CannabisNewsWire
Editorial Coverage: Legal changes in Canada are creating an
ideal base for cannabis companies, which are shifting their focus
away from smoking.
- As the first G20 nation to make recreational cannabis legal,
Canada is creating an opportunity for its cannabis companies to
become global leaders.
- Analysis shows that the global cannabis market is larger than
expected — and set to keep growing.
- Many new consumers prefer not to smoke their cannabis, leading
to a shift towards cannabis-derived food and drinks.
Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP)
(LXRP
Profile) has developed patented technology that helps
make cannabis available to nonsmokers; the company’s innovative
development methods make cannabis’ active chemicals more palatable
and more effective in food and drink. Companies such as
Tilray, Inc. (NASDAQ: TLRY) are expanding their
production to cater to this growing market, resulting in rising
share values. GW Pharmaceuticals Plc (NASDAQ:
GWPH) has leveraged its position in the market to raise
extra financing through a $345 million public offering.
Aurora Cannabis, Inc. (OTC: ACBFF) (TSX: ACB) has
been focusing on ensuring access to a broad market, setting up
supply agreements across Canada. Meanwhile, other companies are
evaluating international growth opportunities, with Cronos
Group, Inc. (NASDAQ: CRON) (TSX: CRON) having established
subsidiaries on five continents.
The Canada-led Revolution
This month marks one of the most dramatic changes ever in the
cannabis market, a moment set to transform the industry and the way
that it’s viewed. As of Oct. 17, consumers across Canada are able
to buy cannabis for recreational consumption for the first time.
Canada is the first G20 nation to make such a change, and the
precedent could be critical. Other countries are watching what
happens in Canada, as voters around the world push their
governments toward similar legalization; there are already more
than 30 countries around the world where cannabis is legal in some
form for medical use.
The Canadian example comes just as analysis shows that the
cannabis market is larger than previously realized and set for
continued growth. This puts Canadian companies in a powerful
position, able to make the most of being based in a country that’s
friendly to the cannabis industry. By using the freedom and
opportunities this presents, these companies could easily become
global leaders in a fast-growing sector.
Canada Legalizes Cannabis
For Canadian companies working in the cannabis sector, such as
Lexaria
Bioscience Corp. (CSE: LXX) (OTCQX: LXRP), huge
changes are coming.
After much political maneuvering, recreational cannabis is now
legal in Canada in keeping with a promise made by Justin Trudeau
when he was elected prime minister in 2015. The wait has been
frustrating for some, but it has given companies such as Lexaria
time to establish their leadership position.
Canada already has a thriving medical cannabis industry, in
which tight regulation provides control over the use of drugs. The
new regulations extend this careful
approach to the recreational market. Using a model similar to
liquor licensing, retailers will have to be licensed to sell
cannabis and follow clear rules. Those who try to sell outside the
system will be quickly shut down.
In setting up its system, the Canadian government and provincial
authorities have learned from the example of legalization in
certain U.S. states. They worked with cannabis companies to ensure
that the licensing system for both production and retail was ready
for the Oct. 17 deadline While there will undoubtedly be hitches,
including the likelihood that demand will initially outstrip
supply, this appears likely to be a smooth launch.
Companies have also been making adjustments. For example,
Lexaria recently announced a new subsidiary,
Lexaria CanPharm Corp., which is focused purely on applying the
company’s technology to the cannabis industry. Because Lexaria
sells technology, if is already earning revenue in several
locations both within and outside of Canada without touching the
plant. Lexaria has a Canadian base but international reach.
Cannabis Market Larger Than Expected
Judging the potential size of the legal cannabis market is a
tricky business. The drug’s widespread illegality around the world
means that data is almost entirely drawn from surveys, in which
respondents may be wary of admitting their consumption.
Legalization will likely lead to changes in consumption patterns;
easier access will almost certainly increase both medical and
recreational demand.
Despite the limitations on judging the market, observers have
been keen to estimate what the market could represent. A survey from before legalization indicated that 4.2
million Canadians consume cannabis on a regular or occasional
basis. Based on this data, companies and commentators have
predicted an industry worth billions of dollars, which could
quickly surpass the whiskey industry.
But leading cannabis commentators are now suggesting that
previous estimates may have undervalued cannabis’ potential. The
only specialist cannabis analyst for a major Wall Street trading
firm believes that the impact of
legalizing a previously illegal market has been underestimated.
Legalization could lead not just to large-scale sales of cannabis
but also to its use as an ingredient in other products. Because
Fortune 500-type companies are now interested in the space, the
market could eventually be worth hundreds of billions of
dollars.
If that analysis is accurate, then many cannabis companies are
being massively undervalued. That’s good news for the future
prospects of businesses such as Lexaria.
Consuming Cannabis without Smoking
This growth is likely to be coupled with changes in the way
cannabis is consumed — changes of huge relevance for Lexaria.
A recent survey of U.S. consumers showed that
many would like to try cannabis if it became legal. They also said
that they would be more likely to do so if they could consume the
plant through food. Putting cannabis into drinks and snack foods
will make it easier for people to enjoy in a social setting with
friends, in a similar way that they currently consume alcohol. That
would make it a more popular and accepted part of everyday
life.
Lexaria’s patented technology could be invaluable for companies
catering to this desire. Its lipophilic
enhancement technology is designed to improve the biological
conductivity of active compounds, including those found in
cannabis. It increases their potential for absorption by the body,
meaning that consumers get better value for their cannabis. It also
improves the taste, which will be important in making cannabis food
and drinks popular. Recent tests have
shown good results for applying this technique to active
ingredients derived from cannabis.
Lexaria plans on licensing this technology to third-party
partners and was recently awarded its 9th and 10th granted patents
applicable for cannabis beverages. With cannabis-infused food and
drink set to hit the Canadian market next year, and with large
companies eyeing its potential, plenty of companies are sure to be
interested in such technology that takes advantage of Lexaria’s
leadership position.
Growing with the Market
The legalization of recreational cannabis is good for companies
already working in the Canadian medical market such as
Tilray, Inc. (NASDAQ: TLRY). A company with a
strong pedigree in research and development, Tilray is expanding
its sales potential in preparation for the recreational market. Its
High Park Farms subsidiary recently received a
license to sell cannabis in Canada and has already carried out
several harvests to get stocks ready for sale. Such moves have led
to positive views of the company’s future, with Wall Street commentators predicting a huge rise in the
value of its shares over the next year.
The expectation of huge growth in the cannabis industry is
helping companies raise extra finance to tap into that market.
GW Pharmaceuticals Plc (NASDAQ: GWPH) has just
raised over $345 million through a public
offering. A medical cannabis company, GW isn’t currently
involved in the recreational sector but is still profiting from the
growth it brings.
One of the big players in Canada’s medical cannabis market,
Aurora Cannabis, Inc. (OTCQX: ACBFF) (TSX: ACB),
has been laying the groundwork to make the most of recreational
sales. The company has supply agreements
with provinces across Canada, giving it the opportunity to
reach a broad customer base. As well as providing quick profits,
this will help to establish brand recognition early on for greater
influence as the market grows.
While attention is currently focused on Canada, that is just one
part of the cannabis market. As with other industries, global reach
will eventually decide the biggest players, and Cronos
Group, Inc. (NASDAQ: CRON) (TSX: CRON) is already working
on such expansion. With subsidiaries in
North and South America, Europe, Australia and Israel, the
company is tapping into growing cannabis markets around the world.
Lessons from Canada will help in developing these other markets and
in positioning Cronos to make the most of them.
The legalization of cannabis in Canada is a critical part in an
international puzzle, one whose pieces include unexpected growth,
global connections and transformations in consumer habits. Put
together, these pieces offer the hope of a profitable future for
cannabis companies.
For more information on Lexaria Bioscience Corp., visit Lexaria
Bioscience Corp. (CSE: LXX) (OTCQX: LXRP)
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