Analysts anticipate that white label cannabis products – those manufactured by one company for branding and marketing by another – will play a key role in Canada’s cannabis extracts market, as companies look for ways to capitalize on the crucial segment without breaking the bank.
Canada will allow the production and sale of marijuana edibles, extracts and topicals later this year, with some estimates anticipating those products accounting for more than 50% of the total cannabis market.
“Extractors have the opportunity to become indispensable white label partners and unload some of the burden and growing pains that (licensed producers) are currently experiencing,” a recent GMP Securities report noted.
Montreal-based GMP sees multiyear tolling services in the short term giving way to white label opportunities in the long run.
Three companies looking to capitalize on white label services are:
- Barrie, Ontario-based MediPharm Labs (TSX: LABS)
- British Columbia’s Valens Groworks (CSE: VGW)
- Laval, Quebec-based Neptune Wellness Solutions (TSX: NEPT)
MediPharm Labs President Keith Strachan said the company is gearing up to produce white label gel caps and vape pens – pending regulatory approval – for other businesses.
“We think those will be two of our biggest products,” Strachan said.
MediPharm can already process 150,000 kilograms (330,693 pounds) of cannabis annually, and that’s going to rise to 250,000 in the coming months.
MediPharm competitor Valens Groworks sees white labeling as advantageous for companies that want to tap the huge extract and edibles market without diverting much of their own internal resources – allowing them to remain hyperfocused on their business plans.
Everett Knight, executive vice president of strategy and investments, said Valens is going to make vape pens for its customers, as well as cannabis-infused beverages, topicals, edibles, capsules and tinctures.
“We’re completely white label. We don’t want to compete with our customers,” Knight said.
“There’s no limit to it, especially when you look at it from a (consumer packaged goods) standpoint and CBD. There’s going to be a ton of variety of edibles and other products.”
Valens has the capacity to process 240,000 kilograms of marijuana annually.
“I think we’re going to be the largest manufacturer of third-party vape pens in Canada. We’ve custom manufactured five different vape pens,” he said.
“What we’re seeing from our customers going into 2020 and 2021 is there is a lot of demand.”