Report: Canadian Edibles Market to Be Worth C$2.7 Billion

A new study by Deloitte focusing on the “cannabis 2.0” stage of legalization in Canada projects that the upcoming edibles market will be worth over C$2.7 billion per year.

The report, published on Monday (June 3), is the research firm’s third annual study of the Canadian cannabis market.

Deloitte projects the heavily anticipated edibles and infused marijuana products market will offer C$2.7 billion annually, with edibles alone representing C$1.6 billion per year in Canada.

In a survey of consumers, gummies took the top spot for preferred edible items with a 26 percent market share, while cookies, brownies and chocolates rounded out list.

The research shows that another cannabis item that has caused a splash of interest will also offer some substantial value.

Cannabis-infused beverages represent C$529 million per year of the total edibles projection.

These drinks have gained notoriety among investors thanks to partnerships between cannabis firms and alcohol producers looking for an entry point into this market.

Some Canadian cannabis producers with beverage deals include: Canopy Growth (NYSE:CGC,TSX:WEED), Tilray (NASDAQ:TLRY) and HEXO (NYSEAMERICAN:HEXO,TSX:HEXO).

As the effects from adult-use legalization are still being seen across the country, industry players expect the opening of sales for edibles and infused items to be a shot in the arm to the overall space.

However, one Canadian firm recently expressed concerns about the expectations for beverages.

In a conference call with investors and analysts in May, Cam Battley, chief corporate officer with Aurora Cannabis (NYSE:ACB,TSX:ACB), said the firm has focused on products with strong demand using a model that is based on what the legal US state markets have experienced.

According to Battley, cannabis beverages secure a “low market share” in the total marketplace.

Jennifer Lee, partner at Deloitte and the firm’s cannabis leader for Canada, said cannabis-infused edibles will “clearly threaten” the established alcohol space in Canada.

“According to our research and stakeholder interviews, much of this economic boost will be on top of current cannabis product spending,” Lee said in a press release.

As part of its study, Deloitte interviewed a variety of industry players on the state of the market.

Edibles market offers Canadian players edge over US

As the Canadian market has seen the growing pains from its legalization path, the US space has seen exponential growth in investment and interest thanks to the emergence of multi-state operators, companies that manage assets in legal cannabis states.

Deloitte is bullish on the potential for the Canadian market to gain a spark from the entry of edibles and beverages.

The study indicates that the market will need to be patient as the regulations for edibles come into place.

“There will be missteps, delays, and frustration,” Deloitte says about the legal framework for cannabis and derivatives in Canada.

As mentioned, Deloitte refers to this new stage of legalization as “cannabis 2.0,” noting that, while it will take some time for the market to really establish itself, in time the momentum will be great enough to match the interest for the US market.

“Cannabis 2.0 will position Canadian companies and talent for global growth — even as the US market gains momentum,” the report states.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.