A Huge Milestone for the Canadian Cannabis Industry 🍁
A turning point in the Canadian cannabis industry as sales in the legal market surpass the illicit market
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It’s no secret that since legalization the Canadian cannabis industry has struggled to compete with the illicit market.
With a bounty of high-quality cannabis readily available to consumers at lower price points compared to what the legal market has to offer, it should come as no surprise that a majority of Canadians have opted to continue purchasing their cannabis from the illicit market.
Stacking on top of this the inability to purchase edibles and cannabis concentrates, the Canadian cannabis industry has struggled to capture meaningful market share from the thriving illicit market.
With that being said, many of these issues have now been resolved, and for the first time in the history of the Canadian cannabis industry sales in the legal market are estimated to have surpassed the illicit market.
What's causing consumers to change?
As we have previously discussed here at Four PM, legal cannabis prices in Canada have recently been collapsing.
In less than a year (Q2 2019 > Q2 2020), the average price per gram of legal cannabis sold on the Ontario Cannabis Store fell by over 40%, moving from $10.70 to $6.41 CAD.
For cannabis producers, this decline is undoubtedly a huge cause for concern, as your profit margins are going up in smoke; for cannabis consumers, however, the opposite is true.
Canadians are accustomed to purchasing high-quality cannabis and paying competitive prices, and for the past two years, the legal market simply hasn’t met their expectations—until now.
The Canadian Cannabis Industry Today 🍁
With an abundance of craft cannabis producers coming online, sufficient cannabis concentrates at price points competitive with those of the illicit market, and a huge array of edibles and beverages available alongside topicals and tinctures, consumers have more reason than ever to spend their dollars in the legal market.
(📸 Some of the many cannabis beverages now available in Canada)
The sum of these changes has resulted in Canadian consumers spending an estimated $800 million CAD on legal cannabis, with just over $750 million CAD being spent in the illicit market in Q3 2020.
Although this is a huge milestone for the Canadian cannabis industry, with the eyes of the world watching and learning, it remains clear that we still have lots of progress to make before the legal cannabis industry can truly become the best possible version of itself—and displace the illicit market.
What Needs To Change?
The marketing regulations Canadian cannabis companies have to abide by are in urgent need of updating in order to give producers a legitimate chance to build the brands that will go on to become household names.
Packaging regulations need to be updated to remove the fear-mongering that is currently required to be printed on each unit of cannabis: “WARNING: Frequent and prolonged use of cannabis containing THC can contribute to mental health problems over time. Daily or near-daily use increases the risk of dependence and may bring on or worsen disorders related to anxiety and depression.”
Supply chain inefficiencies need to be resolved, including removing provincial governments from their position as the middlemen in a supply chain transporting perishable goods.
Looking To The Future
With a huge financial incentive for the Canadian government to get this right, I remain extremely optimistic that much of these changes will come into effect in the coming years.
For now, let’s celebrate this milestone, with Canadians spending over $800 million CAD on legal cannabis in just 90 days.
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