There was a lot of fanfare when Canada legalized recreational cannabis in 2018 and several investors wanted to break into the market. However, the past year has been one to forget for cannabis companies as the industry has not lived up to the hype.
Cannabis stocks plummeted last year as investors began to flee following regulations that slowed the rollout of new markets in the country. For instance, the six largest publicly traded marijuana companies had torrid times losing close to $25 billion in market value last year.
Cannabis industry faced a myriad of challenges last year
In the first year of legalization, the industry faced a myriad of challenges like slow licensing of stores, supply issues, and pricing issues. Equally cannabis producers were not certain of the type of strains that they could cultivate. Canopy Growth Corp (NYSE: CGC) president Rade Kovacevic indicated following legalization in the first year they were trying to ascertain the type of strains and quantities they should grow.
Lack of enough retail stores is another issue the industry has been grappling with in the past year. For instance, Ontario which is the most populous province in Canada had very few retail stores making rollout to be slow. Ontario had around 24 retail stores serving a population of over 14 million. However, the government has indicated that in 2020 the number of stores will be increased significantly.
Cannabis 2.0 products offering Cannabis companies a lifeline
However, things seem to brighten up in 2020 following the legalization of Cannabis 2.0. Equally the number of retail outlets in various provinces could increase significantly as the government moves to cancel certain prequalification requirements. The cannabis derivatives market has huge prospects and according to a report by Deloitte the derivatives market is valued at $2.7 billion. Equally the report indicates that the edibles market alone could be worth $1.6 billion annually.
Most cannabis companies in Canada are already developing Cannabis 2.0 products while others have already released their products. Some of the products the companies are producing include infused beverages, edibles, vapes as well as topicals that include balms and lotions. Health Canada opened applications for edibles in October with a 60-day notice period and therefore the first batch of products hit shelves in mid-December.
The cannabis derivatives will change the dynamics of the cannabis market in Canada. As a result, they will push cannabis products closer to the packaged goods model. According to Bethany Gomez the research director at Brightfield Group, this will enable brands to differentiate their products and identities in the more diverse market.
Delta 9 Cannabis launches Cannabis 2.0 products in its stores
For instance, Delta 9 Cannabis Inc. (OTCMKTS: VRNDF) recently announced the introduction of cannabis derivatives in its portfolio in Manitoba. The company received its first batch of cannabis derivatives mid-last month from various producers. Delta 9 Cannabis launched cannabis edibles and vape products in its stores sourced from brands such as Aphria Inc. (NYSE: APHA), Cronos Group Inc. (NASDAQ: CRON), Aurora Cannabis (NYSE: ACB), and OrganiGram Holdings Inc. (NASDAQ: OGI) among others.