Deloitte researches new Canadian legislation

What did Canada learn from Cannabis 1.0?

The Canadian market for next-generation cannabis products is worth an estimated $2.7 billion annually, with edibles contributing more than half, according to a new report from Deloitte.

"All eyes remain on Canada as it prepares for the next stage of cannabis legalization—a step that will keep the country firmly at the vanguard of a societal revolution and a new industry exploding with potential", they say. 'Cannabis 2.0' will see edibles containing cannabis and cannabis concentrates become legal on October 17, 2019. "The introduction of new cannabis products has created unique market opportunities for edibles, beverage, and health and wellness companies as a wider assortment of cannabis formats become available over time. Cannabis 2.0 will appeal to a much broader consumer base including those cannabis consumption methods", they say. 

"However, we do need to acknowledge that Canada’s legal recreational cannabis industry is still in its infancy. 'Cannabis 1.0' legalized combustible cannabis, cannabis oils, and cannabis plants and seeds only a few months ago, and provincial governments, licensed producers, licensed retailers, R&D facilities, analytic testing facilities, financial institutions, and consumers are still navigating this new landscape. Cannabis 2.0 will undoubtedly be a 'slow burn' at first, but as more products become available we’re confident it will catch fire and gain momentum. Cannabis 2.0 will position Canadian companies and talent for global growth—even as the US market gains momentum."

As in previous years, Deloitte conducted comprehensive market research to understand Canadian consumer sentiment on cannabis edibles and other alternative products arriving with Cannabis 2.0.

A slow burn towards new growth
Patience is a must across the Canadian market as the regulatory framework for edibles and alternative cannabis products evolves in the run-up to October 2019. As the industry settles, Deloitte believes the strong growth potential for legalized edible and alternative cannabis products will drive increased mergers and acquisition activity in the industry. They fully expect Cannabis 2.0 to attract interest from strategic CPG players looking to enter the space, amongst other new entrants.

Cannabis 2.0 - What will current and likely Canadian cannabis consumers expect?
To gain insights into what Canadian cannabis consumers are thinking, Deloitte surveyed 2,000 Canadian adults in early 2019. They then compared the data with information provided by Headset to identify similarities and differences between US and Canadian markets.

What have we learned from Cannabis 1.0?

  • Each province has progressed at its own pace, leading to uneven growth across the country creating the need for strong business fundamentals.
  • M&A has become a key lever for growth. Thorough due diligence, including integrity due diligence, is a critical part of any M&A strategy, and should not be overlooked.
  • As other countries legalize or decriminalize recreational and medical cannabis to varying degrees, Canadian firms must quickly move forward to secure their place at the forefront of the global industry.
  • The globalization of cannabis has caught on around the world as new players enter the various cannabis categories.
  • Consumer experience will continue to be a key differentiator.
    Insight-driven organizations will lead the way in an industry where companies cannot rely on traditional branding or marketing to reach consumers, data and analytics to discern key insights will be vital in making faster, smarter business decisions.

Download the report here.

For more information:
Jennifer Lee
Partner - National Cannabis Sector Leader
Consumer Advisory & Analytics
Practice Leader  

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