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• Aside from the fact that cannabis sales hit a new all-time high in November — something not unexpected given that the Canadian pot industry is still ramping up — what really stood out is that monthly sales finally eclipsed $100 million (that’s U.S. dollars). 

By: Sean Williams

It’s pretty incredible what a difference a year can make.

At this time last year, cannabis stocks were flying high, and the expectation had been that most brand-name companies would push toward recurring profitability by the end of the year. Of course, hindsight being what it is, we know this didn’t happen. High tax rates in select U.S. states, persistent supply issues in Canada, and a resilient black market weighed heavily on the cannabis industry in 2019 and pushed a number of popular pot stocks to two-year lows.

However, there may be light at the end of the tunnel.

Image source: Getty Images.

Canadian weed sales just hit a monthly milestone

Late last week, Statistics Canada released its monthly retail trade sales data for November. Since the marijuana industry is tightly regulated, but nonetheless legal, licensed cannabis store data is included in this monthly report. Aside from the fact that cannabis sales hit a new all-time high in November — something not unexpected given that the Canadian pot industry is still ramping up — what really stood out is that monthly sales finally eclipsed $100 million (that’s U.S. dollars). 

Here’s a snapshot of how licensed cannabis store sales have progressed since adult-use weed hit dispensary shelves on Oct. 17, 2018 (data is reported in Canadian dollars (CA$), with parenthesis featuring U.S. dollar equivalency).

• October (2018): CA$53.68 million ($40.83 million)
• November (2018): CA$53.73 million ($40.87 million)
• December (2018): CA$57.34 million ($43.61 million)
• January: CA$54.88 million ($41.74 million)
• February: CA$51.66 million ($39.29 million)
• March: CA$60.94 million ($46.35 million)
• April: CA$74.58 million ($56.73 million)
• May: CA$85.81 million ($65.27 million)
• June: CA$91.46 million ($69.56 million)
• July: CA$107.36 million ($81.66 million)
• August: CA$125.95 million ($95.8 million)
• September: CA$122.93 million ($93.5 million)
• October: CA$128.98 million ($98.1 million)
• November: CA$135.75 million ($103.25 million)

It took more than a year, but November featured more than $103 million in sales for Canada, a market that Wall Street foresees generating $5 billion in annual sales by 2024. As a whole, the Canadian marijuana market has generated $916.6 million in revenue since sales commenced on Oct. 17, 2018. This makes it very likely that Canada surpassed $1 billion in aggregate pot sales since launch in December, but we’ll have to wait a month to confirm.

Image source: Getty Images.

Here’s why Canadian cannabis sales could make a major leap forward in 2020

The hope, among both Wall Street and investors, is that this uptick in sales is really just the tip of the iceberg. Two key changes in the cannabis market are expected to improve consumer demand and relieve a lot of the supply bottlenecks that’ve hindered pot sales to this point.

The first is the launch of high-margin derivative products, which kicked off in mid-December. Derivatives are non-dried flower products, such as vapes, edibles, infused beverages, topicals, and concentrates. Not only do derivatives offer a new means of consumption that doesn’t, necessarily, require smoking cannabis, but they’re significantly more attractive to a younger generation of users who have shown a greater willingness to try or buy these higher-margin consumption alternatives.

According to investment bank Cowen Group, half of all U.S. pot sales are expected to be generated from derivatives, with dried flower and pre-rolled cannabis making up the other 43% and 7%, respectively. If these figures translate similarly in Canada, then the launch of derivatives should begin to put some pep in grower’s step by midyear, or maybe even sooner.

The other major catalyst is the long-awaited dispensary license reform being undertaken in Ontario, the country’s largest province by population. Having previously worked with a lottery system, Ontario, home to 38% of Canada’s residents, only opened 24 cannabis retail stores as of the one-year anniversary of recreational weed sales. This created few channels for legal product to reach consumers and allowed the black market to thrive.

Moving forward, Ontario has plans to issue dispensary licenses in a more traditional fashion. Licenses should start being issued by no later than April, with the expectation of 20 (or more) stores opening each month. By year’s end, provincial regulators hopes to have around 250 open locations, representing about a 10-fold increase from where it began the year.

Image source: Getty Images.

Source: https://www.fool.com/investing/2020/01/28/canadas-marijuana-sales-top-100-million-in-a-month.aspx

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Cannabis Industry: 2020 Predictions

• Cannabis Legalization Is Going Global
• Real Medical Testing Will Increase
• Older Customers Will Expand Their Cannabis Purchases Beyond Medical Use

By: Julie Weed Contributor

Here, industry executives predict top trends for 2020.

Cannabis Legalization Is Going Global

Legalization is growing outside of the United States, and countries that are first to the global marketplace can create sustainable advantages for themselves in their customer base and their funding. Kyle Detwiler, chief executive of Clever Leaves, an international operator with brands, extraction facilities, cultivation operations, and other investments in six countries, says that countries like Colombia and Portugal that have been among the first to legalize cannabis “are poised to continue establishing their global dominance in short order.”

The countries’ first-mover status will also be a magnet for financial interest he said. “There is little doubt that the expanding European cannabis market will make it an attractive investment opportunity,” Detwiler said.

Hemp, the source for CBD in many non-psychoactive products, will expand internationally as well, driven by the CBD’s demand. The CBD market will grow to $2.1 billion in consumer sales by 2020 according to the Hemp Business Journal, with $450 million of those sales coming from hemp-based sources. Puerto Rico’s Department of Agriculture has already reported there will be at least 10,000 acres of hemp cultivated for commercial purposes in 2020

The CBD Product Market Will Mature

CBD is being added to products across the retail spectrum from food to make-up, but with little legal oversight or requirements, the products can easily be mislabeled or ineffective. Clever Leaves chief executive Detwiler says in 2020 CBD standards will begin to emerge based on customer demand. “Consumers are getting more savvy on the benefits of CBD and they will begin to insist on knowing exactly what they are paying for and what they are getting when they purchase ‘CBD’,” Detwiller said.

Consumers will “begin to insist” on CBD standards agrees Bill Thurman, chief executive of Redbird Bioscience a medical cannabis operator and producer of pharmaceutical-grade cannabis for patients in Oklahoma.

Thurman said companies will help the market succeed as a whole if they adhere to high quality standards and agreed-upon guidelines in testing and manufacturing. That kind of rigor is needed to significantly increase the size of the market and only by conducting “science-driven randomized clinical studies, can we shed reliance on anecdotal data to support medical claims,” he said. 

Barbara Goodstein of B GREAT  which produces full-spectrum upscale CBD items expects CBD to be added to even more products like deodorant, hand soaps, throat sprays and nasal sprays. The popularity of the category also creates additional business risks according to Goodstein. “The hype around this space will end up creating applications and uses that make no sense, which will unfortunately diminish the real value of the product,” she said.

Real Medical Testing Will Increase

Until cannabis is taken of the Schedule One substance list, medical research will be challenging to undertake. Still, executives in the industry are seeing some movement in the area. Israel still leads the world in global cannabis research, and Israeli scientists like chemist Raphael Mechoulam, a researcher at Hebrew University and pioneer in cannabis research, are being hired or given research grants by American organizations.

Dr. William Levine, founder and chief scientific officer of CannRx a subsidiary of Izun Pharmaceuticals that develops proprietary medical and recreational products expects companies to use better data, and well-designed clinical trials. His own company is focused on better “bio-availability” which focuses on lower dose products that can offer similar benefits to higher dose products, but with fewer side effects.

Older Customers Will Expand Their Cannabis Purchases Beyond Medical Use

CannRx’s Levine predicts there will be “increased recreational expansion into older populations,” as product quality and more controlled dosing options come to market.

Legislative Action Will Remain Robust

According to Marijuana Moment, as of January 16, there were 975 cannabis-related bills moving through state legislatures and Congress for 2020 sessions.

“We expect to see a lot more regulatory activity in 2020 on both the state and federal levels,” said Redbird Bioscience’s Thurman.

Each state makes its own rules. For example, regarding medical marijuana use, some states have a list of specific ailments that can warrant a recommendation of the substance (states include Florida and New Jersey). In other states the decision to use medical marijuana is entirely between patient and doctor (states include Oklahoma and California.)

States will have more models to look to as they develop their laws and will likely start adopting each others’ best practices. Law makers will start learning more from each other’s experiences and “harmonize” their regulations with each other said Levine. He also believes the federal government could take the first step to legalize medical marijuana.

Matt Anderson, chief executive of Vanguard Scientific, a company that provides service resources for cannabis and hemp botanical extraction, says just the ongoing discussion of legalization and decriminalization will continue to drive market growth.

Multi-state Operators Will Face A Shake-out

Running a cannabis business is expensive, and running a multi-state cannabis business when each state has its own rules to abide by make it hard to achieve economies of scale. Lack of access to traditional sources of capital like debt and equity add to the challenge. This year will see a few multi-state operators (MSOs) fold and sell off their component companies according to Lewis Goldberg, managing partner of  KCSA Strategic Communications“

Most of the MSOs have been run by financial operators Goldberg said, not operational experts, but “with the need to deliver results, that will change.”

Back To Basics

Businesses are focusing on the fundamentals to stay solvent or to make themselves attractive acquisition targets. Matt Hawkins, chief executive of Entourage Effect Capital a cannabis-only private-equity firm that has deployed more than $50 million into 32 companies says companies will â€œmake every effort to be more efficient.” They will still aggressively seek out new customer bases and explore innovation, he said, “but preserving margins will matter.”

Jeff Fallows, president of The Valens Company, says he also expects to see a marked improvement in the underlying fundamentals of the companies themselves. This will be a big year for the companies that execute well on their business plans, he said. Those companies will “emerge as leaders and those will be the ones to watch in 2020 and beyond. â€œ

Source: https://www.forbes.com/sites/forbestreptalks/2020/01/26/cannabis-industry-2020-predictions/#87768c3f31ff

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Legalization 2.0 Product Rollout in Canada

• The approval of these products is significant, both for consumers and for the cannabis industry in Canada
• The infused products sector is large and very lucrative, and has already been hugely successful in parts of the US where cannabis is legal
• It is also one with enormous growth potential. Some estimates suggest that the market will grow by a whopping $17 billion by 2022.

By Matt P

On October 17th, 2019, the Canadian government went ahead with the second phase of its cannabis program. Legalization 2.0 included the approval of edibles and infused products.  The move came exactly one year after the first wave of legalization which saw Canada make history, with recreational cannabis flower and oil hitting the legal market for the first time.

The approval of these products is significant, both for consumers and for the cannabis industry in Canada.  The infused products sector is large and very lucrative, and has already been hugely successful in parts of the US where cannabis is legal.  It is also one with enormous growth potential. Some estimates suggest that the market will grow by a whopping $17 billion by 2022.

While legalization occurred in October, Canadians still had not been able to purchase the new items. January 6th, 2020 marked the first day which vaporizers and cannabis-infused products were widely available to all Canadians.

Why Has It Taken So Long To Get Product Out?

Much of the delay has come from the restrictions imposed by the government.  All licensed producers looking to sell these new products are required to submit a 60 day notification directly to Health Canada. 

This means that the earliest date they would be available on shelves would be mid-December.  The timing was particularly important, since it fell right before the start of the holidays. Retailers and producers were looking to capitalize on making these hot new products readily available for holiday shoppers. 

Some retailers and consumers were lucky enough to get a limited supply before the holidays.  However, many had to wait until January 6th to finally get their hands on the new goodies.

Legalization 2.0 Product Rollout Across Canada

Whether or not you’ve had access to edibles before now depends largely on which part of Canada you’re living in. Consumers in British Columbia have had access to them since late December. Residents were able to purchase both through BC’s online store as well as through a number of private dispensaries. Edibles hit the shelves just in time for the holidays.  Saskatchewan was another province that saw edibles become available just before December 25th.

For other parts of the country, January 6th was the first time residents could pick up the new products.  In Ontario, Alberta and Quebec, the rollout for legalization 2.0 was delayed until January.  This was mainly due to the fact that all three provinces maintain their own distribution system, as opposed to allowing licensed producers to interact directly with retailers.

Image Courtesy of Alexander Stein

In Alberta, January 6th marked the first day that stores were able to place their orders with the AGLC, which acts as the cannabis wholesaler for the provinces retailers.  There are currently a limited number of products available, but that’s expected to change.  AGLC spokeswoman Heather Holman commented on the situation, saying that “right now in Alberta, AGLC has contracts with 43 federally licensed producers.  They manufacture a variety of products. About half of those licensed producers will be providing for what we’re calling cannabis 2.0 (which are) the new line of products like edibles, extracts and topicals. What we see this week and the coming weeks isn’t reflective of the bigger picture.”

In Ontario, online sales through the Ontario Cannabis Store began at 9:00am Thursday, January 16th. The store subsequently sold out of all product by 2:00pm on the same day.  The online retailer announced last week that they’d be carrying 59 new cannabis products.

Quebec and Legalization 2.0

The situation is significantly more complicated in the province of Quebec.  The province has the distinction of having the strictest cannabis laws in the country. The province also passed a law raising the age of consumption to 21 back in October.

Although they officially rolled out the new products this month, these strict laws extend to legalization 2.0.  In addition to heavy-handed age of consumption laws, the province has also passed a number of restrictions on these new products.  Infused products such as chocolates and baked goods have been banned.  So have vape pens and cartridges. Quebec officials enacted the bans based on fears that the products could appeal to minors.

For the time being, it seems that users in Quebec will have to make do with a much more limited selection than the rest of the country.

Issues And Potential Hurdles

Much like the original rollout of legal cannabis flower in 2018, things haven’t gone as smoothly as both the government and cannabis industry would have liked.  Along with the delays in multiple provinces, there have also been other issues.

The Aphria Recall

In a case of terrible timing, cannabis giant Aphria was forced to recall its line of vape pens. The recall was due to leaky vape cartridges.  According to chief corporate affairs officer Tamara Macgregor, “out of an abundance of caution we asked provincial customers to return certain initially shipped ‘510 cartridges’ that did not meet our intended consumer experience.”

Like most of the licensed producers in Canada, Aprhia has no doubt had their eyes set on this second wave of legalization (particularly given what a disappointing year 2019 was).

Vaping Restrictions

One of the big issues plaguing the cannabis industry over the past year has been the backlash against vaping across the country.  Effective as of January 1st, Ontario has implemented an advertising ban on all vape products in convenience stores and gas stations.  The move was prompted from data indicating that more young people are vaping, and is designed to bring the current laws in line with provincial tobacco laws.

Image Courtesy of Lexphumirat

The move didn’t effect the cannabis industry directly. The Ontario cannabis Store and licensed retailers are responsible for the sale of cannabis vapes. However, the fact that provincial lawmakers are willing to target vaping more broadly is troubling.  Along with Quebec, Newfoundland and Labrador have also banned cannabis vapes. Officials in British Columbia plan to raise taxes on these products specifically to 20%.

These moves have no doubt left the industry very concerned. Canada will continue to be a proving ground for legalization as Cannabis 2.0 rollout continues.

Source: https://www.puffpuffpost.com/legalization-2-0-rollout-canada-success-and-failure/