Has the legal Cannabis Market in Canada Failed its Consumers?

There was a sense of pride in the air in October of 2018 when Canada’s bill C-45 went into effect, making cannabis products legal. Canada is now one of two countries in the world where cannabis is legal at a national level.

Canadians were hopeful at the thought of economic growth through an un-tapped commodity. They were excited to be global leaders in a potentially lucrative market- a market that many countries were considering.

However, the overwhelmingly expected effect has fallen short. In the first full year of the Cannabis Act in effect (2019) Canadians spent 1.2 billion dollars on recreational cannabis products.

Although that number is projected to grow significantly in 2020, Canadian consumers and business owners are disappointed in the rollout to say the least.

So, what’s the Issue?

To sum it up: the weed is expensive, the selection is limited, the black market persists, and licensed stores are scarce.

Supply VS Demand

Canada allowed provinces to shape their own regulations and standards, including age restrictions and choosing between a public or private retail system.

Suppliers hit a production issue right off the hop in October- there wasn't enough supply to meet the demand, with only 24 brick and mortar retailers in Ontario, the nation’s most populous province (17.5 million residents). Some of Ontario’s applicants are so unhappy with the lottery system they have taken their case to court.

It’s nearly Spring in 2020 and licensing approvals continue to drag on for many cannabis retailers. Long lines and backed-up online orders made Canadians doubt the governments roll-out strategy.

The Black Market Persists

The lack of access to cannabis products is one thing, but the prices are a whole other issue for consumers. Black market products are estimated to be nearly half the cost of legal products, and long-time recreational users aren’t going to succumb to those prices.

Mike Babins of Evergreen Cannabis Society, Vancouver's first store-front cannabis retailer has customers asking, “Why should I buy this? I can get ounces from a guy for 100 bucks..” 

Susan Chappelle of the British Columbia Independent Cannabis Association summed it up: “Everybody still uses their neighbors and their backyard’s.”

Companies like Canopy, Tilray, and Aurora, have even launched “value brand” products to compete with the illegal market.

The Cannalysts Inc., an independent cannabis research firm, estimates that the black market still accounts for approximately 86% of cannabis sales in Canada.

However, attitudes seem to be shifting slightly. 30% more cannabis users reported obtaining cannabis from legal retailers in the second and third quarters of 2019 compared to the same quarters in 2018.

Perhaps consumers are starting to value quality-assured cannabis and therefor making more costly, educated purchase decisions. Buying an ounce from someone on the black market is cheap, sure. But more often than not you don’t know what strain you’re getting, or the potency of THC or CBD you’re consuming.

Canadian seniors are a demographic that are definitely taking advantage of the legal market though, with 360,000 more seniors reporting to have used cannabis since bill C-45 was passed.

Regulatory Problems

Producing and selling cannabis was positioned as a job stimulus for the country, but many cannabis producers have reported consecutive disappointing earnings, resulting in lay-offs and a steep decline in their stock values. 

Because of slow licensing approvals, many businesses got a late start, or worse- haven’t started yet at all. Bricks and mortar retailers have been eagerly awaiting the go ahead, but are left with bong and rolling paper sales to make rent.

Regulatory hurdles have made it incredibly difficult for emerging cannabis brands to advertise and market their products, too. Dominant (American owned) advertising channels like Facebook and Google prohibit the mention of any cannabis related terms, making it incredibly difficult for cannabis brands to reach their audience.

“Canada’s regulations were designed only to decriminalize marijuana use, not necessarily encourage it. The result is a system that mimics the country’s approach to tobacco, and largely blocks marketing and advertising.” Ian Austen, New York Times.

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The truth is, Canada took a big leap pegged with a hefty transition period. There are bound to be speed bumps along the way.

Robin Ellis, co-founder of Toronto retailer The Friendly Stranger, says it's important to remember that despite the industry's growing pains, legalization is still a success for the country.

And there is still plenty of growth opportunities to capitalize on within the industry, like cannabis infused beverage products, which are said to hit shelves this month.