue innovating to secure a strong, sustainable competitive position as legislation evolves in other countries.
Other notable findings in the Deloitte report include:
- The global market for alternative cannabis products is expected to nearly double over the next five years, to US$194 billion.
- More than half of the estimated C$2.7-billion Canadian market for edibles and alternative cannabis products will be spent on edibles ($1.6 billion), followed by cannabis-infused beverages ($529 million), topicals ($174 million), concentrates ($140 million), tinctures ($116 million), and capsules ($114 million).
- Nearly half of likely edible users are planning to consume gummy bears, cookies, brownies, or chocolate at least every three months.
- Canadian cannabis companies will need to manage consumer expectations, as the preferred edible formats may not all be available when legalization occurs in October.
- Government and the cannabis industry have learned from the first round of legalization, in October 2018, and are committed to improving the roll-out of edibles and alternative cannabis products in October 2019.
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