Both Aurora Cannabis (NYSE: ACB) and Canopy Growth Corporation (NYSE: CGC) have reported disappointing quarterly results in the most recent quarter. Share prices have also mostly seen declines in the past six months for both firms.
However, it may not be the right time to ditch these marijuana giants – Canada’s second round of legalization, fondly called Cannabis 2.0, holds abundant growth opportunities for both firms.
What is Cannabis 2.0?
About a year ago, Canada passed a revolutionary cannabis bill, legalizing weed’s use for medical and recreational purposes. However, only cannabis seeds, oil, and flower came under the ambit of legal recreational weed.
On October 17 this year, Canada will pass another round of legalization, which includes marijuana-infused edibles, extracts, beverages, and a few other products. Both Aurora and Canopy Growth have already been preparing to take on this new market for some time through research and investments. It’s time to reap the benefits from these efforts.
According to Deloitte, the market for cannabis-based products, which includes gummies, chocolates and cookies, is set to touch CAD 2.7 billion annually. Meanwhile, these products are set to hit the shelves only by December as the legislation requires cannabis producers to notify Health Canada about the products two months before kick-starting sales.
Aurora’s primary focus will be on vape products. The company already has a licensed CBD oil product line that is vape ready, which should give it a proper headstart in the industry. Separately, it has inked a deal with American vaporizer company Pax Labs to sell its products in Canada. The agreement could be extended to CBD-based vapors once Cannabis 2.0 is in place.
But Aurora’s efforts are not restricted to vapors. It’s Health Canada licensed Aurora Air facility will start producing chocolates, gummies, and other edible products starting December. Meanwhile, its 300,000-sq foot Aurora Polaris facility, which is expected to be functional by the end of 2019, will produce baked foods and beverages.
Canopy Growth Corporation
If there is any company that has been more focused into Cannabis 2.0 than Aurora, it’s none other Canopy Growth Corporation. Though Canopy Growth is also looking to take on the vape industry, its primary focus will be on beverages and edibles, driven by the partnership with Constellation Brands (NYSE: STZ).
It has a bottling plant functioning in Ontario, besides Hummingbird as an in-house CBD-chocolate manufacturer. The $9-billion investment it received from constellation brands last year was mostly used up to leverage Canopy’s food products ambitions.
Looking beyond these two marijuana giants, Hexo Corp (NYSE: HEXO) and OrganiGram Holdings (NASDAQ: OGI) are two firms that are poised to benefit from Canada’s second round of legalization. Keep a close tab on them.
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