Cannabis 2.0 Could Trigger $2.7 Billion in Annual Sales

It’s being called cannabis 2.0. It is expected to generate billions in annual revenue. And it could be a powerful catalyst for a little-known Canadian cannabis company.

What am I talking about?

October 17, 2019 is the day it becomes legal to sell cannabis extracts in Canada.

Despite legalizing recreational cannabis last year, cannabis companies have only been allowed to sell dried cannabis flowers. But that’s about to change – and that’s a good thing for Canadian cannabis companies and shareholders.

Anyone who has been around recreational cannabis in the last few years knows that extracts – including oils, edibles, and beverages – are a booming segment of the cannabis industry that is quickly eclipsing the popularity of smoking dried flower.

A recent report from leading consulting firm Deloitte predicts that cannabis 2.0 – legalizing extracts – will generate billions in annual revenue for the cannabis industry.

Here’s what Deloitte said.

The report, Nurturing new growth: Canada gets ready for Cannabis 2.0, says the legalization on October 17, 2019, of edibles containing cannabis and cannabis concentrates will create new product mixes that will reach consumers who may have been reluctant to try traditional cannabis consumption methods that are currently available. Many of these novice or “cannabis-curious” consumers will be older, often female Canadians who will prefer more familiar consumption formats, notably edibles such as baked goods.

“The edibles market alone is estimated to be worth at least $1.6 billion a year in Canada, with cannabis-infused beverages adding a further $529 million,” said Jennifer Lee, a partner and Deloitte Canada’s Cannabis National Leader, and Consumer Advisory and Analytics Practice National Leader. “According to our research and stakeholder interviews, much of this economic boost will be on top of current cannabis product spending. The introduction of cannabis-infused edibles will clearly threaten the alcohol industry as consumers are using the product for similar usage occasions.”

Here’s a link to the full report.

One way to potentially profit is by investing in one of Canada’s largest cannabis companies that will be selling extracts, such as Canopy Growth Corp (CGC)Aurora Cannabis (ACB) or Organigram Holdings (OGI). These companies are all early industry leaders and I expect them to sell hundreds of millions of cannabis extracts.

An even better way to potentially profit is with a little-known cannabis company headquartered in Canada that specializes in helping the industries largest players extract and develop cannabis oils. Medipharm Labs (TSXV: LABS, OTC: MEDIF) is a Canadian cannabis company and an early leader in the high-growth cannabis extracts and oils business.

Medipharm has partnered with the largest Canadian cannabis companies to provide them with mission-critical cannabis extraction services and product development. Here’s an infographic from Medipharm that highlights its specialty in extracts.

As you can see, Medipharm has partnered with Canada’s largest cannabis companies, including Canopy Growth Corp, Cronos, and Supreme.

For example, in November of 2018, Medipharm signed an 18-month contract to supply at least 450 kilograms of extracts to Canopy Growth Corp and its subsidiaries.

I expect these supply contracts to deliver big-time sales and earnings growth when extracts become legal in Canada at the end of the year.

Medipharm is Ready to Graduate to the Toronto Stock Exchange

Medipharm currently trades on the Toronto Stock Venture Exchange, an exchange created for smaller companies to access to public capital.

However, Medipharm has received conditional approval to graduate to the full Toronto Stock Exchange and expects to receive final approval on July 23. This is a big win for Medipharm because it establishes more credibility and creates a channel to access greater amounts of shareholders.

Medipharm Shares are up More than 100% Since Last October

Medipharm began trading in Canada last October. Since then, shares are up a little more than 100%. More recently, shares have pulled back about 25% after hitting a new all-time high.

The Big Picture on Cannabis 2.0 and Medipharm Labs

Cannabis 2.0 is right around the corner. Leading market research firms are predicting billions in annual sales. Medipharm Labs is a direct play on the Canadian extracts industry.

I expect the company and shares to get a big boost off the next phase of the Canadian cannabis industry.

Michael Vodicka owns shares of Canopy Growth Corp, Aurora Cannabis and Organigram.

About the Author

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.