Cannabis edibles and beverages have more than doubled their share of the overall cannabis market since 2011, according to data from ArcView Market Research and BDS Analytics, with revenue projected to grow from $1 billion in 2017 to $4.1 billion by 2022.
Consumer appetite for edibles also appears to be rising as people seek out ways to consume cannabis without smoking it. According to a Dalhousie University survey, 46% of people are willing to try cannabis-infused products when they become commercially-available and a full 93% of people favoring cannabis legalization were open to trying an edible product.
These dynamics have started to draw the attention of blue chip companies around the world. For instance, Constellation Brands Inc. (NYSE: STZ) shelled out $4 billion for its stake in Canopy Growth Corp. (NYSE: CGC) (TSX: WEED) and Anheuser Busch Inbev NV (NYSE: BUD) partnered with Tilray Inc. (NASDAQ: TLRY) to research THC and CBD drinks.
Let’s take a look at some of the biggest innovators in the space and some of the key challenges facing the industry as edibles go mainstream.
Who Are the Biggest Innovators?
There are many companies involved in the cannabis edibles space, but there are a few companies that have built a reputation in the emerging space.
TransCanna Holdings Inc. (CSE: TCAN) (FSE: TH8) provides branding, transportation and distribution services through a wholly-owned network of California subsidiaries. The company recently signed an LOI to acquire the business and assets of SolDaze. SolDaze is a CBD/THC organic mango cannabis infused snack line conceived in Santa Cruz, California. The infused natural edible is low in sugar, and tastes like a healthier version of dried fruit. The tropical mango bites and the mango strawberry bites won best edible at the 2018 Emerald cup. Mangoes are packed with myrcene, a terpene that interacts with THC, making this cannabis edible a match made in heaven.
Sublime Canna is a leading cannabis manufacturing and distribution firm in California with an award-winning line of vape cartridges and pre-rolls. When developing an edibles product, the company sought out a discreet and easy-to-use product format. The team recently launched Dosies, a cannabis mint that contains just 2 milligrams of THC, to empower consumers to fine-tune the experience that they want or microdose throughout the day.
The company’s Tic Tac-like cannabis mints are only the beginning of what’s to come after the company brought on LJ Buffardi as its Vice President of Edibles Development. Prior to joining the company, Mr. Buffardi, along with his family members, sold Ferrara Candy to Ferrero, the Italian maker of Nutella and Tic Tacs, for an undisclosed amount. Next up from Sublime is a THC-infused freezer popsicle, called Freaze, that will be launching in July. Each popsicle will include 10 milligrams of THC.
Other companies are focused on private label contract manufacturing rather than developing their own brands. FinCanna Capital Corp.’s (CSE: CALI) portfolio company QVI Inc. is building a state-of-the-art production facility to produce edibles, topicals, tinctures, chocolates, hard candies, gummies, beverages and other products on a contract basis for licensed cannabis cultivators and brands — all under a single roof.
FinCanna is a royalty company that provides growth capital to rapidly emerging private companies operating in the licensed U.S cannabis industry. The Company earns its revenue from royalties paid by its investee companies that are calculated based on a percentage of their total revenues.
What Are the Key Challenges?
The edibles industry must overcome some key hurdles before products reach mainstream consumers around the world.
The regulatory uncertainty surrounding the industry has caused some issues. In the U.S., the FDA is in the process of reviewing the status of CBD as an ingredient in foods and beverages, and it could decide to restrict its use. In Canada, the government is expected to legalize edibles and beverages later this year, but for now, consumers are limited to cannabis flower and concentrate products. Packaging and labeling regulations are also in a state of flux.
Cannabinoid metabolism could also pose a challenge for the industry. Unlike alcohol, cannabinoids are fat soluble, which means that there’s a slower on-set and potentially undesirable taste issues. Microemulsions and nanoemulsions could help solve some of these issues, but they come with their own set of issues, such as shelf life, taste, stability and predictability — there’s still a lot of work to be done on delivery systems.
Finally, many smaller companies in the space could face stiff competition from larger competitors. As these concerns clear up, there are many large companies that are likely to enter the space in a big way. Coca-Cola Co. (NYSE: KO) has reportedly expressed interest in CBD-related beverages, while many alcohol companies have already started to make strategic moves designed to capitalize on the potential for THC beverages.
Looking Ahead to What’s Next
Cannabis edibles and beverages could become a huge market segment over the coming years. Investors looking at the cannabis industry should consider adding exposure to their portfolios to diversify away from simply holding cultivators and dispensaries. Despite the significant potential, there are several key risk factors that investors should consider when looking at companies with ambitious plans in the space.
For additional details on FinCanna’s disclaimer and Forward Looking Statements please visit:
The above article is sponsored content. Emerging Growth LLC, which owns CannabisFN.com and CFN Media, has been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation:http://www.cannabisfn.com/legal-disclaimer/