Legalization of cannabis edibles could be a serious boost to the sector, GMP says

An amendment for inclusion of cannabis edibles and concentrates in Bill C-45 is a positive for the sector, says GMP Securities analyst Martin Landry.

On Tuesday, As part of its clause-by-clause review of Bill C-45, The House Standing Committee on Health (HESA) voted for and passed yesterday an amendment that would ensure edibles containing cannabis and cannabis concentrates become available no later than 12 months following legalization next year. The amendment will be considered and voted on during the third reading of Bill C-45 in the House of Commons.

“This proposed amendment would provide certainty and timing for Canadians and the industry that edibles containing cannabis and cannabis concentrates will be authorized for sale no more than 12 months of the proposed cannabis act,” said Liberal committee member John Oliver.

In a research report to clients Wednesday, Landry said this is a positive development it provides visibility on the timeframe for edibles and concentrates. He believes it could significantly boost the addressable market size.

“HESA’s proposed amendment is quite positive in that it establishes a timeframe for the introduction of edibles and concentrate products, which are expected to comprise an important proportion of the adult-use market in Canada,” the analyst explains. “According to data from BDS analytics, concentrates and edibles accounted for ~40% of the Colorado market in 2016.”

Landry says already established Licesnsed Producer stand to benefit.

“The establishment of a timeframe also provides much welcomed visibility for LPs, allowing for improved business planning around the introduction of these products. We would expect the amendment to provide the ability for LPs to conduct formulation and testing work in order to adequately prepare for the launch of edibles and concentrates which are expected to carry higher profit margins than dried flower products. Assuming approval during the House of Commons’ 3rd reading of bill C-45, the HESA amendment provides us with increased clarity surrounding the potential evolution of the market size in Canada, as well as its composition. Given the expected higher pricing (on gram equivalent basis) associated with edibles and concentrates, the amendment as proposed would have a positive impact on our market size assumptions.”