10 things investors should know if they want to get rich off the pot craze

10 things to know to get rich off the pot craze

Here’s a cheatsheet for investors and entrepreneurs looking to get in on the marijuana-mania

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This past June, prime minister Justin Trudeau announced that Canadians will be able to consume marijuana recreationally without criminal penalties starting on Oct. 17, 2018—a few months later than initially promised. Trudeau’s main goal in legalizing cannabis was to take it out of the hands of criminals selling to kids, but he likely didn’t realize the powerful business and investment forces that he would unleash.

The numbers tell the story. Conservative estimates peg cannabis, or “cannabiz” to be a $6 billion industry in Canada by 2021.

The effect? Tens of thousands of people across Canada are scrambling to figure out how to get rich quick from legal pot. Some are even ditching successful careers with telcos, banks and universities to get in on the action, while those with an interest in publicly listed cannabis companies on the Toronto Stock Exchange or Canadian Securities Exchange have already become superrich. Even small investors, caught up in the investor frenzy, are checking out their options in stocks, mutual funds and ETFs that invest in cannabis and its spinoffs.

READ: Condos rushing to ban pot smoking before legalization

So what do you need to know if you want to get rich off cannabis in Canada? First, while dried cannabis will be legal this year, extracts, edibles, and juices/carbonated drinks will become legal in 2019. The stuff coming next year, however, is where the biggest profits are expected to be made and it’s what has “cannapreneurs” wildly excited. Cannabis-infused martini anyone? Or how about a canna-sports drink that increases endurance during your workout? Or in the bedroom?

Options are limitless but here are 10 things you need to know to get rich off cannabis in Canada:

1. Know the producers

The most money will be made by major cannabis growers, or licensed products (LPs), with supplier contracts for pent-up demand stretching across the country. Their main customers will be government retailers in tightly regulated provinces like Ontario, Quebec, and B.C. alongside private-sector resellers in free-wheeling provinces like Alberta and Manitoba. And the biggest and most successful cannabis play in Canada by far is Canopy Growth (TSX: WEED), who is mass producing pot in greenhouses the size of car assembly plants.

2. Drinks over smokes

Drinking could be the future of marijuana consumption in Canada. Ice teas, shakes and juices all infused with THC (tetrahydrocannabinol) will be a huge new product category on store shelves next year. THC could also be added to beer, wine, vodka, tequila—all with the end goal of getting you high. THC is likely the main reason U.S. alcohol giant Constellation Brands Inc. (NYSE: STZ) paid $245 million for a 10 per cent stake in Canopy Growth. At the same time, beverages can also have cannabidiol (CBD), a non-psychoactive component of cannabis that’s said to inhibit some diseases, added to them, and these CBD-infused beverages are sure to challenge energy drinks for ultimate supremacy in the market. Some of the major companies in this area include Aphria Inc. (TSE: APH), Cronos Group (TSE: CRON) and Phivida Holdings (CNSX: VIDA).

MORE: What are pot stock investors smoking?

3. Equipment is imperative

Sophisticated industrial equipment costing a small fortune is needed to turn dry cannabis into concentrated oils used to make everything from gummy bears and granola bars to carbonated drinks and vape cartridges. Leading suppliers of this type of equipment include Advanced Extraction Systems (AESI), based in PEI. Some of the country’s biggest growers are already among its customers.

4. Looks matter

Packaging that looks professional is key for cannabis. That means automated labelers, sealers scales, baggers, conveyors and product inspection tailored to the industry. MD Packaging of Uxbridge, Ont. has worked with purveyors of medical pot for years and sees the addition of recreation products as a boom for its business.

5. Keep an eye on edibles

Craving Chocolate Coconut Bliss Balls or Ganja Peanut Butter Cookies? How about Magic Flute Brownies and Chewy Chocolate Trip Cookies for liftoff into outer space? Edibles including chocolates and hard candy, all infused with a dose of THC, are coming your way soon. There are several small businesses in this country selling THC edibles online in Canada, so far just for medical purposes but soon for fans of “The Hitchhiker’s Guide to the Galaxy.”

READ: Investors need to watch the accounting on weed stocks

6. Cannabis-infused topicals are on the rise

Topical creams and balms infused with cannabis are already available for people who suffer from chronic joint pain and arthritis, provided you have a script from an MD. But this will remain a grey area for legalization for non-prescribed users because the legislation doesn’t directly address this product category. But this won’t slow online sales, which are already booming. For instance, Vancouver’s Miss Envy Botanicals makes a sex lubricant infused with cannabis extract to increase blood flow to sensitive parts of the body while Cannalife Botanicals makes similar products.

7. Novelty products

Wholesalers of specialty paraphernalia are sure to make a killing. Amsterdam’s Futurola manufactures a variety of cool items, including the Knockbox 2, a machine cost $4,500 U.S. that rolls 100 perfect cannabis filled cones in a matter of minutes.

8. Genetically-modified pot?

As users become increasingly picky about the mood alteration they want from their pot, genetically modified cannabis will become a big thing. And the same goes for medical users in terms of the health benefits they demand. Canadian pharma labs able to patent new and better strains of cannabis will be in high demand. Companies such as Monsanto Co. (NYSE: MON) and Bayer (BAYN: GR) are already sharing secrets about the production of genetically modified marijuana.

9. PR bonanza

Consultants, lobbyists, and PR companies will prosper. Navigator is lobbying provincial governments on behalf of clients while Toronto’s Lift & Co. is positioning itself as the go-to PR agency for things cannabis.

10. Cannabis stock products

Mutual funds and ETFs are in the game too. The list of investment products with exposure to cannabis stocks includes iShares Core S&P/TSX Capped Composite Index ETF (TSE: XIC), BMO S&P/TSX Capped Composite ETF (ZCN: TO) and Vanguard FTSE Canada All-Cap ETF (TSE: VCN).