At an annual rate, $5.9 billion was spent by Canadian households during the fourth quarter. Statistics Canada’s real GDP report shows what effect cannabis legalization has had on Canada since it took effect back on October 17th of 2018. Data shows that the black market for cannabis is still alive and thriving which shouldn’t come as a surprise since the legal supply can’t keep up with demand. Additionally, concerns such as mouldy product to excessive packaging aren’t helping the fight.
Of the $5.9 billion that Canadian households spent on cannabis, an estimated $4.7 billion went to the black market. When legal recreational adult use sales started in Canada, statistics were shooting for a 30-35% displacement of the black market by the end of the first year of legal sales. In the first quarter, the numbers for black market displacement were becoming closer to fruition. Vice president of strategy, Nick Pateras, at Lift & Co. told Yahoo Finance Canada,
“I’m actually pleasantly surprised to see that over 20 percent of all cannabis sales went through regulated channels in Q4, given most early targets were aiming for a 30 to 35 per displacement by the end of year one.”
Mr. Pateras also reminded people that even after five years of legal sales that the black market still accounted for roughly a quarter of the cannabis market in the state of Colorado.
Not Apples to Apples
At market prices, cannabis amounted to 0.4% or $2.2 billion of Canada’s fourth-quarter GDP. $1.4 billion or 65% of this amount was from illegal cannabis sales. Only $770 million or 35% of sales were on the legal side. StatsCanada website says the average flower price per gram on the black market was $6.51. This is in comparison to $9.70 per gram on the legal market. StatsCanada also reminded people these stats are not a representation of a random sample but that they were self-reported. Nick Pateras of Lift & Co was also quoted saying,
“This underscores the need for more stores to be licensed and the introduction of new product classes to effectively compete with the black market. Until we actually match the black market’s form factors and accessibility, we’ll never be making a true apples-to-apples comparison.”
It will most certainly be interesting to see where these numbers rest after the first year of legal recreational adult use sale for cannabis across Canada. It’ll also be interesting to see if Canadian cannabis regulators will keep up with the times and meet the demands of consumers or to see if their efforts to regulate and control the market continue to get pushed back by the black market.
“Once you turn a market black, it’s hard to turn it back.”- Ellen Bukstel