Cannabidiol (CBD) is a naturally occurring component of cannabis. It is extracted from the cannabis plant and often made into an oil for use. CBD is not psychoactive, and does not produce the ‘high’ of THC (tetrahyrocannabinol), the primary psychoactive component of cannabis. CBD is legal in Canada and has been used in the treatment of various medical conditions. A study by Future Market Insights (FMI) predicts that the Global CBD Oil market will continue rising, enabling the market to exhibit a compound annual growth rate (CAGR) of a robust ~31%, through 2031.
The Canadian Cannabis Industry Finally Starts to Hit Its Growth Phase
Although recreational cannabis has been legal in Canada for three years, the market continues to face challenges.
Municipal bans on cannabis brick-and-mortar retailers in Canadian provinces have slowed down the growth of the industry by forcing consumers to drive long distances to municipalities that have a large number of cannabis brick-and-mortar storefronts.
The decision to ban the opening of cannabis retail stores has benefited the illicit market and authorities hope to see a decrease in the number of municipalities that have banned the opening of cannabis retail stores in 2022.
CBD Market Reaching New Heights
Over the past four years since Canada officially legalized cannabis, the industry’s green wave swept the Nation. CBD continues to trend as one of the most popular cannabinoids due to its unique health and medical benefits—albeit without all the buzz of THC.
From consumption to sales, manufacturing and investment, the Canadian CBD market continues to trend upward. In fact, just two years after legalization, the Canadian Health Food Association (CHFA) reported that the Canadian CBD market could grow to $2 billion if regulations were changed to regulate CBD as a health product. Furthermore, the group projects that this number will continue to increase by 7% yearly.
Improving The Consumer Experience: The New Trend
The big trend of 2020 was that of Canadian licensed producers (LPs) focusing on improving product quality, branding, and consumer experiences. This, in turn, led to ameliorated brand recognition and loyalty across the market.
According to researchers, this trend is expected to continue in the next stage of the Canadian cannabis industry. Brands will seek to appeal to a deeper, more diverse pool of consumers with their product offerings and messaging—all while balancing regulatory compliance with the innovation and quality that a more mature market will demand.
As the market evolves, the industry will also witness continued partnerships and consolidation, with companies coming together to streamline and play to their strengths to successfully compete in a crowded field.
How Regulations on Hemp is Affecting the Sales of CBD in Canada
The Cannabis Act distinguishes between traditional cannabis and industrial hemp. While hemp is a member of the cannabis family, it does not fall under the definition of “Cannabis” in the Act and is therefore subject to a different set of regulations.
Under these regulations, known as the Industrial Hemp Regulations, the mature stalks, grains, and seeds of industrial hemp plants from licensed industrial hemp farmers may legally be sold in Canada. There are currently no specific regulations or guidance around the manufacture and sale of CBD products derived from this specific hemp source.
This is a crucial distinction to note, as hemp has been known to contain high amounts of CBD, however, it contains very little THC, less than 0.3% in dried hemp—making it non-psychoactive unlike products containing higher levels of THC.
Health Canada is expected to amend the Cannabis Act to have a more comprehensive view of hemp-derived CBD by spring 2023, and industry sentiment is that Canada will follow suit and regulate hemp CBD as a natural health supplement (rather than a recreational drug), as the US and parts of Europe have already done.
2022 to be a Better Year for the Canadian Cannabis Industry
2021 has been a challenging year for the Canadian cannabis sector and LPs have been under heavy pressure. Licensed Canadian cannabis retailers have also been trending considerably lower last year than in 2020.
As the probability for federal cannabis reform in the US increases, so has the number of Canadian cannabis companies that have acquired hemp and CBD businesses that are likely to benefit from a potential change in regulation.
Major Players in the Canadian CBD Market
Since legalization, Canada’s cannabis giants (Canopy Growth, Aurora, and Tilray) have produced most of Canada’s CBD oil. Smaller boutique growers also supply the market, but most CBD products come from the Big 3.
With a market capitalization of 8.4 billion USD, Canopy is the biggest cannabis corporation in the world. However, most people are unaware of this, as none of Canopy’s brands feature their name. They also own stores that retail different CBD products in various formulations.
Looking Ahead: The Future of Canadian CBD
These days stress and anxiety are at an all-time high, which explains consumers’ drive towards all-natural healing solutions. This, along with the rise in availability of legal CBD goods is causing CBD to become in high demand.
The good news is that illegal sales of unregulated CBD products is now being addressed by local officials causing a monumental shift in the market. As authorities continue to crack down on the illicit market for consumer safety purposes, a rush of customers are seeking high-quality, refined, tested, and transparent CBD products.
Nandini Roy Choudhury, Client Partner Food and Beverage at Future Market Insights is an experienced research professional and client research partner at ESOMAR-certified market research and consulting firm Future Market Insights (FMI). FMI is headquartered in Dubai, with offices in the US, UK, and India. You can connect with Nandini on LinkedIn.