Canada ‘falling woefully short’ of displacing illicit cannabis market, researcher says

Nova Cannabis in Calgary. (Photo by Lindsey Bartlett)

Canada’s regulated cannabis sales accounted for only 14% of total demand by volume in June, according to a new analysis by market researcher TheCannalysts.

That’s counter to some estimates that the regulated market “wiped out half the black market” in the first year of legalization, as claimed by the former principal secretary to Prime Minister Justin Trudeau.

TheCannalysts researcher Craig Wiggins arrived at the 14% figure by comparing sales to the projected overall demand of cannabis.

Regulated medical and recreational sales in June were 11,178 kilograms-equivalent, he said. That’s only 14% when measured against total cannabis demand – medical and adult-use – which Health Canada estimates at about 77,000 kilograms-equivalent per month.

The report also estimates monthly harvests in the legal market at over 62,000 kilograms, “and increasing rapidly.”

That already represents 81% of Health Canada’s projected total demand, Wiggins writes.

After outdoor production is added to the mix this fall, he expects harvests to reach 95% of projected annual demand.

The report says there is “an 892-day supply glut of existing inventory in the legal market versus legal sales to the above mix.”

On the pending supply glut of mass-produced cannabis Wiggins writes, “The plane is about to fly into a rock-face, and it would be a shame that much of the effort everyone has put in – including Health Canada – will be left in a smoldering heap.”

“Health Canada will need to have an action plan in place to deal with bankrupt companies. They are coming – and they will bring with them inventory of varying quality. Bankruptcy consultants are licking their chops to get their hands on this industry. Without clear procedures, all value in a bankrupt company will go to the administrators of the bankruptcy.”

The report notes that sales reported by federal license holders far outpaced actual retail sales – what Wiggins calls “sales channel pressurization.”

That’s because sales by federal license holders are mostly to provincial wholesalers to stock new stores. So a measure of demand that only takes sales reported by licensed producers into account doesn’t tell the full story, he said, as LP sales get the benefit of inventory not yet sold by retailers in their sales figures.

Wiggins called on other provinces to take a close look at Alberta’s success in opening retail stories.

Alberta has seen over 270 store openings compared to Ontario’s 24.

Matt Lamers can be reached at mattl@mjbizdaily.com

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2 comments on “Canada ‘falling woefully short’ of displacing illicit cannabis market, researcher says
  1. Mike on

    Yeah that’ll happen when you charge as much as the government stores are charging. Last weekend I paid $26 for 2 joints at an Edmonton dispensary. One strain was absolute garbage….the other was “meh”.

    Reply
    • Maxcatski on

      Cannabis stores are not called dispensaries in Canada. They are called… cannabis stores or pot shops.

      Prices will drop when all that excess inventory hits the market. I feel sorry for anyone who has to buy pot today, however. I am a legal self producer and two joints cost me about fifty cents.

      Reply

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