Early sales of regulated adult-use cannabis chipped away at the illicit market in the final quarter of last year – the first period of legal recreational cannabis sales – with black market purchases declining 8% in the October-December period, according to fresh data from Statistics Canada.
Legalization came into force in mid-October.
Illicit cannabis sales declined from 1.28 billion Canadian dollars ($960 million) in the July-September period to CA$1.17 billion in the October-December period.
Illicit purchases of cannabis products in Canada accounted for 79% of the overall market for medical and recreational marijuana in the last quarter of 2018, an improvement from the previous quarter’s 90%, according to the data.
“This is promising considering the presence of product shortages and the limited retail access in major markets like Ontario, Quebec and B.C.,” said Mitchell Osak, managing director of Grant Thornton’s business consulting and technology services.
“As more, higher quality product becomes available and the physical retail footprint expands over the first two quarters of 2019, I expect the legal market to begin making a sizable dent in the size of the illicit market.”
Sales of adult-use cannabis got off to a rocky start in provinces that failed to roll out an adequate number of retail outlets at the onset – most notably Ontario and British Columbia.
The black market won’t fade into the sunset until Canada’s major markets significantly open up their retail sectors, improve their product mix and leverage the upcoming legalization of edibles, Osak said.
The latest Statistics Canada data was the first time the government agency’s national economic accounts included estimates from illegal economic activities related to nonmedical and medical cannabis production, distribution and consumption.
Household final expenditure on legal medical and nonmedical marijuana products was estimated at CA$307 million in the fourth quarter, while spending on illicit cannabis products was CA$1.2 billion.
In the third quarter, CA$137 million was spent on legal cannabis products – all on medical because adult-use did not start until Oct. 17. In the same period, CA$1.28 billion was spent in the illicit market.
The data also shed some light on price differences between illicit and legal sales.
Legal cannabis was 32% more expensive than illegal cannabis in the October-December period.
The average all-in market price paid for legal cannabis flower was CA$9.70 per gram in that period, while the corresponding average price of illegal cannabis was CA$6.51 per gram.
Statistics Canada warned that price statistics should be interpreted with caution, as they are anonymously self-reported and do not constitute a random sample.
Cannabis consumption rises
Separately, Statistics Canada also released crowdsourced data on the frequency of cannabis use that showed almost 720,000 Canadians over the age of 15 consumed cannabis daily in 2018, a 3.2% increase over the previous year.
Another 1.3 million Canadians consumed a cannabis product at least once per week, also a 3.2% increase over 2017.
Overall, just over 5 million people in Canada consumed marijuana at least once last year. That number has grown steadily since 2014, when 4.3 million Canadians consumed marijuana.
This set of data did not disclose demographics or the amount of cannabis consumed as a function of frequency.
Previous studies have shown, however, that the vast majority of marijuana is consumed by more frequent users.
Matt Lamers can be reached at mattl@mjbizdaily.com
