Legal Cannabis Prices in Canada Are 50% Higher Than the Black Market
The Canadian statistical agency has released data on the development of the country’s legal and underground cannabis markets. Unfortunately, the numbers paint a less-than-optimistic picture for the legal market. Since national legalization on October 17, 2018, the price per gram of legal recreational cannabis has continued to rise each month due to ongoing product shortages. As a result, by mid-January, the average price of legally produced cannabis was about 50% higher than the prices offered by gray and black market dealers.
Statistical Data
The information on the state of Canada’s legal cannabis market is based on data collected by the agency during the last months of 2018. In addition to legal producers and distributors, consumers themselves contributed data using a special mobile app developed by the statistical bureau a few years ago for fast and efficient data collection. The published report used information from 385 app users who compared local prices between the legal and underground cannabis markets.
The data shows that just two weeks after the national reform, average prices for all types of cannabis products in stores across the country began to rise quickly, while black market prices remained the same or even dropped slightly compared to pre-legalization levels. By the start of the year, the average price per gram of legal cannabis nationwide was about $9.70, while a gram of similar product on the black market cost around $6.51—about 50% less.
The report also highlights other trends. In the weeks following legalization, the number of people who bought and tried cannabis for the first time increased noticeably (among survey participants, 7.7% said they bought cannabis for the first time in the first month after legalization). Survey results also show that the cannabis consumer demographic is now almost evenly split between those who prefer to buy legally and those who still use underground dealers (about 49.8% of male respondents said they buy only from legal stores; among women, the share was 41.6%).
Reasons for the Sharp Price Increase
After analyzing the results, statisticians asked: what caused such a sharp rise in legal market prices? According to David Clement, North American representative of the International Center for Consumer Culture Studies, the price hike is due not only to product shortages but also to numerous restrictions and requirements imposed by authorities on the now-legal cannabis market.
“By Canadians’ own estimates, just meeting all the packaging requirements for cannabis products will cost domestic companies about half a billion dollars by the end of the year,” Clement told the press. “So, to keep their businesses afloat and make any profit in the current market, cannabis producers and dealers have to raise prices per gram.”
“On top of that, there’s a high tax rate on cannabis production and sales, and a lack of legal competition for the few existing stores. Until there are truly large-scale recreational cannabis cultivators in the country, existing businesses will keep raising prices to stay profitable,” Clement added.
Ongoing Problems in the Legal Cannabis Market
Overall, the statistics confirm that in the four months since legalization, Canada has not solved its cannabis supply problem. Neither large nor small cultivators can provide dealers with enough product to meet national demand. Unfortunately, the analysis shows that product shortages are present in every province, with the most severe legal cannabis shortages in the most densely populated regions.
Moreover, based on this data, the statistical bureau’s experts have revised their previous estimates of how long the shortages will last. While analysts initially predicted that supply issues would last about 18 months, they now expect the country will only fully overcome shortages by the third anniversary of national legalization.