With the October 17 approach of Cannabis 2.0, many expect Canada to legalize the sale of cannabis-derived products, such as vapes, edibles, and cannabis-infused beverages. In anticipation of this legalization, many cannabis players have focused on vapes and edibles. However, the recent vaping-related deaths have shifted the focus toward edibles as the second phase of legalization nears.
Findings of Deloitte research work
In May, Deloitte published a research paper, which stated that consumers were more interested in trying cannabis-infused edibles, topicals or ointments, and beverages. The report also estimated the market for edibles and alternative cannabis products to reach 2.7 billion Canadian dollars per year. Edibles alone comprise 1.6 billion Canadian dollars per year.
Of the wide variety of cannabis-infused edibles, Deloitte’s survey found that gummies, cookies, brownies, and chocolates were the preferred choices. The study indicated that 26% of the correspondents used gummies once in three months, while 23% used cookies, 22% used brownies, and 16% used chocolates.
Further, the survey indicated that 50% of the correspondents were likely to try cookies, 49% were likely to try gummies, and 48% were likely to try both gummies and chocolates. However, the survey also cautioned that these preferences could vary by region. Against this backdrop, let’s see how Aurora Cannabis is gearing up for the edibles market.
Aurora Cannabis’s initiatives for edibles
During its fourth-quarter earnings call, Aurora Cannabis (ACB) announced that it would initially focus on vapes and edibles in the cannabis derivative product market. Its management added that the company was in the stage of commercially manufacturing cannabis-infused mints, gummies, and chocolates.
Aurora Cannabis is planning to produce edibles and vape products at its Aurora Air and Aurora Polaris facilities. In July, the company announced that Aurora Air would have several production lines to produce gummies and chocolates. On October 3, the company announced that it would complete its Aurora Polaris facility’s construction by the end of this month.
Other players and Cannabis 2.0
Canopy Growth (CGC) (WEED) is also getting ready for Cannabis 2.0. The company plans to introduce vaping products by the end of this year. During its earnings call for Q1 of fiscal 2020, Canopy’s management announced that it would launch a portfolio of chocolate products.
Canopy Growth expects its recent acquisition of the Hershey chocolate factory to be instrumental in developing new chocolate products. For analysts’ recommendations for the company’s stock, please read Canopy Growth: Analysts’ Target Price and Ratings.
During its second-quarter earnings call, Cronos Group (CRON) announced that edibles would be an important category for the company’s growth in the long term. It added that the company is developing a portfolio of functional food products, and it expects to launch these products after the legalization.
Cronos Group hired Todd Abraham as its chief innovation officer, who has more than 35 years of industry experience. For more information, please read Cannabis 2.0: What Cronos Group Has in Store.
Weakness in the cannabis sector
This year, the marijuana sector has underperformed the broader US equity market. The ETFMG Alternative Harvest ETF (MJ) and the Horizons Marijuana Life Sciences Index ETF (HMMJ) have lost 25.1% and 26.8% of their stock values this year, respectively. However, during the same period, the S&P 500 Index has risen 17.2%.
Aurora Cannabis, Canopy Growth, and Cronos Group have lost 26.8%, 25.8%, and 26.4%, respectively. However, we expect the second phase of legalization could boost the cannabis sector. For cannabis-related news and updates, please follow 420 Investor Daily.