Next October 17 will be the cannabis industry greatest day in Canada as a result of the new regulations
On October 17, the laws on the production, processing, distribution and sale of cannabis products will officially enter into force, which makes this date the cannabis industry greatest day. The legal marijuana industry has taken a short time to become a multi-million dollar business since last year Canada legalized recreational cannabis despite the fact that illegal sales worth many billions of dollars remain a reality.
Financial analysts estimate that at the end of the next decade we could be talking about 50 billion dollars, 100 billion dollars, or even 200 billion in annual global legal sales.
Although Canada is not expected to lead the international cannabis market, the truth is that it is the only industrialized country that has legalized recreational marijuana so far. For this reason, Canada is a kind of model for other countries to learn. And next week, on Thursday, October 17 Canada will become an example for the entire international cannabis industry. It will undoubtedly be the cannabis industry greatest day in this country.
October 17 is cannabis industry greatest day because laws on the production, processing, distribution and sale of cannabis-derived products will officially enter into force. Cannabis derivatives are products derived from marijuana flowers, such as edibles, vapors, non-alcoholic infused drinks, concentrates and topicals.
When the Cannabis Law was passed in Canada, only some marijuana products were legalized. That October 17, 2018 only the sale of dried cannabis flowers, cannabis oil and sublingual sprays was legalized. The fact that other cannabis products were not legalized at that time had to do with a combination of factors. It was necessary to allow time for industry and legislators to solve the many problems of a new and unprecedented industry.
Another important factor was that if the legalization of recreational cannabis was limited to a limited number of products, Parliament was more likely to pass the Cannabis Law of 2018. But this legal situation will change on October 17. With the exception of alcoholic beverages containing cannabis, which remain illegal, the amount of cannabis-derived products for sale will increase considerably in Canada. It seems that the first birthday of legalization will be cannabis industry greatest day.
But in addition, the economic margins of the sale of recreational cannabis could increase in Canada. The reason for this is that the dried cannabis flower in some states of the United States has proven to be the victim of an excess supply and commercialization. On the contrary, cannabis derivatives are unlikely to suffer from some kind of excess supply or price pressures, which implies that these products will have considerably higher margins.
Everything seems to indicate that the actions of Canadian marijuana companies will be very successful. But things could get complicated. First, the official legalization of cannabis derivatives does not imply that these products will be available for sale in dispensaries on the same day as the legalization. In fact, the regulatory agency Health Canada has already said that until mid-December, groceries, vapors, beverages, etc, cannot be purchased legally.
As with recreational marijuana sales a year ago, it takes time to take inventory of physical and online stores. But there are other problems. The biggest concern for the cannabis industry is the constant lack of supply throughout the country. From the same day that recreational cannabis was legalized, the supply of cannabis flowers and oils has been very limited.
There is a significant accumulation of application for culture and sales licenses in Health Canada, and the licensing process for dispensaries in some provinces of Canada is also too slow. This has been the cause of a good part of supply problems. And although solutions are being taken it will still take some time to solve the problem. By the time cannabis derivatives are supposed to arrive at the dispensaries, the problem of lack of supply will remain.
Are investors too optimistic about derivative sales in the initial stage in Canada? Nor can we forget the health problems related to vaporizers in the USA. UU. This problem could be extended to the Canadian market and reduce vaping sales. The Centers for Disease Control and Prevention had located 1080 cases of lung diseases related to the vaporizer as of October 1 and have already caused 18 deaths. Without having the absolute certainty of the cause of these diseases, it is quite possible that vaping sales are a disaster.
Experts are convinced that cannabis products are the future of the marijuana industry. Younger consumers like more than smoking dried flowers. And in addition, we have already said that they will generate higher profit margins. But there are experts who doubt that next October 17 is the cannabis industry greatest day, since it is possible that sales, at least at the beginning, do not meet expectations, given the many challenges described above . Even so the cannabis industry will thrive despite supply problems and health problems related to the vaporizer. The truth is that marijuana lovers are convinced that October 17 will be cannabis industry greatest day in Canada.
Extraction service providers do not have these problems because their income does not come from the sale of individual products, but from extracting services based on contract fees. This implies that some of the large companies in the sector can have a predictable safe cash flow every quarter. For example, although Neptune Wellness is focusing its extraction capacity in the United States, it offers 200,000 kilos of extraction capacity per year in Canada.
In June, the company Neptuno signed the largest extraction agreement to date with The Green Organic Dutchman, for a total of 230000 kilos over a period of three years. And there are other large companies that move in the same line. For these giants, October 17 will be the cannabis industry greatest day. Valens GroWorks and MediPharm Labs get great deals.
Valens has recently increased the volume of its extraction agreement with Tilray to 60,000 kilos per year, and also signed an agreement to extract 80000 kilos with HEXO. MediPharm has an 18-month extraction service contract with Cronos Group worth $ 30 million that could reach $ 60 million in 2 years. Although cannabis is a volatile industry, Canada’s extraction service providers are a guarantee of success in increasing sales of cannabis derivatives.