Sep 30 2019
In part 3 of our Canada Industry Winners & Losers series, IBISWorld identifies the industries most poised for opportunity as a result of the rising popularity of CBD products as well as those most exposed to substitution risk.
In October 2018, Canada became one of the first countries aside from Uruguay to fully legalize the use of recreational marijuana country-wide. Since then, the Cannabis Production industry in Canada (IBISWorld report 11141CA) has become the country’s fastest-growing industry, with its revenue projected to increase an annualized 137.1% over the five years to 2019, according to IBISWorld forecasts.
This kind of unprecedented growth has led to considerable buzz among consumers, businesses and investors alike, with much speculation regarding the future of the industry’s regulatory landscape as well as new product lines currently being rolled out by emerging cannabis companies as the market becomes more established.
Much of this interest centres around products containing cannabidiol, popularly referred to as CBD, which is just one of over 100 active cannabinoids isolated from the cannabis plant thus far. However, unlike tetrahydrocannabinol (THC), the main psychoactive component of marijuana, CBD is non-psychoactive, meaning that it does not produce a traditional “high.”
Although there is still further research to be conducted regarding the exact ways that CBD interacts with the human body, scientists believe that CBD causes the body to produce more of its own naturally occurring endocannabinoids, which are thought to help in the treatment of anxiety, pain and inflammation, among other conditions.
As a result, both the medical and recreational markets for CBD have been booming, with CBD use becoming increasingly widespread throughout Canada, to the benefit of a wide range of industries. At the same time, certain industries may be left out in the cold due to the CBD boom. So who, exactly, stands to win? And who stands to lose?
Winner: Coffee & Snack Shops
One of the industries that is likely to benefit from CBD’s growing popularity is the Coffee & Snack Shops industry in Canada (72221bCA). One of CBD’s most talked-about characteristics by far is its versatility, especially in consumable products. CBD lattes and other caffeinated products are on the rise, along with CBD cookies and other snacks.
In the United States, many coffee and snack shops are already jumping on this trend, and Canadian operators may soon follow suit. With this particular industry’s revenue projected to increase at an annualized rate of 1.9% to $5.6 billion over the five years to 2024, industry operators may choose to capitalize on the CBD trend for even more robust revenue growth.
Winner: Cosmetic & Beauty Product Manufacturing
If consumers want to try CBD without ingesting it, then they can try using one of the rapidly multiplying topical CBD skin care products instead. Currently, many cosmetic and beauty product manufacturers are experimenting with CBD in their skin care lines, as its anti-inflammatory properties make it a potential treatment option for those that suffer from acne.
Furthermore, the antioxidant properties of CBD oil have led to some cosmetic companies touting it as part of their anti-aging product lines, with CBD’s soothing properties permitting even those with sensitive skin to use products containing the compound. Companies that sell CBD skin care products include Lord Jones, Cannuka LLC and KaliKare, the last of which is Canadian-based and -owned and exclusively manufactures natural cosmetics and body care products that are infused with CBD.
IBISWorld anticipates that as CBD becomes more popular over the five years to 2024, the 258 operators in the Cosmetic & Beauty Product Manufacturing industry in Canada (32562CA) will likely begin experimenting with CBD skin care products on a wider scale, potentially boosting industry revenue further than its currently projected 1.5% annualized increase during the five-year period.
Losers : Brand-Name & Generic Pharmaceutical Manufacturing
While some industries may benefit from the legalization and subsequent proliferation of CBD in the Canadian market, other industries may end up losing out. Such may be the case for the Brand-Name Pharmaceutical (32541aCA) and Generic Pharmaceutical (3251abCA) Manufacturing industries in Canada. These industries develop prescription and over-the-counter products that are used in the prevention and treatment of various illnesses. If CBD proves an effective enough replacement for any of these industries’ pharmaceutical products, they may ultimately experience a long-term decline in downstream demand.
CBD is the current poster child for alternative medicine and has been used and studied as a viable option for treating anxiety, depression, insomnia and heart disease. For cancer patients, CBD oil may provide a natural alternative for pain and/or symptom relief. As Canada continues to experience a national opioid crisis, with overprescription of opioid pharmaceuticals leading to increasing numbers of overdoses and deaths, the general public is becoming increasingly aware of the dangers of opioid abuse. Moreover, more and more doctors are now refusing to prescribe opioids such as oxycodone, hydrocodone and morphine, all manufactured by operators in these pharmaceutical manufacturing industries. Over the five years to 2024, these same doctors may instead begin advising their patients to begin using CBD as a replacement of sorts for more addictive medications.
Though CBD and its properties were discovered decades ago, it’s only now picking up significant traction in the news and among the Canadian public. Additionally, the recent legalization of recreational marijuana, including that of CBD products, has left many questions as yet unanswered; the industry is simply too new for there to be any measurable impact on Canadian industries so far.
If CBD’s current buzz and trendiness holds, the next five years may provide us with some of these answers. In the meantime, however, expect CBD to continue popping up everywhere as established operators and budding entrepreneurs alike continue to experiment and discover new practical applications.
Looking for additional industry coverage on the legalization of recreational marijuana in Canada? Discover our previous Industry Insider article and podcast on the opportunities and challenges of Canadian cannabis production!
Edited by Kieran Newton
Infographic Design by Alexandria Valenti