Canadian pot producers going full bore on vaping despite health risks, competition
Hundreds of new vaping devices are set to hit the Canadian market as early as next month, a sign that emerging health concerns, taxes, and even a provincial ban isn't enough to deter what some Canadian cannabis producers are hoping will be a big money maker.
Health Canada told BNN Bloomberg that it has received close to 50 applications from licensed cannabis processors who have requested regulatory authority to sell the new classes of pot products. According to the regulator, those applications cover a total of 747 different cartridge-based vaping systems that industry players are hoping to sell when next-generation cannabis product sales begin on Dec. 16.
While the country's cannabis regulator noted that figure may not necessarily reflect the unique number of vaping systems as the same product may have been submitted by two separate licence holders, such as a cannabis extractor and a pot producer, it does signal the opportunity that the legal marijuana industry sees for these devices.
"There’s going to be a lot of choice for consumers, because all the [licensed producers] are getting into the vape space," said David Kideckel, an analyst with AltaCorp Capital Research, in a phone interview. “There’s now going to be the potential for oversupply in that market, although we won’t know the answer for that for some time.”
That potential comes amid a health crisis in the U.S. where 47 people have died and over 2,000 others have suffered lung illnesses from using cannabis-infused vapes sourced from the illicit market. The U.S. Center of Disease Control determined that the black market vapes contained a vitamin E acetate additive which could coat the insides of lungs like grease and now considers the substance to be a “chemical of concern.”
"While on the one hand we have the U.S. banning these vapes, in the Canadian market, there’s going to be some trepidation when these hit the shelves," Kideckel said. “But at the end of the day we’re optimistic because there’s more restriction on additives in Canada, it’s less likely that the health impacts will happen here.”
Health Canada said it is actively monitoring the vaping illness situation in the U.S., and stated it has restricted the type of ingredients that are used in cannabis vaping products.
"These [cannabis] extracts are not permitted to contain anything other than carrier substances, flavouring agents, and substances that are necessary to maintain the quality or stability of the product," a Health Canada spokesperson wrote in an email to BNN Bloomberg.
The surge of vaping-related illnesses has led Quebec to opt out of selling vape products when they become available next month, eliminating a major market for Canadian cannabis producers. Meanwhile, British Columbia slapped a 20-per-cent tax on all vape products, sparking fears the move would exacerbate an already-thriving illicit market.
Still, the Canadian cannabis industry appears unfazed. Vape products and other so-called Cannabis 2.0 offerings such as beverages, topicals and edibles are expected to generate double the amount of gross margin potential for cannabis producers, according to a recent report by Raymond James.
Canopy Growth Corp., the largest cannabis company in the world, unveiled its suite of vaping products during a glitzy event in Toronto's Design Exchange on Thursday. Other cannabis producers such as Hexo Corp., Aurora Cannabis Inc., Aphria Inc. and Organigram Holdings Inc. have also indicated they plan to have vape products available for sale next year.
Canopy President Rade Kovacevic told BNN Bloomberg in an interview that the company’s lineup of vape devices are produced to abide by top safety and manufacturing standards and adhere to all Health Canada regulations. He added that the devices are the end result of establishing a separate “high-tech” division within the cannabis producer where its R&D staff took dozens of off-the-shelf devices, tore them apart and figured out how to build a complete new product from scratch.
“At the end of the day, you have to take a step back,” he said. “We’re not manually filling vaporizers and there’s no one else in the industry saying that. We’re trying to automate a process and do it at scale. That’s how we’re differentiating ourselves from our competitors.”
Even smaller players don't appear to be concerned about health concerns or the upcoming deluge of competitors in the nascent legal vape market.
Simon Grigenas, chief executive officer of cannabis accessory maker BRNT Designs, said his company will start selling its vape devices in Western Canada early next year.
"We knew this challenge was coming and prepared for it from day one," he told BNN Bloomberg in a phone interview.
"It’s reflective of the Canadian cannabis market. You wake up one day and the market looks radically different."
BNRT spent 18 months developing its proprietary vape devices and secured a two-year deal with Valens GroWorks Corp. to source its cannabis extracts, Grigenas said. The company plans to sell its vapes between $30 to $55 each and hopes its focus on its unique design will lure consumers away from black market devices, which may cost 10 to 15 per cent less, he added.
"We were prepared for a battle and that’s exactly what we got," Grigenas said.
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