The world is watching the Canadian cannabis market to see how legalization plays out in a relatively free-market landscape. One of the biggest questions: how will consumer tastes shape the fortunes of the so many new (and newly legal) cannabis producers and retailers?

After price, the most important consideration for purchase decisions is the type of cannabis products made available at a retailer, according to Deloitte’s most recent survey of Canada’s cannabis industry.

When Global News analyzed the online marketplaces for each province. While each province featured a unique set of products, the most consistently diverse type of product was the flower varietals. British Columbia topped out at ninety-seven varietals, the most available in any province. But when it came to the availability of other products, it was hit and miss. Non-smoked options such as gel capsules, oils, and sprays were often non-existent. The ongoing supply shortages haven’t helped consumers or retailers figure out what’s truly driving consumer tastes.

In 2019, the supply issues (should) get better (for more on that, see my earlier article, China Is Blaming Canada For Its Cannabis Problem But Is Producing 50% Of The World's Supply). More consistent supply will help give retailers a better sense of consumer tastes.

China Is Blaming Canada For Its Cannabis Problem But Is Producing 50% Of The World's Supply @Canada#Canada https://t.co/bxUjvCtIhIpic.twitter.com/R70L2rlGxy — Canada Reddit (@Canada_Reddit) August 18, 2018

The biggest change for 2019, though, will come with another form of legalization.

When the Cannabis Act passed, cannabis edibles and cannabis-infused beverages were conspicuously absent from retail locations on October 17. Though Canada’s cannabis market is hyper-regulated, the Canadian government decided it still needed time to create regulations around products that could be potentially confused for non-cannabis alternatives. In particular, the government is concerned with sorting out labeling issues—they want to avoid what happened in Colorado, where a bunch of children were admitted to the ER after eating cannabis-laced edibles. Trudeau’s government gave itself until one year after the first day of legalization to create the regulations for edibles, so the latest date you’ll have to wait for edibles is October 17, 2019.

Nevertheless, as CBC reports, businesses are already ramping up their edible production in advance of legalization. That’s because retailers know how popular edibles are for many first time and seasoned cannabis users. Though retailers can’t sell it, it seems edibles are the freebie of choice for retailers. According to a survey, 24% of Canadian cannabis consumers said they had received a free edible in the last 30 days.

That makes edibles the most exciting product group for 2019, even if it takes until October to hit the market.

Edibles

If you’re determined, you can buy cannabis oils and make your own edibles at home. The edibles market is expected to be a billion-dollar industry in its own right in the coming years. According to Grizzle, as smoking becomes less popular, the edibles market has become “the fastest growing and most profitable segment in cannabis.” Some estimates put the edibles market to grow to $4 billion by 2022.

#DidYouKnow: Edibles are expected to quadruple in Canada and the U.S. by 2022, reaching a value of more than $4.1 billion. Meanwhile, global sales are anticipated to surge from $9.5 billion in 2017 to $32 billion.https://t.co/8i0e1Ij0cn — BloomCultivation (@Bloom_Cannabis) January 3, 2019

Deloitte estimates that six out of ten likely Canadian cannabis customers will choose to consume edible products after they become legal later this year. Baked goods like brownies and cookies (51%), along with chocolate (43%), were by far the edibles Canadians were most eager to try when asked.

“It’s important for Canadian regulators to look to legal U.S. markets and consider the massive consumer demand for different types of edibles such as gummies and other non-chocolate confections, and how they fit in with the rules for packaging," said Dan Anglin, Co-Founder & CEO of CannAmerica Brands Corp. (CSE: CANA) (OTCQB: CNNXF), a branding, licensing and intellectual property company with a portfolio of premium cannabis brands,told me. "Otherwise, Canadian consumers will continue to utilize the illicit market or go the DIY route, and both of these options create uncertainty with THC content in products.”

The Canadian government released its regulations for edibles, and the biggest guideline (besides ensuring the products don’t appeal to children) is the limitation of THC in edibles. For every edible (or drink) package, which will be roughly one serving size, it can only contain up to 10 mg of THC. It’s a similar scheme to California, which limits a serving to 10 mg THC increments and packages to 1000 mg per package.

"While 10 mg THC is a standard serving size, what truly makes a difference is child-resistant packaging and capping total THC at 100mg per package, while also marking the edible product itself to clarify that the product contains cannabis," Anglin continued. "These regulations to prevent children from accessing these products have been established and proven to work.”

The one holdout from the edibles market may be Quebec, which has generally been the strictest province when it comes to local regulations. According to Eater, the government of Quebec is unlikely to legalize edibles in the province.

Cannabis-Infused beverages

Even though Health Canada's regulations stipulate that cannabis and alcohol shall not mix, alcoholic beverage giants are jumping into the Canadian market. Constellation Brands, the group behind Corona and Modelo beers, have partnered up with Canopy Growth, Canada’s largest cannabis producer. Meanwhile, Molson Coors has partnered with HEXO, another large cannabis producer in Canada. Even Coca-Cola is looking into CBD-infused drinks.

Though these established alcohol companies won’t be able to combine their brews with the psychoactive elements of cannabis, they’re jumping into Canada’s cannabis market to produce THC-infused drinks. Mark Hunter, the president and CEO of Molson Coors, believes that the beverage market will account for up to 30% of the edibles market--up to $3 billion per year.

In lieu of alcohol and carb-laden brews, expect the THC and CBD-heavy variants of coffees, sparkling waters, and juices. In particular, the CBD varieties will likely be touted as health-drinks (though without strong health claims), as CBD can help reduce inflammation and anxiety in many users without the “high” feeling associated with THC.

The federal government is aiming to legalize #edibles and cannabis-infused beverages by October 2019. Is this a development you’re looking forward to or concerned about? Let’s #DiscussCannabis. Source: https://t.co/MvHhv3bZTVpic.twitter.com/YFxXEX6fBN — Emerald Health Therapeutics (@emeraldhealthca) January 4, 2019

CBD products

CBD, or cannabidiols, are, in a word...everywhere. Creams, coffee, vapes, chocolate, bath bombs, and even pet products feature CBD now, making it the trendiest of cannabis’ 80-plus chemicals.

CBD is such a big deal that when Walmart Canada announced it was considering selling CBD products in its stores, Walmart’s share prices jumped up 2.5%. The excitement stems, in part, from the estimates that the CBD market could be $22 billion by 2022 in the U.S., and even more globally.

The CBD market is blowing up because it is being touted (correctly or not) as a cure-all for everything from inflammation and pain to depression and insomnia. Some critics are calling it the next Bitcoin or avocado toast.

As one of the largest hemp producers in the world (CBD is often made from hemp, not marijuana), Canada already has the supply to be a leader in the CBD industry, though since industrial hemp cultivation began in 1998, much of that hemp has been used for other purposes. The market for CBD in Canada alone is expected to hit $1 billion in the next five years.

"Cannabis oils in a 1:1 (one part CBD to one part THC) formulation are currently very popular in Canada, and there is a shortage of products with this formulation in the provincial cannabis retail outlets,” Todd Morrow, president of HempMeds told me. “We are looking forward to taking advantage of this 1:1 popularity later this year when Health Canada approves edibles and higher concentrate products for the legal market. We think these products will be extremely sought-after when that happens."

Look for CBD to be added to a wide variety of products this year throughout Canada.

Tourism

While not a product, per se, expect the tourism industry to graft itself onto the cannabis craze. In traditionally marijuana-friendly places like Vancouver, cannabis is already being incorporated into cafes and non-dispensary retail stores across the city. The big retailers like Cannabis Growth are repurposing old buildings--like a Hershey’s factory in Smith Falls, Ontario--into functional factories with visitor centers and educational tours.

Recently, Vice profiled the emergent “luxury weed tourism” industry that has emerged since last October. Everything from nature hikes and massages to fine dining and weddings are being infused with cannabis.

As edibles and beverages become more commercially available, expect the cannabis tourism industry to grow even more.