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Cannabis Growth: Canadians Spending as Much as on Wine?

Jon Brown Jon Brown, Stockhouse
0 Comments| July 2, 2019

Cannabis has been legal in Canada for just over 250 days. Leading up to its legalization, supporters touted the market as a solid revenue generator. Were they right? The numbers indicate they just might be ….

Statistics Canada tracked spending on non-medical cannabis over Q1 2019 with its National Cannabis Survey. In June 2019 the agency released its findings, noting such exceptional facts that that consumers are spending as much on cannabis as they spend on wine, roughly $2 billion.

Spending is forecast to hit $7 billion this year, roughly a third of what was spent on alcohol in 2018. Over the first few months of this year, nearly 18% of Canadians (roughly 5.3 million people) over the age of 15 consumed cannabis, which is up from 14% recorded before legalization.

By the Numbers
  • Rates of cannabis consumption for males increased from 16% to 22%
  • Rates of consumption for people aged 45 to 64 rose from 9% to 14%
  • Rates of consumption for females remained constant at 13%

Click to enlarge

Increase in consumption, increase in spending

The National Cannabis Survey reported that Canadians spent $2 on average for every adult in the country (for those adults 18 and over). Those in Yukon Territory spent the most, with Prince Edward Island coming in second and those spending the least were in Ontario and British Columbia. Ontario’s numbers could change with the recent news that the province’s wholesale cap on cannabis products have been eliminated due to sufficient inventory. Alberta has also lifted its moratorium on new retail licences and Québec has shifted toward more regular cannabis store operating hours.

From the report -

“During the first quarter, 646,000 cannabis users reported trying cannabis for the very first time in the past three months. This number of first-time users was nearly double the corresponding estimate of 327,000 people one year earlier, when non-medical cannabis use was not yet legal.”

The regulated licensed industry is still seeing stable growth in Canada with more than 260 companies operating in agriculture and retail, as well as manufacturing. Canada’s cannabis industry brought in $6.7 billion to the country’s GDP in March 2019, of which the licensed industry made up $2.3 billion.

Click to enlarge

Meanwhile, legal cannabis sales are still less than half of other cannabis-related purchases, including illegal purchases, likely due to the price difference. On average, illegal cannabis purchases have been roughly $6.37 a gram, while legal purchases have been averaging just under $10 a gram.

Even so, Canadian consumers have been quick to embrace legal sources for cannabis. Approximately 2.5 million people bought cannabis from a legal vendor over the first three months of 2019, compared to 954,000 during that time a year earlier. According to the Cannabis Survey, an estimated 47% of cannabis users (2.5 million Canadians) made purchases, compared to 23% (954,000 people) over the same period a year earlier from places such as authorized retailers and online licensed producers.

This means that fewer people (38%) said they bought cannabis from an illegal source (like a dealer) in Q1 2019, down from 51% in Q1 2018. A similar decrease was noted for the proportion reporting friends or family as a source (47% to 37%). There was also a percentage of people who bought cannabis from multiple sources across Q1 2019, which could possibly include illegal options.

From the report -

“Obtaining cannabis from multiple types of sources was more common among daily or almost daily users (33%) than among those who used occasionally (once or twice) (14%). Results also indicate that cannabis consumers who began using in the past three months were less likely to obtain cannabis from an illegal source (23%) compared with other users (40%).”

Spending tracked by Canada’s largest recreational cannabis retailer, National Access Cannabis Corp. (TSXV: META), shows a similar growth. In its report also released June 2019, it marked over $40 million in retail sales since federal legalization on October 17, 2018. This is significant, given its massive portfolio and what it represents across the industry: 28 licenced stores in Alberta, Manitoba and Saskatchewan. According to provincial licensing statistics, META has the largest footprint of any private or public cannabis retailer in Canada. The Company has also submitted applications for seven licences in British Columbia and is submitting applications for licences in Ontario, now that licencing has opened to more private retailers.

Getting high on an over-supply?

While the industry had dealt with a major speedbump where excessive demand led to a supply shortage at the onset of its legality, there are reports that Canada could reach a surplus and even oversupply of legal cannabis as soon as the of the year.

Research firm BDS Analytics stated that this will depend on the rollout of edible cannabis products and other next-generation products and how it affects supply. BDS pointed to Canada’s licensed producers (LPs), who are well-funded and building upon their capacities at a growing rate, which is expected to lower prices even further.

However, given the 60-day notice LPs must give Health Canada to file intent to sell new edible products, the earliest consumers would see these products on the shelves would be December 2019. The research firm is also predicting that legal recreational and medical cannabis spending in Canada will grow by nearly tenfold from $750 million in 2018 to around $6.8 billion CDN ($5.2 billion USD) by 2024.

Click to enlarge

More than half a million using cannabis before or during work

Cannabis has never been cheaper in Canada. Adjusted for inflation, a gram’s average value has fallen from $9.40 in 2008 to $7 in 2018 and costs less than a fifth of what it did in 1961. This has led to more casual use obviously, but more Canadians are reporting cannabis use at work. The Cannabis Survey also noted that a quarter of regular consumers also consume cannabis before work or on the job during Q1, this works out to an estimated 13% of Canadian workers (514,000 people). While it is still not legal to be impaired at work, Canadian resource company go2HR advises employers to accommodate those who use medical marijuana under similar practices as those who use prescription drugs. As for recreational use, this poses questions around health and safety as well as productivity.

DISCLAIMER: All infographic images via Statistics Canada. Full their full info sheet, click here.

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