Canada sure knows how to throw an anniversary party!
As we approach the one-year mark of that country’s historic legalization of cannabis, it is giving us a second major turning point.
I’m talking about another catalyst to the long-term growth and profit potential of this explosive global industry. Legalization 2.0 in the Great White North — or Great Green North, as it is now oftentimes called — is upon us.
It’s an exciting time for investors, especially for someone who has followed this industry for so long. Just about every major cannabis company worthy of the title is gearing up for the anticipated revenue boost from newly legal product lines, including edibles, beverages, and concentrates.
After all, it’s not every day that investors get to participate in new markets opening up across an entire nation.
Adding to the excitement, this new market already has a well-established customer base. Consumers are ready to buy these new products, with edibles taking center stage.
A study this June by Deloitte found 59% of likely cannabis users in Canada are interested in trying edibles — higher than any other cannabis product category — with gummies being the preferred form. Research by Dalhousie University was even more bullish. Up to 93% of Canadians it surveyed were willing to try cannabis-infused edibles.
They’ll have to wait a little bit longer. On October 17, companies will be able to apply for a license from Health Canada to sell cannabis edibles, beverages, and vaping products, as well as extracts and topicals. But it won’t be until 60 days later — in December — that these products will actually hit the store shelves.
Major accounting firm EY (formerly known as Ernst and Young) says edibles could wind up attracting three million new customers in a country of 37 million people.
Part of the appeal for these new consumers is being able to buy cannabis products from licensed, regulated shops in a safe and consistent way that just isn’t possible on the black market.
No matter the type of edible, consumers — particularly women and older folks — view safety and product quality as the top considerations in choosing an edible to purchase.
For the next generation, who are more focused on consuming cannabis for their health and well-being, not having to inhale these products into their lungs or deal with the social stigma of stinking up a room is another positive.
More of these likely new users also said they’d prefer to consume cannabis socially among a small group of friends than those who currently consume at home.
In other words, cannabis companies are on the verge of ushering in a whole new category of products and welcoming a brand-new group of consumers.
Big Growth, Big Profits
According to Deloitte, cannabis-infused products will be worth $2.03 billion annually in Canada on top of the existing $4.51 billion in recreational and medical revenue. That’s a 45% boost to the overall market, with edibles making up 18%, or $1.2 billion.
Even better for producers, cannabis-infused products can realize profit margins of up to 92%, which is significantly higher than 76% for dried marijuana flower. And because they command higher prices, edibles can account for 25% to 60% of a dispensary’s profits.
We can get an idea of what to expect looking at leading adult-use markets like Colorado and California. According to BDS Analytics, cannabis consumers in those two states shifted their spending habits from predominantly flower to edibles and other infused products.
By 2022, they expect spending on flower to comprise just 36% of the total, down from 50% in 2017. Meanwhile, the use of edibles will climb from 12% to 14% of the total spending on cannabis during the timeframe, with other infused categories also gaining market share.
Aside from the technology behind creating edibles, we’ve seen major consumer brands — Constellation Brands (NYSE:STZ), the maker of Corona beer; Molson Coors Brewing (NYSE:TAP); and Anheuser-Busch InBev (NYSE:BUD) — jump into the cannabis space with an eye toward providing customers with products they’re quite familiar with: snacks and beverages (minus the cannabis). These titans of consumer-packaged goods know how to market and sell such products, and I expect they will help normalize cannabis for mainstream consumers.Arcview research sees cannabis edibles, which include CBD-infused products, bringing in $4.1 billion in revenue by 2022. If the industry hits that target — or exceeds it — it will likely happen as a result of innovators like Organigram Holdings (NASDAQ:OGI). The company has developed proprietary technology using nano-emulsion (an advanced mode of drug delivery) to create uniform micro-droplets. Put into an infused product like an edible, these micro-droplets get absorbed into the body faster and help control dosing. The company’s scientists can also make the emulsion into a tasteless powder that can be used in beverages.
And here’s the really exciting part for investors … legalization of edibles and infused products isn’t just coming to Canada.
Canada Is Once Again Just the Start
Meanwhile, the U.S. continues on its path to legalization. When that happens, it will instantly become the world’s biggest cannabis market.
On January 1, 2020, recreational cannabis will be legal in Illinois. Not only is Illinois an economically vibrant state with a population of 12.7 million, it’s the economic hub of the Midwest … and its soon-to-be cannabis capital.
Michigan, another important state for the region with the 13th largest economy in the nation, is also going live with recreational sales starting in the first quarter of 2020.
Millions of potential customers in these two states will soon be able to line up at their local dispensary and purchase edibles, growing the sales base even higher for the companies making the best products.
Legalization across the United States is only a matter of time, which means now is the time to invest. When it happens, those savvy enough to have gotten in early will reap the massive windfall.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.