Aurora Cannabis (ACB) is ready to launch its new products for Cannabis 2.0. Health Canada regulations specified a 60-day waiting time to obtain licenses for new products to hit stores. Meanwhile, cannabis companies have been setting the stage by planning and developing a wide range of edibles products. They can’t wait to cash in on Cannabis 2.0. But do we think they’re ready for the next phase? Is Aurora Cannabis ready for Cannabis 3.0? Let’s find out.
Aurora Cannabis and preparation for Cannabis 2.0
In October, Aurora Cannabis provided an update on its next-generation cannabis products. Furthermore, on its fiscal 2020 first-quarter earnings call, it detailed its product expansion and growth strategies for Cannabis 2.0. In October, ACB also provided an update on the progress of its global operations. The company is well positioned in the cannabis industry due to its strategic acquisitions.
Can we expect Cannabis 3.0 soon?
Cannabis 3.0 discussions have been ongoing. Canopy Growth ex-CEO Bruce Linton feels Canada could soon see Cannabis 3.0 and 4.0. In a weekly podcast with the Financial Post, Linton mentioned that Canada should now target Cannabis 3.0 to become a global leader in the cannabis market. He said, “Cannabis 3.0 is when you start reading data and saying this in this dose delivered this way may assist anxiety or may assist sleeping. Then you go further into that, and you start getting into the target outcome, which is really selling on a competitive basis against over-the-counter and some light pharmaceuticals and, over time, curative products.”
Many industry experts also believe that to curb black-market sales, Canada should focus on quality, research, packaging, a higher number of legal stores, and product differentiation. Easy access to products and less-strenuous regulations could help drive legal sales and combat illegal sales. To learn more about Cannabis 3.0, read Cannabis 3.0: Is It on the Horizon?
Aurora Cannabis’s strategy for growth
Aurora Cannabis has positioned itself well in the industry. The company has made numerous investments in setting up high-class facilities to develop the best quality products. I feel the focus of Cannabis 3.0 will be on quality products. If that’s the case, it appears Aurora could have an edge over its peers. However, its rising debt burden could pose a challenge.
A Stock Investor article also stated, “There is room for endless innovation and added value in the cannabis marketplace.” If Cannabis 2.0 sales kick in and cannabis companies recover from their losses, it would be an excellent opportunity for them to focus on research and innovation for Cannabis 3.0.
Cannabis companies’ struggles
When Canada legalized cannabis in 2018, higher revenue forecasts forced cannabis companies to increase production. However, regulation procedures were arduous and time consuming, which led to a lower number of store rollouts. The existence of fewer legal stores affected supply. Now, the cannabis industry faces a demand-supply situation. In 2019, Canada saw declining cannabis sales numbers. To learn more about this, check out Cannabis Sales Decline Across Canada—Why?
Moreover, the illicit cannabis market took advantage of this opportunity, resulting in higher illegal marijuana sales. As a result, cannabis companies’ revenue targets took a hit in 2019. I discussed in Why Aurora Cannabis Stock and Peers Are Struggling how cannabis companies stocks suffered this year. However, hopes for Cannabis 2.0 are high.
A November Seeking Alpha article discussed what issues Aurora Cannabis is facing. According to the report, for now, the Canadian cannabis industry expects to reduce cultivation capacity by up to 800,000 kg. However, Aurora is planning on doubling its production from its fiscal 2020 first-quarter numbers.
So far in December, ACB is up 1.6%. Year-to-date, the stock has fallen 48.7%.
For more cannabis-related updates, check out 420 Investor Daily.