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For many Canadians who have considered investing their time or money in the Legal Cannabis industry, it might seem like a total coin-toss whether it’s looking like a success or failure. Since official legalization on October 17, 2018, cannabis in Canada has undergone more changes than the weather forecast in Vancouver: one minute, it’s sunny and people are looking forward to the rest of their day… the next minute, it starts pouring again. What trends can we identify so far? How have we done in terms of establishing the world’s first Federally legal cannabis market? Why is there so much division in this industry and the people who use cannabis? If you’ll learn anything about cannabis in this country, it’ll be that the Canadian marijuana markets are just as diverse, multi-faceted and mysterious as the very plants themselves.
Cannabis was legalized with the intention of establishing the world’s first major, legal market for marijuana in all its forms. There are many opinions for what is the most important facet of cannabis legalization: the fundamental right access to medicine; a unique opportunity to be the world leader in the cannabis forum; a chance to wrest control of this one-of-a-kind plant from the clutches of criminals and bring it to the forefront of society. There are as many opinions swirling around cannabis legalization like a wreath of smoke, freshly exhaled after a deep and satisfying toke that was October 17th. Without the tandem support of Federal & Provincial legalization of cannabis, Canada might have staggered into 2019 under the haze of a similar situation to its southern neighbors, the United States. In the USA, millions of people support the idea of legal marijuana, and the majority of its 50 States have spearheaded efforts to bring it into the mainstream, but with Uncle Sam (U.S. Federal Gov’t) looming over any progress that could or should be made you can’t help but feel that they’re running uphill, backwards and with a Federal-sized boulder attached to their waist. Canadians chose to push for legalization and follow through with the industry as it is today because many people in this country understand how difficult it can be to keep progressive ideas rolling the right way.
Today’s news is fraught with hot political temperatures, a constant media battle that pits sensitivity versus stoicism, and a seemingly very imbalanced socio-economic landscape where the West butts heads with the East on a daily basis. How has cannabis fared in its first 390+ days of legal existence in Canada? Well, that depends on who you ask (or how strong the buds they’re smoking are), but nevertheless it is worth looking at the current and future forecasts for the Canadian marijuana markets. First, we’ll fly across the country and survey each class of cannabis (flowers, oils, plants, seeds), and then we’ll analyse the growing trends (no pun intended) that will likely dominate the Canadian cannabis story for years to come.
CANNADIAN SNAPSHOT:
Cannabis Products in the Provinces & Territories
When it comes to cannabis in Canada, this unique plant’s popularity is a lot like the diverse population that uses it. There is a lot of variability in Canadian cannabis consumer behaviors, such as the preference for cannabis flowers in provinces like Quebec & BC while Ontario or Alberta show some of the largest marijuana concentrates consumption data. Each province and territory appears to have certain cannabis themes that dictate their cannabis culture, some factors that reflect on their unique cannabis economy or show more of an impact in societal/political terms. For instance, in the province of British Columbia – or “Bud Country” as BC is often dubbed by cannabis consumers – there are a lot more personal cultivators than is typical in other provinces. This could provide some reasoning for why cannabis sales at the retail level are not as large as originally forecasted. Many British Columbians have greater access to cannabis cultivation space, equipment, and know-how, therefore many of the Federal cannabis market issues of high prices, lack of supply are being supplemented (if not outright replaced) by personal cultivation or medical licensed cultivation.
Continuing with this example for BC, retail cannabis flower sales in the province for Q3 2019 were $2.5 million. Compare these seemingly low-tier sales figures with that of Alberta ($15.9 million), Ontario ($19.7 million) and Quebec ($13.6 million) and you might begin to scratch your head and say: “I thought BC was a very cannabis-friendly province… but why is nobody buying what the Government is selling?!”. When you juxtapose these fledgling sales numbers with the StatsCan cannabis usage numbers in BC – 830,000 British Columbians – you can begin to see that there’s a strong cannabis practice in the province but very few residents of BC are spending on the legal marijuana market. BC has the second highest cannabis consumer markets in Canada – second only to Ontario at 2.2 million users – so are British Columbians growing their own? Purchasing illicit cannabis? Are many British Columbians medical license holders, and purchase their cannabis from licensed producers or produce their own medical cannabis? There seem to be more questions than answers when you peel back the layers of cannabis trends in Canada, so it can be difficult to glean any well-defined data.
Just looking at one class of cannabis (flowers) in one particular province (BC) already illustrates how difficult it can be to project sales, consumer trends or account for the impacts of the “cannabis black market”. Last time we checked, criminal organizations do not keep up-to-date statistics, nor do they submit relevant data to government agencies, so there’s always a void of information you need to account for when you consider cannabis market data. That being said, you can forecast cannabis consumer behaviors if you consider both official and unofficial sources for cannabis supply, cannabis stats in addition to cannabis industry trends. It can be tough to rely on word-of-mouth as reportable data, but nonetheless with an industry that is in its infancy it will be years before the market research catches up to the current state of affairs. With these caveats in mind, let’s continue to look at some cannabis flower trends followed by an analyses of the other classes of marijuana that have market data. An important note: edibles, concentrates and topicals will not have any statistical relevance yet, because technically they were only Federally legalized in The Cannabis Act 2.0 a month ago, October 17 2019; for the purposes of interpreting the data we currently have access to, we’ll focus on cannabis flowers in addition to cannabis oil, the plants themselves and some seeds/genetics.
To understand the landscape for cannabis flowers in this country, you have to know who is producing what, how much and where cultivation is taking place. Provincial regulations about the sale of cannabis, as well as municipal rules that apply to big LP’s and micro-cultivators alike can impact how/what/when a licensed producer grows. The total number of Federally licensed producers in Canada, as of October 2019, is 246: Ontario has the most at 112, BC comes in next at 56, Alberta with 29, Quebec & Saskatchewan with 17 and 10 respectively, and the remainder of the provinces making up the remaining 42 license holders for cultivation.
This is almost a doubling of the guard, so to speak, since last October when legalization went into full effect; there were 132 license holders as of October 2018. Some might say that the increase in licenses from 132 to 246 over 12 months shows steady growth, but when you consider how many applications have been submitted since before legalization kick-off (some estimates believe there to be 500+ applications still in the que for cannabis cultivation, processing and sale licenses) the near 250 approved licensees seems very low, and slow in progress.
A trend highlighted by this steady trickle of licensed players in the cannabis game is the imbalance of supply-demand of cannabis across the country (specifically with cannabis flowers and cannabis edibles). Many Canadians turned to legal cannabis products in the months following legalization, only to find that the supply of high-priced, poor quality and lack of strain variability was very unfavorable. Many LP’s blamed the government’s restrictive Cannabis Regulations, or the lack of promotions/marketing of their cannabis, or even the slow licensing and inspection processes involved in quality assurance/quality control of legal cannabis. These continue to be legitimate concerns, and unfortunately supply shortages, quality issues and extremely inflated prices also continue to plague the cannabis flowers market in Canada. Added to these concerning trends in lower sales and an imbalanced supply-demand are the alarm bells of stock prices for cannabis LP’s plummeting in recent weeks/months. Whether you’re a casual investor, a shark swimming on the high tides of the TSX, or completely dismissive of the entire stock market, the fact that many of the largest cannabis companies like Aurora, Canopy, Tilray and Hexo are hemorrhaging investment value is not a good sign for legal cannabis as it stands today.
Just taking a glimpse at the original sales forecasts for the cannabis industry and comparing the numbers to actual sales figures today can shed some light on this “devaluation” of cannabis’ biggest players. The famous (or infamous, to some) Deloitte Cannabis Report of 2018 was considered by many to be one of the leading forecasts and industry summaries for cannabis in Canada. In this reports, Deloitte projected cannabis sales in Canada around $7 Billion for 2019. Total legal cannabis sales for the entire country reached $700 Million this past October (2019), meaning that Canada as a whole is over $6 Billion Dollars short of these estimates. Again, being fair to both Deloitte and the cannabis industry as a whole, sales projections are not an exact science but they need to have some burden of reality associated with how they’re applied to investment & development of a budding industry like legal cannabis. Of the projected $7 Billion, roughly half ($4-4.5 Billion) was expected to come from recreational sales of cannabis products (again, with the understanding that more than half the classes of cannabis products like edibles or concentrates were not going to be approved until October 2019). The vast differences between what was expected and what was actually produced and sold does not look good for either producers or retailers. Both parties, including the Federal government’s involvement with both, deserve some of the blame for not adapting to market conditions; LP’s continue to claim they’re forced to keep prices so high due to restrictive regulations, while consumers’ dissatisfaction grows by the day. No matter what side of the fence you stand on, highlighting these issues shows the “big picture” problems for the model of cannabis regulation that Canada is currently operating within: limiting producers’ abilities to meet consumers’ needs, while also ignoring consumers’ demands for change.
Many proponents of cannabis are looking to “Cannabis 2.0” (as in the second wave of The Cannabis Act & Regulations that includes edibles, concentrates and topicals) to make or break the Canadian cannabis industry, and for good reason. Statistics suggest, and so does common sense, that smoking is diminishing year-to-year (sometimes declining as much as 0.5 % of Canadians per year). These figures are typically considered for tobacco and cigarettes, but the health concerns about ingesting products through the lungs, be it tobacco or marijuana, are continuing to rise while other forms of cannabis medicine become more popular (capsules, oils, edibles, topicals). This is to say, and we haven’t even brought up the vaping health crisis that has gripped the nation’s consciousness like a vice in the past several months. We won’t get into this hot-button issue in detail, but suffice to say there is not much support for the medical efficacy of smoking cannabis flowers, vaporizing cannabis concentrates or extracts, while there is significant public outcry against vaping products as the health risks continue to surface. That being said, cannabis concentrates, extracts, oils that can be vaped or smoked have been legalized under The Cannabis Act 2.0, there just appears to be more strict regulations on the horizon for these products in the near future. Case-in-point, Quebec is the first province to officially ban public vaporizing in Canada, with many other provinces & territories expected to follow suit. Coupled with a restriction on personal cultivation (4-plant rule) and the increased minimum age of consumption from 18 to 21 (January 2020), and Quebec has suddenly gone from one of the leading authors of the Canadian cannabis story to one of its harshest critics.
It might seem like a lot of doom-and-gloom for the cannabis bloom, but these kinds of things should be expected when you’re pioneering an entire industry. The “curse of being first” is a real thing, and it definitely bites those innovators who are willing to take the leap and create the standards that the rest of the world will eventually follow. Canada is currently suffering these kinds of headaches as the first G7 country to Federally legalize cannabis, both recreationally and medically. It’s important to remember that other major players in the global cannabis framework – such as Australia, Mexico, the European Union and potentially the United States – are looking to Canada for guidance on the best ways forward with legalized marijuana. Canada could have taken a page out of the success story of legalized cannabis States like Colorado, but instead the Liberal-majority government of Canada decided to focus on increasing medical access, providing the bases of personal cultivation, and insisting on the “public model” of cannabis retail & distribution. Government-run distributors, like the BCLDB (British Columbia Liquor Distribution Branch), and similar set ups in other provinces & territories have not earned the public’s approval, nor their disposable income. Many Canadians have become turned right off of legal cannabis because of the aforementioned high prices, poor quality, and lack of inventory problems – in fact, some estimates assume up to 80% or more of cannabis consuming Canadians continue to purchase from the “black market” or have even increased their support of illicit cannabis since legalization occurred.
These are major red flags for Health Canada and the Justice Department of Canada, because two of their primary goals for legalizing cannabis was to provide regulated, quality controlled, safe and clean cannabis while also wresting control from the criminal supply of marijuana (not to mention all the tax dollars that are being missed!). Still, having looked at a lot of the downsides of legal cannabis in Canada, there’s a lot of optimism filling the sails of the industry as it rides in the wake of Cannabis 2.0. Let’s shift our focus from how we got here and why to the current state of cannabis affairs and where we’re headed in the near future.
MAKING SCENTS OF CANNABIS TRENDS:
The Here & Now & Future
It may come as no surprise that the fastest growing category of cannabis consumers are Seniors (aged 65 or older), but we can assure you that it is definitely a welcome surprise for many cannabis producers and policymakers alike. The current iteration of cannabis regulations seems tailor made for Seniors, as they are least likely to purchase cannabis from non-legal sources, but they are among the most prevalent medical cannabis users and prefer to get their cannabis through government-regulated, legal channels. Canadian Seniors also represent the smallest age demographic that consumes cannabis (7-8% ages 65+ vs. 25% ages 45-64 & 26% ages 15-45), but our elders are also the quickest growing group of marijuana users by a wide margin (from 1% of Canadian Seniors to almost 10% across the country, including an estimated 400,000 new cannabis users over the age of 65 in the past 3-6 months). Many of the Seniors in this country lived through much of the formative years of cannabis’ tumultuous history – such as the “Reefer Madness” era of 1940’s & 1950’s, the “Cannabis Revolution” from 1960-1980, and the resurgence of “Cannabis Medical Rights” throughout the 1990’s and early 2000’s. These generations of our grandparents, great aunts & uncles, or even our retired neighbors have literally seen it all when it comes to the lifetime of cannabis in Canada.
The fact that this age group just happens to be the people who have the most medical needs/experience the most benefits from marijuana speaks to the positive direction for cannabis as a whole. As you might expect, medical cannabis use is much more common among older individuals whereas recreational marijuana consumption prevails in younger Canadians. Over half of Seniors reported using cannabis strictly for medical reasons (52%), compared to 60% of young Canadians (ages 15-24) are sited as using cannabis for non-medical purposes (recreationally). These trends are somewhat obvious, but something to be mindful of is just how many new cannabis users have been generated since legalization. Over a quarter of all Seniors who reported consuming cannabis were new to cannabis (27% of Seniors aged 65+); a very positive development in the pursuit of ending the stigmas around marijuana.
It’s important to look at specific areas of cannabis consumption or certain demographics, but it can also be beneficial to understanding the direction of the cannabis industry when you step back and observe the “big picture”. More than 5 million Canadians reported as having consumed cannabis in 2019 (that’s 13.8% of the total Canadian population), which is roughly the same number as the year before. This might seem like stagnation, but if you combine this cannabis consumer population with some other details you can begin to see the legal cannabis market is picking up steam. In 2018, only 10% of Canadians consumed cannabis from legal sources according to StatsCan; this figure has jumped up to 28% as of Q3 2019, with this portion of legal-cannabis use expected to rise well into the 30-35 percentile range by the end of the year. So, of the 5.2 million Canadians who reported using cannabis, 28% of them (1.45 million people) used legal cannabis in one full calendar year. Next, you can consider that most Canadians prefer non-smoking options for medical cannabis (oils, topicals, edibles, etc) of which most cannabis products haven’t even reached the shelves yet, and you can start to see that the foundation for this industry’s success is there we’ve just experienced a series of speedbumps so far. Once Cannabis 2.0 has had several months-years of operation, and the market data begins to stream in, it seems like the picture of Canadian cannabis’ future will continue to get more colorful, more bright and a lot more positive attention than in these past 12-14 months.
Like with any data set, it’s important to take the facts and figures with a grain of salt (or a gram of cannabis). Statistics on cannabis use in Canada are relatively new, and constantly being reshaped as more data pours in. Also of significance is the existence of a strong illicit cannabis market – in fact, some experts have remarked that the most significant developments from cannabis legalization have been to drive consumers back to the black market. Supply issues, quality problems, pricing woes and a general lack of promotional tools for legal producers have created a “renewal” of sorts for the illegal cannabis markets. Regardless of where you get your cannabis from, demand for this plant and its products is at an all time high (again, no pun intended). Now is the time for investing your trust, your disposable income, or your efforts into a career in this fascinating industry – there’s never been a better time to be a part of the positive developments in medicine, health, fitness and a “green”/sustainable future with cannabis.
FOR FURTHER READING…
It is a great time invest some resources into exploring the benefits of cannabis and how it can potentially improve your life. The Canadian medical cannabis market and marijuana industry are undergoing a lot of transformation, and we won’t necessarily know what we have in this country until the plant and its proponents have had time to develop it to its full potential. There are a lot of variables to understand when considering cannabis in Canada, but there’s also a lot of resources that can help you navigate its rolling tide. Statistics Canada is at the forefront of reporting updated data on the cannabis market, but it is also essential to devote some time to reading articles, journals, peer reviews and news about the Canadian marijuana market. We recently produced an overview of some important stats on cannabis in Canada, and our guide to shopping for cannabis online can also help you get started.
To summarize, there’s a lot of opinions about cannabis in Canada so far, but we’ve got one final forecast for cannabis in Canada: it’s time to get growing, experience the benefits, and trust in the power of plants to improve your life in ways you never imagined. Cannabis surely can benefit you and your loved ones, and as long as we all continue to explore this plant and invest our time and dollars into its development, Canada will move forward as a world leader in freedom and prosperity.