Canada is getting ready to add to the list of products cannabis companies can legally produce and sell in the country. All of these will be good for publicly traded cannabis companies doing business there and investors like you and me. And it’s happening more quickly than its full legalization rollout earlier in 2018.
The next wave of regulations for Canada‘s new fully legalized cannabis marketplace is on pace to go into effect no later than October 17 of next year. And that’s great news.
Usually, when people here the word “regulations,” they wince a bit. They might think about things being taken away. Or they might think about an onerous list of mandates that cause problems and stymie what should be a booming marketplace (i.e., the California legalization story one year ago).
But Canada is getting ready to add things, all of which will be good for publicly traded cannabis companies doing business there and investors like you and me. It will open up opportunities that are yet banned in the country even as many cannabis products have now been legal for adults to purchase there for just over two months now.
So, with Health Canada‘s release in the last week on the subject of new legal cannabis products, comes a number of big news items.
Now, the draft regulations are subject to change, of course. But this unveiling was definitely a positive. The fact that Health Canada is starting the process before the end of the year means that it almost surely will avoid delays to the start date of these new products.
Canadian regulators may even be able to surprise everyone by introducing the rules earlier than that. Remember, that last year Canada initially intended to begin recreational sales in June; bureaucratic delays pushed the date back to October. It’s good for everyone that Health Canada is ahead of schedule this time around.
But there are much bigger pieces of news than the timeline. And one aspect will help boost one of my favorite cannabis industry stock picks in 2019 and beyond.
Here’s what I’m talking about…
Cannabis Vaping Getting the Green Light
Canada is going to allow vape pens, according to Health Canada’s draft regulations for new products. That’s massive news from the draft regulations Health Canada issued in the last week on the subject of new legal cannabis products.
There has been some concern regarding whether the regulator would include vape pens in the list of new products it would approve by next October. As we’ve discussed before here at Cannabis Profits Daily, vaping typically has taken a 30% or more market share of cannabis consumption in developed recreational markets in the United States. And it does so quickly.
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If Canada had banned vape pens on the list of approved products, it would have slowed market growth there. It also would have delayed the demise of the illicit market, one of Canada’s main goals in legalizing cannabis in the first place.
And it’s not that vape cartridges or gummies, which are also allowed as part of the proposed 2019 product phase-in, are not available in Canada – It’s that they are not available legally.
Overall, the announcement is (a little) earlier than we expected here at the National Institute for Cannabis Investors, but it confirms our belief that vape pens would be among the approved products. After the regulations are cleaned up, they will be part of the story of Canada’s market growth.
One of the companies in my Cannabis Investors Report member-only stock portfolio stands to benefit big from these proposed Health Canada regulations. This pick-and-shovel company I’m talking about works closely with cannabis companies without actually “touching the plant” itself, and it earns half of its revenue from vape pens. Having a wide variety of vape pens it can sell to producers, publicly-owned retailers, private retailers, and online cannabis platforms in Canada will supercharge this growth in that country.
Wide Variety of Newly Allowed Products Will Leave Consumers (and Investors) Spoiled For Choice
I already mentioned that edibles made the list of legal products come October 2019, maybe earlier. Beverages and topicals also made the cut, according to the new Health Canada proposals.
All of those are rapid-growth product categories in jurisdictions where they are legal, mainly a handful of U.S. recreational-legal states and more medically legal ones. Their introduction will benefit producers, retailers, consumers, and investors almost as much as vaping will.
Of course, some more changes to the proposed regulations would be beneficial – and they’re coming. These draft regulations are only a starting point, even if a strong and encouraging one.
For example, the draft calls for limits to the amount of THC, the psychoactive element of marijuana, in edibles at 10 mg per package. In the United States, more typical packaging would be 100 mg in a package of 10 gummies.
Aside from being a headache for producers from a logistics standpoint, Health Canada’s proposed level is too low to dislodge the illicit market. Again, it’s clear that the regulators are concerned that children will find a package of cannabis edibles and not know that eating all of the edibles in a package is unhealthy.
All that just means the industry is going to have to work with Health Canada to provide a packaging solution that addresses its concerns but still allows multiple-edible packages to be sold. Single-pack edibles would not kill the industry, but it would create a lot of waste and added expense. Given how intelligent the cannabis industry has been at coming up with solutions in recent years, we should not be worried that the industry and Canadian regulators will craft a workable solution.
Perhaps the biggest provision which will have to be worked out is regulation of THC-based beverages. No THC beverage (or any THC product) may have alcohol – that is uncontroversial and expected. But THC beverages also may not have any “elements that would associate the product with alcoholic beverages or brands or alcohol.” I don’t know about any specific brand plans, but surely Molson Coors Canada, Constellation Brands, and most recently Budweiser‘s parent company AB InBev did not invest tremendous amounts of time and/or capital in cannabis companies without hoping to leverage their brands’ goodwill. Again, those changes will come.
These draft regulations are only a starting point.
Thanks for being an important part of the National Institute for Cannabis Investors,
Executive Director, National Institute for Cannabis Investors
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