Forecasting 2019: What can we expect in the new year?

Looking forward to 2019

2019 brings opportunities and milestones to look forward to – as well as new challenges to navigate for the cannabis industry. Last year laid the foundation, but there’s much to build upon in 2019. Here’s our take on industry progression in the new year.

Business trends:

Supply issues

The greatest damper on the primary year of legalization was supply issues that plagued the nation. Within the first two weeks of legalization, Canadians consumed $43 million dollars worth of cannabis. There was certainly no shortage of demand. Alberta’s private market was hit hard, as AGLC halted licenses to keep up with demand. Supply was also notably less than promised from cultivators.

Looking forward to 2019, we will start to see supply issues lessened. However, it will likely take a few years before we are able to fully keep up with demand. In Colorado, the market stabilized about three years into legalization. That being said, this year many cultivators will be opening new spaces that enable a much greater production capacity. Health Canada is working diligently to approve additional licensed cultivators. We will likely see further mergers of craft cultivators and big-name producers to increase supply. In an interview with the Calgary Herald in December 2018, Mark Goliger, CEO of National Access Cannabis, said: “By the end of the second quarter of next year, there’ll be a massive improvement in the amount of supply available.”

Ontario

All eyes are on Ontario. This coming week we will see the lottery system open in Ontario, with 25 businesses winning a “golden ticket” to open shop in April 2019. We say winning because their lottery system truly just boils down to luck. You can see the full requirements here. The lead up to Ontario’s April opening date will undoubtedly garner a ton of attention, nationally and internationally. The Ontario marketplace will eventually open up to a larger number of retailers, with plans to have a private marketplace like that of Alberta, once supply increases.

Ancillary businesses

The cannabis business is booming, and people are looking to get their share, any way shape or form. This coming year, we will see a huge increase in ancillary cannabis businesses, those who support the industry but don’t directly purchase or sell cannabis products. If we look to Colorado or California, you can see travel businesses, culinary tours, tech companies and wedding planners capitalizing on the green rush. The industry brings with it many new opportunities, so you’ll likely be seeing a lot of innovative entrepreneurs dipping looking to support the emergent cannabis industry.

Cannabis bubble

2018 was full of mergers, acquisitions, increasing market caps and overvalued organizations. Canadian cannabis stocks were at an all-time high prior to legalization but came tumbling down post-October 17th. Large claims by producers and extensive media coverage incited fear that cannabis stocks may be a bubble, as many companies were highly overvalued. In the new year, we will likely see cannabis stocks recover, though they may be a long-term investment as the market stabilizes. Investors will likely be much more conservative with their dollars, ensuring companies truly perform before investing in the hype.

New products on the marketplace:

The introduction of Bill C-46 brings edibles, extracts and topicals on the market, which have been much anticipated.

Edibles

Edibles account for a massive chunk of the market in the States. Due to their discreet nature and extended effects, infused products have gained mass popularity.

Canada has been progressive with their approach to edibles, as they are working to protect public safety. In places with legal edibles and loose regulations, they tend to observe an increase in hospital visits due to overconsumption. This is due to misinformation and the difference in effect between edibles and other consumption methods. The reasoning for this is how the body processes edibles, which can lead to increased effects and prolonged impairment periods. Canadian regulations will likely see a cap on the amount of THC and sugar. Additionally, they will placed in plain packaging to ensure they don’t appeal to children. While we are just beginning to see what legalization of edibles may look like, we can expect to know more over the coming months.

Topicals

Topicals are products that include cannabis as an ingredient and that are for use on external body surfaces (i.e. skin, hair, and nails). In an article from CBC News,CBC Greenlit columnist Rohit Joseph said, “If you’re able to buy a cannabis topical over the counter, without any prescription, and it is indeed certified by our own government and scientists to help with certain aches, pains, and skin conditions … then the cannabis as a wellness product gains a lot more legitimacy.” Cannabis topicals will have a cap at 1000 mg per container under the proposed legislation.

Extracts

Extracts are products produced using extraction processing methods or by synthesizing phytocannabinoids. Preloaded vape pens (categorized as cannabis extracts) contain a precise dosage which makes for easy and controlled consumption. They have been highly requested here in Canada, though the forthcoming legislation caps THC doses at a maximum of 10 mg. Prominent vape pen producers such as Dosist are lobbying to enter the Canadian marketplace, and we can’t wait to have them.

You can read the entirety of the proposed regulations for Bill C-46 here.