Quebec's Vape Market Expansion: A Strategic Entry Point for Cannabis Investors

The Canadian cannabis and vaping markets are undergoing a profound transformation, driven by regulatory shifts and evolving consumer demand. Quebec, a province long at the forefront of cannabis policy innovation, has recently opened a new frontier with the legalization of cannabis vaping products. This development, coupled with the persistent challenges of an expanding illicit market for flavored vapes, creates a complex but potentially lucrative landscape for investors. Among the emerging players, Mercanto stands out as a strategic contender, leveraging regulatory alignment, product diversification, and distribution advantages to position itself in a high-growth segment.

Regulatory Evolution and Market Fragmentation

Quebec's regulatory framework for vaping products has been shaped by a dual mandate: curbing youth access to flavored vapes while addressing the demand for legal cannabis alternatives. The 2023 flavor ban, intended to reduce underage vaping, inadvertently fueled a surge in the illicit market. By June 2025, 80% of vaping products in Quebec were estimated to be illegal, with prohibited flavors accounting for 80% of usage among under-30 adults. This black market, valued at an estimated $68 million in 2025, underscores the gap between regulatory intent and consumer behavior.

The provincial government's response has been twofold. First, it expanded legal cannabis vaping options through the Société québécoise du cannabis (SQDC), launching regulated cannabis vape sales on November 26, 2025. Second, it introduced a framework for legal nicotine vaping products, albeit with strict flavor restrictions. These moves aim to redirect demand from illicit sources while ensuring product safety. However, enforcement remains challenging, as cross-border purchases and unregulated products persist.

Mercanto's Strategic Positioning

Mercanto's entry into Quebec's cannabis vape market is marked by a calculated approach to product differentiation and distribution. The company has launched three 1-gram vape cartridges-Afghan Gold and Cherry Blossom (in-store) and an unnamed third variant (online)-targeting distinct consumer segments. This strategy minimizes internal competition while capturing a broad spectrum of preferences. Crucially, Mercanto's products currently occupy 8% of vape cartridge shelf space in Quebec, a significant foothold in a market with 24 in-store and 29 total SKUs.

A key differentiator is Mercanto's approval of the M3B+ battery, a collaboration with hardware manufacturer CCELL. This device, available in all 104 authorized cannabis retail stores, ensures compatibility and quality, addressing a critical pain point for consumers accustomed to illicit products. By securing one of only two approved battery listings, Mercanto not only enhances user experience but also strengthens its regulatory compliance profile-a vital asset in a market where trust in legal alternatives is still developing.

Competitive Dynamics and Market Share

Tilray, a global cannabis leader, has also entered Quebec's vape market with its Good Supply brand, offering Pineapple Express and Blue Dream cartridges. While Tilray's broader market share in adult recreational cannabis is 9.3%, its specific position in the vape segment remains opaque. The company's financial challenges, including negative earnings and margin pressures, raise questions about its long-term sustainability in a price-competitive environment.

Mercanto, by contrast, appears to be capitalizing on its agility and niche focus. Its early-mover advantage in securing battery approvals and its targeted product portfolio position it to capture a disproportionate share of the 11% of Quebec's cannabis sales projected for vapes in 2025. Moreover, the company's emphasis on natural terpenes and THC distillate aligns with consumer demand for quality and transparency, differentiating it from both illicit and lower-margin competitors.

Growth Potential and Risks

The Canadian cannabis vape market is forecasted to grow at a compound annual rate of 14.2%, reaching $950 million by 2030. Quebec's market, with its regulatory momentum and pent-up demand, is poised to outperform this average. For Mercanto, the path to growth hinges on scaling its product offerings, expanding shelf space, and maintaining its technological edge in battery compatibility. However, risks remain: the illicit market's resilience, potential regulatory tightening, and the entry of larger players like Tilray could compress margins.

Investors must also consider the broader implications of Quebec's policy experiments. The province's experience with the flavor ban and cannabis vape legalization may influence federal or provincial regulatory trends, creating both opportunities and uncertainties. Mercanto's ability to adapt to these shifts-while maintaining its focus on quality and compliance-will be critical.

Conclusion

Quebec's vape market represents a high-stakes arena for cannabis investors, blending regulatory innovation with consumer-driven demand. Mercanto's strategic entry, characterized by product diversity, distribution efficiency, and regulatory alignment, positions it as a compelling candidate in this evolving landscape. While challenges such as the illicit market and competitive pressures persist, the company's early-mover advantages and market-specific strategies offer a strong foundation for growth. For investors seeking exposure to a dynamic and underpenetrated segment, Mercanto's trajectory in Quebec warrants close attention.