Canada is fast approaching the scheduled day of its Cannabis 2.0 legalization. According to Deloitte, the first wave of cannabis legalization opened up opportunities in areas such as cannabis oils, cannabis plants, dried cannabis, cannabis plant seeds, and fresh cannabis.
The second wave of legalization would open opportunities in cannabis-based edibles and concentrates. So, after the Cannabis 2.0 legalization, these companies can sell seven categories of cannabis products in Canada.
Cannabis 2.0 legalization
Deloitte has estimated the market value of cannabis-extract based products to be 1.6 billion Canadian dollars. The audit firm has also estimated the market opportunity in cannabis-infused beverages, topicals, concentrates, tinctures, and capsules to be 529 million Canadian dollars, 174 million Canadian dollars, 140 million Canadian dollars, 116 million Canadian dollars, and 114 Canadian million dollars, respectively.
Two prominent cannabis players, Aurora Cannabis (ACB) and Canopy Growth (CGC), have been strategizing to benefit from this upcoming market opportunity. According to Global News, Cannabis 2.0 legalization will become effective on October 17. Further, the legal sale of edibles in Canada can start on December 17 at the earliest.
Aurora Cannabis targeting Cannabis 2.0 opportunity
In its fourth-quarter earnings call, Aurora Cannabis highlighted its initial focus on vape products and edibles after the Cannabis 2.0 legalization. The company is aggressively investing in scaling up cannabis cultivation and extraction capabilities, as well as adding to its manpower. Aurora Cannabis aims to ensure a sufficient supply of products after December 17. The company is currently producing chocolates, gummies, mints, and vape pens on a commercial scale.
On June 21, Aurora Cannabis announced its plans to expand its presence in areas such as cannabis-based edibles, concentrates, and vapes. The company is focused on expanding its production and distribution capabilities to support the launch of its Cannabis 2.0–compliant products.
To that effect, the company has established production hubs in Western and Eastern Canada. The company also announced the construction of a 21,000-square-foot manufacturing facility, Aurora Air, to produce several edible product lines. On July 15, the company announced receipt of a processing license for the Aurora Air facility from Health Canada.
On October 3, Aurora Cannabis highlighted that its annual production capacity has exceeded 625,000 kg. The company has been constructing Aurora Polaris for industrial-scale production of products such as edibles and vapes. The company expects to obtain building occupancy for this facility by October 31.
Aurora Cannabis also expects to complete the Whistler Pemberton facility by Q4 2019. The company has planned to launch new consumer products under the brand Whistler Cannabis Co. after the Cannabis 2.0 legalization is underway.
On October 3, Aurora Cannabis also announced the construction of a 12,600-square-foot cannabis testing laboratory, Anandia Laboratories, to test cannabis and cannabis-based products. Further, the company announced the ongoing construction of the Cannabis Innovation Center. Aurora Cannabis expects to complete the construction of this center by December.
Canopy Growth targeting opportunity
Canopy Growth plans to launch vapes, edibles, and beverages after the Cannabis 2.0 legalization. The company decided to commence the production of these products in the third quarter of fiscal 2020.
According to its investor presentation, the company is working on securing the appropriate licenses for manufacturing facilities. The company is also involved in factory acceptance testing of these production systems. The company expects the installation and qualification of all facilities for Cannabis 2.0 products to be completed in early October.
According to its first-quarter earnings call, Canopy Growth filed 56 patent applications in areas such as vape devices and vape oil. The company has been working to improve the design and functionality of existing vape products. In December, Canopy Growth plans to launch 15 SKUs (stock-keeping units) associated with new vape technologies.
Canopy Growth is also leveraging its collaboration with Constellation Brands to launch high-quality cannabis-based beverages. According to its first-quarter earnings call, Canopy Growth plans to differentiate based on targeted market segments, taste, packaging, brands, and concentration and quality of cannabis in these beverages.
According to its first-quarter earnings call, Canopy Growth has already set up and automated the manufacturing of cannabis-infused chocolate. These systems have allowed the company to secure the appropriate licenses from Health Canada.