As the legalization of cannabis edibles and infused products in Canada approaches, extracting companies are preparing to meet the projected increase in demand for these services.
During a panel at the MJBizConINT’L event in Toronto last week, two extraction executives discussed the outlook for this market as the attention in the stock market shifts away from producing companies.
Paul Pedersen, co-founder and CEO of NextLeaf Solutions (CSE:OILS,OTCQB:OILFF), and Tyler Robson, CEO and director of Valens Groworks (TSXV:VGW,OTCQX:VGWCF), agreed the interest for the extraction play is only set to rise with the introduction of novelty products in Canada.
Pedersen told the room as the rush for new cannabis products increases, he isn’t sure if every company promising product launches will be prepared for the Canadian market opening.
“There’s going to be very, very few licensed manufacturers of beverage and edibles that are going to be ready,” Pedersen said.
These new wave companies offer extraction services to secure the cannabis oils used by producers to infuse marijuana items such as edible cookies or cartridges used for vape pens.
Canada is set to legalize edible products starting on October 17. However, the actual sales of these items will not officially begin until mid-December, according to Health Canada, the federal agency tasked with regulating the marijuana industry.
Pedersen said investment has only really focused on the growing aspect of the whole cannabis industry.
“As we know, this industry has seen a lot of capital flow into growing plants and building cultivation capacity, but what we haven’t seen in Canada (is) the same level of investment, not even close on the manufacturing side.
“I think there’s a lot of billion dollar companies that are unprepared for what is coming next,” Pedersen told the audience.
To reinforce how far along the cannabis extraction play has come along, Pedersen shared an anecdote of a meeting with a leading licensed producer executive who dismissed the notion of the extraction market as well as companies solely focused on this aspect of the market.
And the Big Cannabis CEO who made that prediction 2 years ago is now using $LABS for all their their extraction processing. Further proof that a lot Major LPs underestimated the amount of R&D and focus required to build an efficient extraction purification business. https://t.co/InMZIEnyZU
— Paul Pedersen (@paul_oils) September 5, 2019
Trina Fraser, partner at law firm Brazeau Seller Law and a speaker at the panel, said she was glad Health Canada did not outright ban some edible items such as cookies due to their inherent appeal to kids.
However, the expert lawyer added that companies will have to navigate the regulatory space carefully so these new products don’t attract minors as part of the promotion and packaging.
Robson said he is bullish on the upside for vape pens. In his view, these products will dominate the Canadian cannabis 2.0 market, a popular term for the introduction of edibles and infused items.
The extraction executive said, while edibles may be appealing, sales numbers in mature cannabis markets in the US paint a different picture for the popularity of these products.
Fraser told the audience she has heard a variety of passionate agreements for vape pens and cannabis-infused beverages as the de-facto leader of the new Canadian market. Fraser added she is excited to see which one proves to be right.
Cannabis-infused drinks have gained a hefty investment interest from various marijuana corporations that are planning to develop products that could offer a replacement to alcoholic beverages.
“I think the extraction market was something that a lot of people who invested in the cannabis industry were not focused on,” Michael Cammarata, president and CEO of Neptune Wellness Solutions (NASDAQ:NEPT,TSX:NEPT), previously told INN when discussing metrics for the extraction company stock market.
In a previous interview with the Investing News Network (INN), Greg Taylor, chief investment officer with Purpose Investments, said he expects an increased stock market focus for the entire extraction play as edibles come into the Canadian space.
Don’t forget to look for the rest of our coverage of MJBizConINT’L, with exclusive interviews and more insights from the show. You can also 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: NextLeaf Solutions and Valens GroWorks are clients of the Investing News Network. This article is not paid-for content.
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