Mercanto's Strategic Play in Québec's New Vape Market

MONTREAL, QC – November 26, 2025 – As Québec turns a new leaf in its cannabis policy, Mercanto Holdings Inc. has made a swift and calculated entry into the province's long-awaited legal vape market. The launch of three distinct vape cartridges marks a pivotal moment for both the company and a provincial market that is cautiously opening its doors to a product category that represents a massive segment of cannabis sales across Canada.

Québec's Cautious Embrace of a Controversial Category

The launch of cannabis vape products in Québec is far more than a simple product line extension; it represents a significant policy reversal and a carefully orchestrated market introduction. The Société québécoise du cannabis (SQDC), the province's sole legal retailer, officially began selling vaping products today, ending a ban that had been in place since 2019. This policy shift is rooted in a public health strategy aimed at capturing consumers from the unregulated illicit market.

According to a 2024 survey, a quarter of Québec's cannabis users were already sourcing vape products from illegal dealers or other provinces, highlighting a potent, unserved demand. By offering a regulated alternative, the SQDC aims to provide safer, tested products. Every vape cartridge sold, including Mercanto's, must pass rigorous testing in Health Canada-certified laboratories.

However, entry into this market comes with stringent conditions unique to Québec. All products must adhere to a strict 30% THC cap, a regulation that has forced producers to invest heavily in research and development to create compliant yet effective formulations. Furthermore, the province has banned all added flavorings, permitting only the use of naturally occurring cannabis-derived terpenes. This regulatory framework creates a high barrier to entry and ensures that only the most prepared and adaptable companies can participate. The SQDC has also invested heavily in consumer education, rolling out extensive training for its in-store advisors to guide customers on responsible use and the distinct risks associated with unregulated products.

A Calculated Entry for Mercanto

Against this complex backdrop, Mercanto Holdings' market entry appears both aggressive and meticulously planned. The company has launched three 1-gram vape cartridges: "Afghan Gold" and "Cherry Blossom" for in-store and online channels, and "Peach Sumo" as an online-exclusive. This differentiated approach allows the company to test different sales channels and capture distinct consumer segments without its products directly competing against each other.

With three SKUs in a market that initially features just under 30 cartridges in total, Mercanto has secured an initial shelf space of approximately 8-10%. This provides a meaningful foothold as one of 14 initial suppliers. For Mercanto, the timing is critical. The company's 2025 fiscal year was described by management as a "transition year," marked by revenue declines attributed to a province-wide restructuring of the SQDC's product assortment. The successful launch of its vape line is therefore central to its strategy for revenue recovery and growth in fiscal year 2026.

While the company's recent financial reports show a challenging period, with a net loss reported in the latest quarter, investor sentiment appears to be turning positive. The company's stock (TSXV: MUSH) has seen a significant uptick in the past month, suggesting that the market is optimistic about the potential of this new category to reshape Mercanto's financial trajectory. The company has stated it expects a clearer picture of sales velocity and market share to emerge by the end of the first quarter of 2026, as initial consumer purchasing patterns stabilize.

The Untapped Potential of the Québec Market

The true prize for Mercanto and its competitors is the enormous potential size of Québec's vape market. While the press release conservatively estimates that vape products account for 15% of cannabis sales in mature markets like British Columbia, Alberta, and Ontario, more recent data paints an even more lucrative picture. According to market analytics from 2022 and 2023, the "inhaled extracts" category, which is dominated by vape pens, commands a much larger share of the market in these provinces: approximately 26% in Ontario, 28% in British Columbia, and over 32% in Alberta.

This category has been the fastest-growing segment of the Canadian cannabis market, with sales increasing by over 30% year-over-year as of mid-2025. The popularity of vapes is driven by their discretion, portability, and potency. If Québec's market adoption even remotely mirrors these national trends, the opening of this category represents one of the most significant growth opportunities in the Canadian cannabis industry today.

The SQDC itself has noted that vaping is already a preferred method for 28% of the province's cannabis consumers, most of whom have been served by the black market until now. By entering on day one, on equal footing with established national brands, Mercanto has positioned itself to capture a slice of this transitioning consumer base.

Beyond the Cartridge: The Strategic Hardware Play

Perhaps the most insightful element of Mercanto's strategy lies not in the cannabis liquid itself, but in the hardware used to consume it. The company is introducing the M3B Plus battery, manufactured by the world-renowned CCELL. Crucially, the SQDC is launching the entire vape category with only two approved battery models available for sale province-wide.

By supplying one of these two foundational hardware options, Mercanto gains a strategic advantage that extends beyond its own cartridges. The CCELL M3B Plus utilizes the industry-standard 510-thread connection, making it compatible with nearly all cartridges that will be sold in Québec, not just Mercanto's. This positions the company to profit from the category as a whole and establishes its brand as an integral part of the consumer's initial experience.

The M3B Plus is a modern, feature-rich device, offering variable voltage settings, a pre-heat function, and convenient USB-C charging—a significant upgrade over older models. By providing a reliable, high-quality battery, Mercanto can build brand trust and loyalty that may later translate into a preference for its vape cartridges. This hardware play is a long-term move, embedding the company into the very ecosystem of legal vaping in Québec and ensuring its relevance regardless of which specific cartridge a consumer chooses on any given day. It is a sophisticated strategy that demonstrates a deep understanding of how to build a durable market position in a new and competitive environment.