Part 1 of the article discussed about what is selling the best in the recreational market in Canada, and in this post we will be discussing the gaps and the possible opportunities for new businesses in the recreational segment.
October 17th, 2019, was a watershed moment for the cannabis industry in Canada. The legalization of cannabis version 2.0 allows seven classes of cannabis to be sold across the country. The segment includes cannabis oil, dried cannabis, seeds, fresh cannabis, whole plants, edible cannabis products, and infused beverages.
There is legislation in place, but the supply is far below the demand. There are many uncertainties that are present in the regulations that are being translated into product development. The way forward is experiential.
The demand and supply gap for Cannabis edibles in the Canadian market
It is estimated that 11% of Canadians are already consumers of cannabis edibles and beverages, and a whopping 13% will be added to this number due to the new regulation. Edibles are perceived as a more discreet way to consume the extract, and the market is expected to respond to the mandate and add valuable growth to the industry as a whole.
The rough estimates offered by a study by Deloitte is that the global market of cannabis and allied products is worth $100 billion currently and the exponential growth is expected to propel the industry to be worth $194 billion by 2025.
Fulfilling this gap in demand will take time, but with proper government support, Canada is slated to become the world leader in cannabis products. The idea is to provide proper regulatory, financial and marketing synergy to fill the demand and supply mismatch.
What caused the demand-supply imbalance?
The laws in Canada are in a state of flux and it takes a long time to get a license to grow and process cannabis. There is no precedent of which strains of cannabis work best in the market as it is a newly legalized substance. As the legal hurdles open up there has been a glut in the market with no proper channels to market new products.
There needs to be a seamless ancillary industry that can consume the raw material and create edibles, tinctures and topicals to serve the needs of the Canadian populace. The current regulations hurdles are causing bottlenecks and shortage issues. There are not enough legal stores that can retail the cannabis products.
Edibles are mostly consumed in cookies, brownies, lozenges, candy, chocolate, and gummies. There needs to be a constant supply of raw materials, licensed manufacturers and a robust supply chain that can reach the product to the end user. There are many roadblocks in getting a seamless process, but with government policy and private participation it can be done.
Precisely, the new wave of regulations is taking time to adapt, which is causing licensing and cultivation delays, thereby causing the demand-supply imbalance.
Market Size for legal cannabis
Since the federal legalization of cannabis for both medicinal and recreational use in Canada on October 17, 2018, store sales have progressively increased. Retail sales reached a peak of around 154.21 million Canadian dollars in January 2020.
This definitely shows the high potential of opportunities and a robust growth in numbers for the new businesses in the recreational segment. Studies suggest that a bright future awaits recreational cannabis in Canada; the market size for top-shelf medical and non-medical dried cannabis is expected to reach 2.8 billion Canadian dollars by 2020 from 1.1 billion Canadian dollars in 2018.
The road ahead – licensing and financing the cannabis industry
The industry will be subject to a lot of trials and tribulations to find the exact framework for producing and marketing the product. Still, experts expect that diligence and patience will be the key drivers of growth. There is bound to be a spate of mergers and acquisitions that will define the industry leaders.
The cannabis industry is nascent, and the first movers’ advantage will separate the professionals from the amateurs.
Financial institutions need to step in and provide a framework to provide cannabis farmers and retailers along with ancillary industries with adequate financing to create a chain that will lead to a robust production-storage-consumption chain. At the moment, there are no structured financial products that support this industry.
The Canadian government, along with licensed producers, marketers, financiers, and analytical centres, will spearhead the expected explosive growth. Recreational and medicinal use of cannabis is bound to be an open market in the foreseeable future, and the time to lay the foundations for exponential growth is now!
About Genesis Cannabis Solutions
Genesis Cannabis Solutions is a full-service Cannabis consulting firm in Canada who provides subject matter expertise on compliance in adherence with country specific Cannabis regulations. Our essential services span from licensing applications through to quality assurance, cultivation, business planning, security and facility design, sales and import/export in Canada and in other countries as well.
We offer risk mitigation, due diligence and regulatory compliance for B2B cannabis producers and resellers around the world. For more information, please contact us at below information.
