Opening more recreational cannabis stores from 2018 to 2020 helped to greatly increase Canada’s legal sales but barely affected overall user numbers, according to new research from Brock University business professor Michael Armstrong.
The research could have applications for provinces with a small number of legal cannabis stores as well as dozens of communities across Canada that still do not allow legal marijuana retailers.
“One direct implication of these results is that jurisdictions which add more stores get substantial increases in legal sales but limited increases in prevalence,” according to Armstrong’s research.
The research implies, “though does not prove,” that the majority of legal sales involved existing users converting to regulated sources, not necessarily new users consuming cannabis for the first time.
Armstrong wrote that Canada’s restrictions on retail promotions such as advertising limits and no free samples “presumably made it harder for new stores to stimulate local demand.”
“Provincial governments might therefore want to update their retailing policies, while municipal governments could reconsider their store bans,” the paper notes.
“An indirect implication of the results is that legal sales – so far – mostly represent market share taken away from illegal sellers, rather than new users entering the market. This implication is clearly interesting and presumably reassuring for Canadian policymakers.”
Mississauga, one of the largest cities in Ontario, is among approximately 70 municipalities in the province that prohibits regulated cannabis stores from setting up shop.
The researcher adds the caveat that “it must also be considered speculative, as many other variables could have confounded the apparent relationships among stores, sales, and users.”
“Policymakers should also note that even if legal retailing contributes little toward prevalence growth, the health impacts of that growth must nonetheless be addressed,” according to the paper.
The research had a takeaway for store operators:
“Cannabis retailers should perhaps approach expansion more cautiously, as it seems adding stores does not stimulate demand for cannabis as much as it might for other products.”
Armstrong’s paper is available here.
