5 Years After Legalization, Canada Hits CA$5 Billion in Recreational Marijuana Sales (And That is Just the Legal Side)

February 25, 2024 · Cannabis.net

Canadian Cannabis Sales Hit CA$5 Billion in Just 5 Years Post Legalization

If you remember, the first piece of legal rercreational cannabis sold in Canada took place at 12:01:01AM on October 17th, 2018 in Newfoundland, Canada and then CEO of Canopy Growth, Bruce Linton, sold the first order at the Tweed store in Newfoundland. Cannabis.net was there to record the historic first recreational sale as it went down live!

Fast forward almost 5 years, and Canada is selling a whooping $5 billion CA a year, and that is just on the legal and reportable side!

According to retail sales figures revealed by the government on Thursday, recreational cannabis sales in Canada reached a value of 5.07 billion Canadian dollars ($3.8 billion) in 2023, indicating a 12.2% growth from the previous year.

This year-over-year growth pattern shows that the Canadian cannabis industry is maturing more than five years after adult-use cannabis was legalized in October 2018, which is reflected in the sector’s slower pace of growth.

Customers initially had better access to a greater variety of goods from unlicensed vendors, but these advantages have steadily diminished as Canada has added additional product categories and enhanced accessibility to authorized dispensaries.

As Poulos pointed out in an interview, there is still one area in which the black market has an advantage despite these developments, namely with regard to edibles’ strength.

Canada limits the amount of THC in cannabis edibles to 10 mg per packet in order to protect public health.

Rise of Pre-rolls and Stabilization of Prices

Pre-rolled joints are becoming increasingly popular in Canada, according to data analyst Mitchell Laferla of Headset, a cannabis business analytics company located in Seattle. This trend is highlighted by the changing cannabis market landscape of customer preferences into 2023.

Laferla’s analysis reveals a significant surge in pre-roll sales, capturing 31.4% of total sales in 2023, representing a notable 19% increase from the previous year. This surge brings pre-rolls nearly on par with flower sales, which stood at 35.2% of the market share, indicating a shifting trend in consumer consumption habits.

An intriguing development within the pre-roll category is the introduction of the “connoisseur/infused” segment, featuring joints fortified with cannabis concentrates. This segment has notably contributed to the remarkable growth observed in Canada’s cannabis markets, appealing to a diverse range of consumers seeking enhanced experiences.

Although the cost of cannabis products decreased overall in 2023 in a number of product categories, the price compression rate stabilised compared to the year before. Pre-roll costs, in particular, were remarkably stable throughout the course of the year, supported by strong demand in the category, indicating that customers continued to be interested in this specific product type.

Insights into Monthly Sales

Statistics Canada has released retail sales data for December, which sheds light on the dynamics of monthly cannabis sales in the country and provides useful insights into consumption trends and market volatility.

Legal adult-use cannabis sales increased 3.6% year on year in December to CA$441.2 million. This increase suggests that customers continue to seek legal cannabis goods, which contributes to the industry’s overall development trajectory.

Furthermore, December experienced a significant month-over-month gain of 8.2% compared to November 2023, reversing the falling trend that began in August, when sales peaked at CA$467 million. This increase in sales reflects a revived customer interest or seasonal variables impacting purchase patterns.

Regional differences are noticeable, even if the general sales trend seems to be improving. The most populated province in Canada, Ontario, topped the month-over-month growth with a significant 19.3% increase, indicating strong demand. However reductions of 5.2% and 12.6%, respectively, were recorded in British Columbia and Quebec, indicating differences in consumer choices and market dynamics between the two provinces.

The cannabis sector needs reliable statistics to assess market performance and make well-informed choices. This is demonstrated by the updated November sales figures, which were downwardly adjusted from the previously reported CA$ 412.1 million to CA$ 407.9 million.

Ongoing Challenges in the Industry

Sales have increased year over year, but there are still major obstacles standing in the way of the Canadian cannabis industry’s expansion and stability.

The burden of high excise taxes, which provide a significant challenge to licensed producers and retailers and have an influence on their competitiveness and profitability in the market, is one of the main concerns expressed by industry insiders.

Furthermore, the ongoing existence of the black market continues to be a major barrier, undermining legitimate companies and impeding attempts to completely shift customers to legal channels.

The parliamentary study of legalization, which is scheduled for release in the spring, is another item that is a source of great expectation. The conclusion of this assessment and its consequences for stakeholders remain unpredictable, even if it may lead to regulatory measures that may benefit the sector.

Notwithstanding these difficulties, there is continuous consolidation in the market, with several companies going through acquisitions or closing. The market’s competitive dynamics are further shaped by the fact that government-owned cannabis businesses frequently outperform their commercial competitors.

Anticipated Growth Strategies

As the Canadian cannabis business advances, players are proactively preparing to overcome obstacles and capitalize on the potential for future growth. Forecasts predict that cannabis sales might increase by roughly 10% in the next year, driven by a variety of reasons like as the continuous migration of customers toward legal channels and the growth of approved cannabis retail stores in previously underserved areas.

Companies in the sector are concentrating on improving customer experiences and broadening their product offerings in order to maintain this development trajectory. Businesses want to stay competitive in the ever-changing cannabis industry by reaching out to new market groups and offering goods that are creative and responsive to changing customer tastes.

Long-term success will depend not just on diversifying the product line but also on removing regulatory obstacles and creating an atmosphere that encourages creativity. The Canadian cannabis market will expand sustainably if proactive steps are taken to encourage research and development efforts and streamline laws. These actions will also create an innovative culture within the business, adding to its resilience.

Bottom Line

The Canadian cannabis industry’s robust growth in 2023 underscores its resilience and potential for further expansion. Despite facing challenges such as high taxes and competition from the illicit market, the industry continues to adapt, innovate, and thrive. With forecasts predicting continued growth and stakeholders actively pursuing strategies to overcome obstacles and capitalize on opportunities, the future of the Canadian cannabis market looks promising. As regulatory frameworks evolve and consumer preferences shift, proactive measures aimed at addressing industry challenges and fostering innovation will be essential for driving sustainable growth and solidifying Canada’s position as a global leader in the cannabis sector. (Full Story)

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