LEGALIZATION 2.0 COVERAGE
One year after Canada completed the federal legalization of recreational marijuana, the nation will now open its market to novelty products infused with the drug. This includes edibles such as cookies and gummies, as well as cannabis beverages, which will be introduced to the market in an attempt by legal producers to tap into a replacement product for alcohol.
As such, on the eve of the launch of this second phase of the marijuana market in Canada, the Investing News Network brings investors a collection of stories and interviews on the impact this opening will have.
As expectations bubble up for the upcoming marijuana-infused beverages market, stakeholders are learning how to adapt to the regulations for these products.
Like dried flower products, cannabis drinks will face strict regulations once they become available for sale later this year in Canada.
Following the confirmation of guidelines from Health Canada, the industry is gearing up to deliver on the promise of these drinks.
With the legalization of cannabis edible items projected to attract 1.5 million new consumers in Canada and infused drinks expected to secure revenues of C$529 million per year, marijuana companies have set a target to deliver novel beverages to the market.
Elliot Johnson, chief investment officer and chief operating officer with Evolve ETFs, previously told the Investing News Network (INN) that he is excited to see the beverage market develop due to the investment entry of established alcohol players.
“Big alcohol and beverage companies are very interested and believe that there’s something there that matches their product line,” he said.
Johnson said that, once the market notices some of the early winners of the cannabis-infused market, he expects the makers of those drinks to become acquisition targets for larger marijuana players or, potentially, established beverage makers.
Investments from established partners into the cannabis market have investors excited about the potential for these beverages to be a home run from the get go. However, Health Canada has warned stakeholders that the roll out of the whole cannabis edibles market will be slow.
Health Canada offers clarity on edibles and infused regulations
In June, Health Canada unveiled its regulations for the roll out of edibles and infused products, including beverages.
The federal government confirmed the regulations will come into effect on October 17, exactly a year from the first round of marijuana legalization. However, sales will not start that day.
“It is expected that a limited selection of products will appear gradually in physical or online stores, and no earlier than mid-December 2019,” Health Canada said.
This soft launch of sorts is being cautioned by the federal government because of the mandated 60 day notice period for new products by cannabis companies. As a result, consumers should not expect a rush of product availability on day one.
As part of the rules from Health Canada, cannabis-infused drinks will face a limit of 10 milliliters of tetrahydrocannabinol (THC) per package. Items will need to display the amount they contain visibly and will require an equivalent to grams of dried flower for consumers to compare.
When it comes to restrictions on stock keeping units (SKUs), the government will allow multi-packs of the same product, so long as the total amount of THC in the complete package does not exceed 10 milligrams.
Retailers will need to prepare for the launch of this market and place orders on the SKUs available.
Despite the entry of alcohol makers and their participation in the development of these marijuana beverages, the federal government has made it clear it will not tolerate any branding associated with existing alcohol brands.
“(It’s) crazy to me that an alcohol company can advertise in the supermarket and advertise online and advertise on bus shelters and have the most beautiful packaging in the world and a cannabis company can have none of that,” David Pullara, chief marketing officer of Hill Street Beverage (TSXV:BEER), told INN.
While edible items will initially attract significant attention, the pressure for beverages to deliver the goods for public firms and investors is mounting.
Different form factors will offer option to differentiate cannabis drinks at first
One of the key differentiating factors for the first batch of competing cannabis drinks will be onset and offset times. This is the amount of time it takes for the high from the drink to kick in and leave the system of its consumer.
Cole Miller, cannabis research director at Iconic Brewing, told INN that there will be a range of onset and offset times for the first few beverages available.
But eventually, in about five to 10 years, he said that this will become standardized in a similar way to the alcohol market today.
According to Pullara, another beverage maker, every company in the cannabis-infused drink market is racing towards delivering efficacy and a standardized product that consumers can develop a trust relationship with.
“Nobody is going to want to take a beverage and not feel it for an hour or two hours and then completely feel it all at once … I think that companies that can’t get their onset and duration right are going to be at a huge disadvantage right from the start,” Pullara said.
Kris Dahl, vice president of corporate development for Sproutly Canada (CSE:SPR,OTCQB:SRUTF), previously told INN that consumers who have previously tried cannabis drinks have suffered from poor technology leading to bad experiences.
“Some people are impatient looking for that effect, so they drink too much, and when it finally hits, they are out of it for a long, long time,” Dahl told INN.
Besides the form factor of delivery times, there has also been support for these drinks being a healthier recreational item compared to alcoholic drinks.
“If I have a choice to hang out with stoned people all night or drunk people, give me stoned people all night all the time,” Bruce Linton, former co-CEO of Canopy Growth (TSX:WEED,NYSE:CGC), told Bloomberg.
Marketing restrictions create critical relationship between budtender and consumers
Health Canada has taken a stiff stance on the marketing and product design for cannabis products, and that has led to some frustration in the sector. Beverages will see similar packaging restrictions and guidelines.
John Kaye, CEO of British Columbia-based marijuana accessory and clothing retailer Burb, said stores will rely on a lot of education and information to sell these drink products. Burb plans to become a licensed marijuana retailer.
Due to the no self-serving restrictions on cannabis products, consumers will not be able to pick up a bottle or a can of a cannabis drink from a shelf or fridge inside a legal store, as they would with other beverages, said Miller. Instead, they will ask the budtenders and associates at a store directly.
“The only way we’re going to reach that consumer is through that budtender right now, because we can’t market,” Miller told INN. His firm sells a variety of novelty alcoholic drinks and will offer cannabis-infused drinks.
Miller explained that cannabis beverage makers will have to work in partnership with budtenders to guarantee word of mouth buzz is created for these drinks.
When asked if any marketing restriction changes could be on the horizon for these drinks from Health Canada, Miller said change occurs when consumers demand it, not when stakeholders ask for it.
“I’m not overtly against having (cannabis-infused drinks) behind the shelves because you have to interact with that budtender and it’s a great point for knowledge and information to get passed along and get that right product for the right person,” Miller told INN.
While marijuana drinks are creating a buzz in investment, stakeholders will still have to see the development of the subsector, as the roll out of these products will take time.
“Nobody really knows what’s going to happen and that’s one of the exciting things about this new format, the edible and consumable beverages coming into the market,” Johnson told INN.
Part two of our feature on cannabis-infused beverages will discuss the deals struck between public marijuana firms and established beverage makers, as well as more about the projections this market is attracting.
This article was originally published by the Investing News Network in July 2019.
Don’t forget to follow us @INN_Cannabis for real-time news updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Hill Street Beverage is a client of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
CanBud Distribution Corporation Closes 2M Second and Final Tranche of its Oversubscribed Private Placement Offering
CanBud Distribution Corporation (CSE: CBDX) (FSE: CD0) (“CanBud” or the “Corporation”) is pleased to announce that it has closed the final tranche of its oversubscribed non-brokered private placement for aggregate gross proceeds of approximately $4,730,000 (the “Offering”).
The Corporation issued a combined total of 39,409,346 units (each a “Unit“) at price of $0.12 per Unit, with each Unit comprised of one common share in the capital of the Corporation (each a “Common Share“) and one common share purchase warrant (each a “Warrant“). Each Warrant entitles the holder to purchase one additional Common Share at an exercise price of $0.22 within 24 months of the closing of the Offering (the “Warrant Term“), provided, however that if the closing price of the Common Shares on the Canadian Securities Exchange (the “CSE“) (or any such other stock exchange in Canada as the Common Shares may trade at the applicable time) is $0.25 or greater per Common Share for a period of five (5) consecutive trading days at any time after the closing date of the Offering, the Corporation may accelerate the Warrant Term such that the Warrants shall expire on the date which is 30 days following the date a press release is issued by the Corporation announcing the reduced warrant terms.
Thoughtful Brands Inc. (CSE:TBI)(FSE:1WZ1)(OTCQB:PEMTF) (the “Company” or “Thoughtful Brands) announces that the letter of intent with Franchise Cannabis Corp. (“FCC”), previously announced in January, has been terminated. The previously announced European joint venture with FCC will continue and allow the Company to launch and tailor its products to European consumer demands
In connection with termination of the merger transaction with FCC, the Company has agreed to pay FCC $100,000 in cash and to issue FCC 5,000,000 common shares of the Company at a deemed value of $0.05 per share. The common shares will be subject to a four-month-and-one-day statutory hold period in accordance with applicable securities laws.
Mergers and acquisitions (M&A) in cannabis space have helped boost the industry to new levels.
Strategic sale of non-core assets by Lobe adds non-dilutive capital and shareholder value
Lobe Sciences Ltd. (CSE: LOBE) (OTC Pink: GTSIF) (“Lobe” or the “Company”) is pleased to announce, further to its press release dated February 23, 2021, that it has completed the sale to Ionic Brands Corp. (“Ionic Brands”) of Lobe’s non-core cannabis assets relating to Washington-based Cowlitz County Cannabis Cultivation Inc. (“Cowlitz”) held by Lobe’s subsidiary vendor, Green Star Biosciences Inc. (the “Transaction”).
Seattle Area Grocery Chain Metropolitan Market to Begin Carrying KOIOS and Fit Soda on March 22, 2021
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Koios Beverage Corp. (CSE: KBEV; OTC: KBEVF) (the “Company” or “Koios”) is pleased to announce that beginning on Monday, March 22, 2021, Koios’ entire line of canned beverage products will be sold at all locations of Metropolitan Market, an urban format supermarket chain in the Seattle-Tacoma area of Washington State. In Q1 2021, the Company announced multiple placements of its beverage products with regional grocers in markets on the west coast of the United States including Market of Choice in Oregon Jensen’s in Southern California and major natural grocery chain Sprouts Farmers Market which has a substantial west coast presence with over one third of its locations (360+ stores across 23 states) in California as well as Washington State 1 . The Company has also recently announced other developments relating to its expansion efforts being undertaken in 2021 such as an in-house beverage canning facility and distribution agreements with regional and national wholesale partners.