Study Says Canadian Cannabis Market Could Reach $5.2B By 2024: 4 Provinces To Watch

On Oct. 17, 2018, Canada made history by becoming the first G7 country and the second country overall to legalize adult-use cannabis.

Yet the rollout of legal Canadian cannabis was fraught with shortages, a limited retail presence and poor product selection. 

In 2018, legal cannabis spending grew by 65 percent to $569 million. In the last two and a half months of 2018, adult-use sales reached $112.5 million, falling short of estimates.

Canadian spending on medical marijuana alone in 2017 grew by 84 percent to $330 million.

In a fairly short period of time, Canada has become the home to cannabis companies like Aurora Cannabis Inc. ACB, Canopy Growth Corp CGC, Tilray Inc. TLRY, Cronos Group, Inc. CRON that have risen to become the largest cannabis companies in capitalization terms. 

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These firms are expanding their presence not just in Canada, but in other countries, either through exports or by establishing full-scale cultivation and distribution operations. No matter what occurs in the Canadian cannabis market, these companies have already established themselves as global leaders.

Provincial Rules, Regulations Are Key 

Through legalizing adult-use cannabis, Canada created a market that covers nearly 30 million consumers.

Shortages weren't completely unexpected, given that the medical market had only included around 360,000 people.

The Canadian government allowed provinces to figure out how to deal with the legalization and consumption of cannabis.

Stricter rules in some provinces mean that overall cannabis spending might be affected, with more consumers continuing to access the illicit market and its lower prices.  

In a new report, Arcview Market Research and BDS Analytics project the legal cannabis market in Canada could reach $5.2 billion by 2024, with the bulk of the figure representing adult-use sales ($4.8 billion).

Arcview and BDS Analytics issued a province-by-province breakdown, to show that not only the role the population plays in the cannabis market's size, but how regulations and the environment created by local government should also be taken into account.

Four Key Provinces

Arcview and BDS identified four main provinces that they project will dominate the market in spending in 2024: Ontario, Alberta, Quebec and British Columbia. These provinces will account for 85 percent of the market by 2024 versus around 82 percent in 2018, according to the report.

While Ontario is the largest market due to its high population and favorable business environment, Alberta is the second-largest, despite having the lowest population of the four provinces, the research firms said. 

Quebec is the second-largest province in terms of population, but ranks fourth in terms of market share. This figure is not only due to regulations, but also due to very low number of consumers.

Let’s take a closer look at how the cannabis market is projected to develop in each of these four provinces and the main factors affecting that growth. 

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Ontario

Ontario is Canada’s most populous province, with 14.4 million people. At the same time, 26 percent of the population identifies themselves as cannabis consumers and 31 percent as acceptors, or people who would consider consuming in the future, according to BDS Analytics’ Consumer Insights. The Ontario cannabis market is expected to exceed $2 billion, with adult-use consumption accounting for $1.8 billion.

The province also has some of the more permissive rules regarding cannabis consumption. Smoking and vaping is allowed in public areas like parks and at designated rooms at hotels, motels and inns. Other than those provisions, public use is regulated in the same way as tobacco.

Another major factor that will help Ontario’s cannabis market growth: changes at the retail level. The government-run Ontario Cannabis Store is being replaced with private retailers, and officials have not set a cap on licenses, although they estimate between 500 and 1,000 locations will eventually open across the province.

Alberta

Alberta is Canada’s fourth-most populous province, with around 4.3 million people in 2018. Since legalization and through the end of 2018, the province registered 28 percent of the total cannabis sales in the country.

The province has a higher-than-average number of consumers (27 percent) and acceptors (32 percent), BDS and Arcview said.

In Alberta, adult-use cannabis is available to people above 18 years of age versus 19 years in Ontario and British Columbia.

The main factor helping Alberta’s cannabis market is the favorable business environment. Following legalization, regulators in Alberta quickly allowed private retailers to enter the market. Two hundred adult-use stores are expected in Alberta, compared to an average of 50 stores in other provinces.

Quebec

Quebec is expected to represent less than 14 percent of the Canadian cannabis market in 2024.

Even though it’s the second-largest province in terms of population, only 20 percent of residents are consumers and it is home to just 3 percent of registered medical patients. Quebec is reportedly considering raising the legal age of consumption fro 18 to 21. Total cannabis spending is expected to reach $704 million in 2024.

Quebec has stricter distribution regulations. Retail is conducted through Société Québécoise du cannabis, which initially opened just 12 stores and doesn’t conduct any advertising. To deal with shortages, SQDC limited the days of operation to Thursday through Saturday, although online sales remain open at all times.

British Columbia

Even though its population is much smaller than Quebec’s  —5 million vs. 8.3 million — British Columbia is projected to amass 14% of total Canadian cannabis spending in 2024, slightly more than in Quebec. Legal sales are expected to reach $722 million by 2024.

Retail sales in British Columbia are conducted both through province-run and private stores. Earlier this year, the British Columbia Liquor Distribution Branch, which is the sole wholesale distributor of non-medical cannabis, partnered with 31 large licensed producers, including Canopy Growth, which operates the largest cannabis greenhouse in the world in the province.

What To Keep In Mind

While provincial regulations may slow down cannabis market growth in Canada, it’s still poised to grow at at an impressive rate, as more products become available sometime later this year and more retailers are allowed to set up locations across provinces.

In the meantime, the legalization of adult-use cannabis in Canada and a regulatory system that gives some degree of leeway to provinces or even municipalities are providing a case study to the rest of the world to see which approaches work best at ensuring safety and quality — and which should be avoided.

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