Canada’s illicit cannabis market has shrunk 21 percent since legalization

If the legal cannabis market is to dominate without interruption from Canada's black market, more cultivators and processors must become operational

Fresh data from Statistics Canada has painted a pretty insightful picture of the positive repercussions associated with December’s passing of the Cannabis Act.  Based on data released by analysts in Statistics Canada’s second-quarter financial report, the North American country’s black market is being overshadowed by the legal market. 

Between October and June, the size of Canada’s illicit cannabis market decreased by 21 percent.

Bill C-45, “the Cannabis Act,” went into effect  October 17th, 2018. Since this time, the formerly thriving illicit black market has plummeted in value from $5.3 billion to $4.2 billion. Canada’s legal cannabis market, on the other hand, has skyrocketed in value. The legal market was pulling in $1.6 billion soon after legalization was enacted, with the figure rising to more than $3.5 billion by June of this year. 

The combination of both legal and illegally-operating cannabis businesses in Canada managed to yield $8 billion in June; indicating growth of over $1 billion since the early days of legalization.

Canada’s illicit cannabis market has had a head start over the legal market

The black market for cannabis in Canada has been thriving for a very long time indeed. Drug cartels have been dealing street weed since way before discussions arose regarding cannabis legalization in Canada.

With such a well-established black market, the task of completely dismantling it was always going to be difficult. Something that severely hindered the growth of Canada’s legal market was the ban on cannabis-infused foods and drinks immediately after legalization. 

Fortunately, a stream of cannabis edibles and concentrated cannabis products flooded the Canadian cannabis market in December 2018, thus amplifying the legal industry’s chances of eclipsing the black market.

If the legal cannabis market is to dominate without interruption from Canada’s black market, more cultivators and processors must become operational. The industry has experienced supply shortages since its initial roll-out, due to increasing demand for dried cannabis and oils.

The rising cost of legal cannabis in Canada is also an issue, due to the fact that street weed is available for less than $7 per gram. On average, a gram of weed from a licensed vendor costs $9.99.

In July, the average price gap separating legal weed from illegal weed was $4.72; an increase from the $3.62 a gram recorded three months prior.

42 percent of consumers still purchase from Canada’s illicit cannabis market

Although the illicit cannabis market in Canada has shrunk by 21 percent since legalization unfurled last year, Statistics Canada also made a point of noting that black market demand is still pretty high.

In August, the national statistical office claimed that 42 percent of 4.9 million surveyed Canadians continue to buy their bud from illegally-operating dealers.

Based on government data, unfinished product surpassed finished product counts by four times the amount in March 2019. This data suggests that more needs to be done to ensure consumer demand is met. 

Additionally, lifting restrictions on branded advertising could help eradicate illegal dealers from Canada’s cannabis scene.