LEGAL RECREATIONAL CANNABIS SALES SURGE, SURPASS SALES IN THE ILLICIT MARKET FOR FIRST TIME
Two and a half years into the legalization of recreational cannabis in Canada, and as more US states look to roll into this legalized rec market, it’s an apt time to pause, take stock and assess if what we’re doing is worth it. Yes, we can buy our cannabis product of choice freely on Main Street, but so what? Has this move created any material difference in the market, and for the public? And if so, who benefits?
The answer is yes, and we all do.
In addition to the substantial tax revenue benefits associated with legalization, the Canadian government’s motivation to bring cannabis to Main Street was also bolstered by three public health and safety pillars: undermine the illicit cannabis market; ensure a consistent and controlled supply of cannabis; and detract children from accessing the product.
All of these pillars go hand-in-hand, and create an environment where it is ok to have a conversation about cannabis, rather than dismissing it as the devil’s lettuce. The result was an increasing acceptance to cannabis education and a culture of yearning to learn more. This is an inspiring vision: one that drew in myself and countless others in the pursuit of fulfilling it.
In 2020, Canada registered an impressive $2.6B in legal recreational cannabis sales through both in-store and online retail operations. Arguments can be made both that this figure could have been higher or lower, if not for Covid-19: this likely would have been bolstered further if not for the delays in construction caused by the shutdowns tied to Covid-19 (lumber was hard to come by in 2020!), but one could also argue that sales from the already-opened stores were stronger than they otherwise would have been, with consumers spending more time at home.
Regardless, $2.6B is a big number for legal cannabis. To put it in perspective, total alcohol sales in Canada in 2019, a “normalized” year for alcohol sales, accounted to ~$24B. That means, this new cannabis industry, that doesn’t necessarily offer consumers the products they want or even know they need, doesn’t have the all the proper retail locations to serve consumers where they live, and hasn’t had more than six months in a row without dramatic regulatory adjustments, while also competing with a thriving illicit market that easily wins on price, managed >10% of total alcohol sales. This is fairly astounding.
More important than comparing the revenue figures to other industries, measuring success needs to be tied back to the public health and safety pillars that launched this whole movement.
In Q3 of 2020, the recreational cannabis market marked a massive milestone: outselling the illicit market. Accessing recreational cannabis legally now means that the product is regulated, consistent, safely packaged and labeled, and sold through highly regulated, safe, and age-gated retail stores.
Cannabis retail stores have also created tax paying jobs across the country that allow guests to interact with knowledgeable staff and learn details about product features that they actually care about. This learning has led to substantial product development in the first couple of years, with more on the horizon to better fit consumer needs. And Canada has positioned itself as the worldwide leader for the cannabis market, allowing others to build upon this platform in the future.
The trail blazers in the cannabis space have been vying for this for decades - any of us in the space today have them to thank for being here now. It’s amazing to see their groundwork come to fruition in Canada within a couple years of legalization. Are things perfect? No. But are they trending in the right direction? Heck yes.