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Edible Manufacturing a Key to Cannabis Market Growth

Robin Lefferts

November 19th, 2020

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It’s been about a year since Canada, following up on the national legalization of adult-use cannabis, allowed ingestible (edible and drinkable) products on the market. It took a few months for some products to hit the shelves and find traction, but both supply and demand have been trending upward lately. According to market research firm Mintel, 59% of Canadians reported using and/or being interested in using cannabis. Importantly, 32% of non-users indicated an interest in trying cannabis and 48% of them listed edibles as the most intriguing format when asked to rank product categories. Overall, 66% of non-users open to cannabis use indicated an interest in edibles.

In many ways, edibles are something of a gateway for curious but inexperienced consumers to try cannabis, and they could be the key in unlocking the full potential of the legalized cannabis market. On top of opening new markets, cannabis infused ingestibles return on average higher profit margins than smokable products do. One company, City View Green Holdings Inc. (CSE: CVGR) (OTCQB: CVGRF), has recognized this trend and is building a business focused on the production, distribution, and sale of cannabis-derived edibles.

City View Green’s Plan

City View Green recently submitted its evidence package to Health Canada, one of the final steps before anticipated approval, for a Standard Processing License. The company has completed the first 12,000 square feet of its 40,000 sf automated processing and manufacturing facility in Brantford, Ontario. Utilizing best in class equipment and processes, the facility is designed to produce 100,000 pieces of edibles every eight hours when fully operational. Cannabis infused chocolates, baked goods, gummies, and chews are all on the menu.

In late April, 2020, City View announced the closing of an asset purchase transaction with Infusion Works Inc. The deal effectively merged the two companies under City View’s umbrella, bringing Infusion Works’ intellectual property, extraction and manufacturing equipment, executive team, and business relationships with it. Infusion Works had been laying the groundwork for full production of cannabis infused foods, perfecting extraction techniques and recipes while establishing contacts with existing licensed producers that may be interested in creating edible brands.

When licensed, City View Green will offer white label manufacturing and packaging services to those existing producers. The company anticipates hitting the ground running, with a deal lined up to manufacture and package edibles for a prominent international licensed producer once the license is secured. Many cannabis producers do not have the expertise, machinery, space, or proper license to manufacture cannabis infused foods, but they most certainly have interest in selling edibles due to the broad appeal and attractive margins.

City View Green is also planning to create and market its own brands of edibles. To that end, the company owns a 27.5% stake in Budd Hutt Inc., a cannabis retail cafe chain with 52 locations in the works. City View plans to use Budd Hutt shelf space to launch its own brands, while also leveraging the relationship to add distribution for its white label partners.

Does It Make Sense?

As the cannabis industry matures and gains legitimacy with a broader range of consumers, some of the old business axioms start to exert themselves. Offering high quality, consistent products with low cost of manufacturing is important, and City View utilizes automated state-of-the-art equipment to achieve those goals. Branding and packaging are critical in creating consumer appeal and ensuring regulatory compliance, and City View has assembled a team of food and consumer packaged goods experts to tackle that end of the business.

With the industry’s growth there is increasing room for specialization. Many licensed producers have maximized their space, capital, and expertise in building cultivation operations, but with the advent of ingestibles and cannabis-derived products they see a more lucrative opportunity lying just beyond their reach. Contract manufacturers that specialize in extracts, formulations, manufacturing, and packaging can provide the bridge to those more profitable products and fill out a more complete product portfolio for licensed producers. This type of arrangement allows each party to focus on what they do best, helping to lower costs and maximize profitability while ensuring quality and consistency of product.

Deloitte estimates that edibles and other alternative cannabis products will end up generating $2.7 billion dollars of revenue annually in Canada. “The edibles market alone is estimated to be worth at least $1.6 billion a year in Canada, with cannabis-infused beverages adding a further $529 million,” said Jennifer Lee, a partner and Deloitte Canada’s Cannabis National Leader, and Consumer Advisory and Analytics Practice National Leader. “According to our research and stakeholder interviews, much of this economic boost will be on top of current cannabis product spending. The introduction of cannabis-infused edibles will clearly threaten the alcohol industry as consumers are using the product for similar usage occasions.”

These projections are very good news for City View Green as it solidifies its position right in the middle of these emerging trends. Keep an eye out over the next couple of months as the company executes its vision and moves into the commercialization phase.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Robin Lefferts

Robin Lefferts has been involved in the legal cannabis industry since 2012, sometimes as an active participant and always as an interested observer.

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