Canada’s decision to legalize recreational marijuana marked the beginning of a new era for a budding business that is bursting at the seams with potential. It is predicted that the total legal market in North America would reach a stunning $20 billion by 2022, according to ArcView Market Research. As a result, such research is particularly optimistic about the development potential of marijuana enterprises based in Canada, with the Canadian cannabis industry estimated to reach $9.2 billion by 2025.
Despite these rousing endorsements, the cannabis sector has seen its fair share of difficulties since it became legal a little more than a year ago. Particularly problematic has been a pattern of recurrent product shortages, which has left consumers dissatisfied and angry. Furthermore, when it comes to the establishment of legal retail outlets in Canada, all three provinces have significantly underperformed. Investors are understandably wary in the face of such a volatile environment, as seen by the fact that marijuana stocks are limping into the end of the year.
Similar to Colorado’s experience, where it took three years for supply to catch up with demand, Canada is having problems filling shelves. However, this cannabis shortage is not the only supply-side issue that the business is dealing with right now. Terry Booth, the CEO of Aurora Cannabis, has warned that “carnage” could soon erupt among Canadian companies that have high production expenses per gram of marijuana grown in their facilities.
While some observers now say that supply has finally caught up with demand, legal sales account for only a percentage of total consumption; the black market plays a significant role in this regard, as previously stated. Such a study also fails to take into account the fact that Canada is expanding the list of authorized cannabis products to include edibles, extracts, and topicals. This “second-wave” of legalization, dubbed “Cannabis 2.0,” means that customers may expect “missteps, delays, and frustration” to continue in the future. Jennifer Lee, Deloitte Canada’s cannabis national leader, makes this forecast, as well as the conclusion that the cannabis sector will be normalized in a minimum of 24 months.
MORE SHORTAGES ARE EXPECTED FROM POT 2.0, IT IS PREDICTED.
On a recent earnings call, Cam Battley, the chief corporate officer of Aurora Cannabis, stated that the company is “going to prioritize vape pens and edibles, and that’s based on our study of customer demand in the United States.” Consumer demand for and interest in alternative cannabis goods, particularly sweets and wellness-related items, implies that Cannabis 2.0 will, over time, prove to be a reliable source of revenue growth for Canada’s cannabis industry.
What exactly is the industry’s potential in terms of growth? With a market that is somewhat larger than Canada’s, vape pens assisted extracts in capturing 37 percent of the market share, which was greater even than dry flower, which accounted for 33 percent in the state. Even while edibles are a long way behind concentrates and dry flower in terms of market share, they nevertheless account for 7 percent of a large market.
The difficulty is that there aren’t enough companies that make extracts to meet demand. Health Canada, a government department, has a backlog of work that is contributing to this lack of production. This organization is in charge of supervising cannabis regulations, and it is now coping with a backlog of 614 applications on their waiting list.
Companies are making the best decisions they can given the current conditions. Auxly Cannabis CEO Chuck Rifici stated last week that the company has made a “very purposeful effort to postpone revenue” in order to ensure that they may stockpile as much extracted concentrate as possible before the company goes public.
This is where the PICK AND SHOVEL business comes in.
How can businesses and investors respond to the combination of Cannabis 2.0 and product shortages? What are the options? ‘That was Mark Twain who said it,’ according to legend.
If you’re in the pick and shovel business, it’s a good time to be alive because everyone is looking for gold right now.
Twain was not waxing lyrical in his speech. According to recent research, it was not the miners who made their fortunes during the California Gold Rush, but rather the businesses who sold them the gear they needed.
The cannabis sector is no exception to this rule. There are numerous ways in which farmers can improve their crop yields, increase the efficiency with which plants are processed, and provide their products to a wider range of stakeholders.
This has been taken into consideration by investors. Even though marijuana investing is still a high-risk endeavor, it is feasible to find safety (as well as income) by investing in auxiliary companies that provide infrastructure services to developing marijuana enterprises in either the recreational or therapeutic segments.
Sixth Wave has entered the pick and shovel sector as a result of the convergence of Cannabis 2.0, the acute demand for highly purified extracts, and the lower pressure on the price of cannabis. It has created a two-phase post-processing extraction technology to make it easier to produce high-purity tetrahydrocannabinol (THC) isolate and cannabidiol (CBD) distilled oil, both of which are essential constituents in the range of Cannabis 2.0 products on the market. Nanotechnology developed by the company is now under patent protection and employs a highly selective molecular imprinting process that exceeds existing technologies.
Due to an increase in the total recovery of the selected cannabinoids, the technology and procedure lower CAPEX and OPEX expenses. It is also a significant value-added product for enterprises involved in the growing and processing of cannabis because it requires no specialized training, allows for unlimited scaling, requires no costly media change, and essentially eliminates losses associated with previous technology.
ANCILLARY MARKET: IT’S NOT ALL ABOUT THE CULTIVATORS ANYMORE.
Given the considerable hurdles that the cannabis business is now facing, the ancillary market will be critical in helping the industry move forward. Many risk-averse investors have fled to the United States as a result of ongoing supply concerns in Canada and rivalry with the country’s still-thriving illegal market.
While the cannabis green rush has seen a lot of attention paid to cultivators, while deciding which companies to support, it’s important to examine the ancillary market as well. Sometimes the most exciting activity isn’t taking place on the field, but rather on the sidelines.
By tripling its investment in cutting-edge technology such as Affinity, the cannabis sector may help address some of its most pressing and costly obstacles, thereby enabling it to enter its next phase of development.
Join Cannabis Tech’s Kristina Etter on Wednesday, January 15th for a live webcast with Sixth Wave’s CEO, Dr. Jonathan Gluckman, to hear more about this game-changing technology and how you can get involved!