Here’s Why Cannabis Derivative Products Could Turn Out to Be the Next Big Thing

While still not legal yet within Canada for recreational consumption, the official legalization of cannabis derivative products appears to be right around the corner.

In this post, I’ll explain why nearly 12 months after recreational cannabis legalization, the market for derivative applications like edibles, oils, beverages, and creams could prove to be absolutely mind-blowing.

Last month, Health Canada released its outline on the final regulations and timeline for the introduction of cannabis edibles, beverages, topicals, and extracts.

Originally, when recreational pot became legal last October, regulators in Ottawa had yet to complete their formal consultations on what the rules for edibles and products should be.

That report was completed this past February with the current expectation for a limited supply of edibles and other derivative products to hit markets sometime this December.

As expected, there will be strict guidelines restricting concentration limits on the amount of THC per serving as well as restrictions limiting producers’ ability to market products that would appeal to youths.

Yet beyond the red tape, the market for cannabis edibles and other derivatives only continues to look more and more appealing.

Take, for example, licensed Canadian cannabis producer Hexo (TSX:HEXO).

HEXO, which inked a deal last year to pair with the world’s third-largest alcoholic brewer Molson Coors to jointly develop a line of cannabis-infused beverages for the recreational adult market, has made clear it has its sights are set on becoming the premier branded ingredients company for cannabis food products.

The company’s vision is to become the leading developer of products aimed at creating “consistent, quick-on and off cannabis experiences for sleep, sport, sex and fun” by working alongside potential Fortune 500 partners, like Molson Coors.

Not only do cannabis derivatives work effectively at creating a bigger overall market for the former Schedule 1 drug — for example, for users who may not feel comfortable inhaling a rolled cigarette or vape pen — but they offer significant advantages for producers as well, namely the prospect of higher margins and expanded profit potential.

Simply put, cannabis derivatives involve a significantly greater deal of processing before they’re ready for market.

That means they’re more expensive and complex to manufacture, but it also allows space for producers like HEXO and others to differentiate themselves, allowing them not only to charge a higher margin on their products but to differentiate themselves from a branding perspective as well, as evidenced in the aforementioned marketing pitch.

Foolish bottom line

Not only do cannabis derivatives offer the potential for producers to separate themselves from the pack, so to speak, but they also offer an avenue for the legal market as a whole to differentiate itself from the still-operating illicit market.

Not to mention that derivative applications also open a pathway for mega-brand consumer packaging goods companies to participate in the growing demand for licensed cannabis products.

The market for cannabis applications only continues to develop, and the latest regulations announced by Health Canada appear to suggest that this is a story that may not go away anytime soon.

Making the world smarter, happier, and richer.

You might be missing out on one of the biggest opportunities in Canadian investing history…

Marijuana was legalized across Canada on October 17th, and a little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

Besides making key partnerships with Facebook and Amazon, they’ve just made a game-changing deal with the Ontario government.

One grassroots Canadian company has already begun introducing this technology to the market – which is why legendary Canadian investor Iain Butler thinks they have a leg up on Amazon in this once-in-a-generation tech race.

This is the company we think you should strongly consider having in your portfolio if you want to position yourself wisely for the coming marijuana boom.

Learn More About This TSX Stock Now

More reading

Fool contributor Jason Phillips owns shares of Molson Coors Brewing. The Motley Fool owns shares of Molson Coors Brewing.

Source: The Fool
Here’s Why Cannabis Derivative Products Could Turn Out to Be the Next Big Thing
The Fool

The Motley Fool
Contributor for
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts