What’s Next for Canada’s Cannabis Sector?
The legalization of recreational cannabis marked an evolutionary step for the cannabis industry in Canada and around the world. But it’s still early days. Much of the change hasn’t even fully happened. In this environment it can be difficult to have a handle on what’s next, but it’s also the time you most need vision and insight. Our MNP Cannabis Team sees four key performance trends emerging for the cannabis industry in the next six months.
1. Resolving Post-Legalization Challenges
We’ll expect to see the industry tackle the challenges that have frustrated companies and consumers alike since legalization, especially supply shortages and sales and distribution issues. We also expect to see cannabis companies ramp up marketing activity to educate consumers about recreational cannabis and how to differentiate between the many products available — while staying onside with government rules around cannabis marketing.
A big part of the industry’s marketing efforts will also entail taking on the lingering stigma around cannabis consumption. “Legalized” and “accepted” aren’t the same thing and the industry must still advocate for cannabis to the wider public.
2. Seizing Opportunities for Domestic Growth
As they tackle post-legalization challenges, Canada’s cannabis companies are already looking ahead to new domestic growth opportunities — especially cannabis edibles, for which there’s strong anticipated demand. Cannabis companies can expect new competition from Canada’s food and beverage sector in this area; many food and beverage companies are establishing cannabis divisions and there’s likely to be significant “cross-pollination” between the two industries in future.
Meeting the demand of the medical cannabis market also remains an important growth area for cannabis companies in Canada as well as internationally.
3. A Maturing Industry Will See Rising M&A Activity
With legalization behind it, Canada’s cannabis sector is set for a period of growth, refinement and consolidation. At the moment, many of Canada’s cannabis companies are stretched thin across the entire cannabis supply chain, from cultivation to processing to retail, each with unique challenges. It won’t take long for these companies to “find their lane” and focus on areas of strength. Indeed, we believe this is a necessary step in the industry’s long-term development.
As companies specialize, they’ll use acquisitions — and increasingly, mergers — to achieve scale in their area of focus and close key gaps in terms of talent, capability, knowledge, reach and more. Canadian companies will drive much of this activity, but there remains the possibility that foreign cannabis companies could acquire our domestic firms.
4. International Opportunities: Canada’s Chance to Lead
The global cannabis industry is evolving fast and creating new opportunities for Canadian cannabis companies. It’s also providing Canada with a unique chance to secure a leadership position in this dynamic, growing sector.
Canada’s cannabis industry is admired worldwide for the care and rigour with which it has been established. The policy framework and government support in place ensure companies grow and sell safe, controlled and quality product. Companies have access to the capital and financial services they need to operate with ease and achieve growth. They can draw on a growing pool of talent with the knowledge, education and expertise needed to cultivate, process and market cannabis products. And they have the research and development capability needed to innovate and build on their successes.
As Canadian cannabis firms move into new markets, they can bring this tremendous intellectual property with them. They can show how to build safe and strong cannabis industries and well-run, productive cannabis businesses. They can leverage Canada’s cannabis-friendly investment environment to finance the world’s cannabis industry and get in on the ground floor of new cannabis developments worldwide. In doing so, they can shape the global cannabis sector in Canada’s image and be the model for others.
Capitalizing on these international opportunities is essential for Canada’s cannabis industry to thrive in the long term. Domestic success will only take Canadian cannabis companies so far; to continue to succeed, they must look abroad to new markets and new customers. By taking action now to get in on the ground floor of emerging cannabis opportunities, Canada’s cannabis companies will be able to not only reap the rewards of their investments — they will truly shape the global cannabis industry in Canada’s image, and help deliver safe, controlled, quality cannabis products to consumers worldwide.
Find out about the international cannabis opportunities in MNP’s latest research report Global Cannabis Markets available.