4 Facts About the Newly Legal Canadian Marijuana Business

In October of 2018, the Canadian government made history by becoming the second national government to legalize marijuana. Both online and brick and mortar marijuana dispensaries now give Canadian citizens a clean, safe, controlled environment to purchase their favorite strain of THC. Are you interested in learning more? Visit Leafythings for additional information.

Here are four facts about the roll-out and growth of the legal Canadian marijuana industry.

1. Canadian citizens spent close to 1 billion dollars in the first year of marijuana legalization

Canada officially legalized marijuana in October of 2018. Between Q3 of 2018 and Q3 of 2019 Canadian citizens spent ~$900MM on legal marijuana. While demand initially outstripped supply after legalization, the market quickly caught up as many brick and mortar stores opened in the different Canadian provinces.

2. Online marijuana sales have plummeted as citizens favor brick and mortar stores

As brick and mortar marijuana stores opened, online sales fell significantly. In October of 2018, online sales represented 43.4% of total sales. Fast forward to November of 2019 and online sales had fallen to 5.9%. This was mainly due to the 400+ in-person marijuana dispensaries that had opened. Marijuana looks to be following a similar trajectory to alcohol, which has struggled to make meaningful progress in the channel of e-commerce. Customers seem to prefer to buy alcohol and marijuana in person.

3. The marijuana black market still exists, but legal businesses are fighting back

While legalization has drawn some customers to purchase marijuana through legal channels, the marijuana black market still exists. This is mostly due to the large price difference between legal and illegal cannabis products. Legal marijuana is priced on average at $7.84 per gram, while illegal marijuana sports an average price of $4.36 per gram.

In response to the price difference, Canada’s largest marijuana companies are beginning to offer “value” cannabis products at prices as low as $4 per gram to entice customers to shop legally.

4. Governmental marijuana tax revenue has fallen short of projections

Marijuana tax revenue has fallen short of projections in both 2018-19 and 2019-20. In 2018-19 the government projected $35 million in revenue and earned $18 million, while in 2019-20 the government projected $100 million in revenue and earned $66 million. While revenue has fallen short there are positive signs that the government is learning how to more effectively structure a legal marijuana market as the gap between projected revenue and earned revenue fell by ~16% from 2018 to 2019. The government is learning not to overtax (as prices will be too high enticing customers back to the black market) and that overly strict licensing requirements lead to inadequate marijuana supply for existing demand.