Canada’s Cannabis Legalization Is Lowering Crime, Increasing Tax Revenue, Private Profit

The gap between legal and illicit cannabis markets in Canada continues widening, according to the latest data from Statistics Canada, the national statistical agency.

Household spending on adult-use cannabis products in legal, regulated channels, grew to $918 million Canadian dollars (US$800 million) in the 4th quarter 2020, which was CA$204 million more than the estimated amount spent on illicit cannabis in the same period.

For the first time, in the previous quarter, spending on legal recreational cannabis in Canada exceeded the value of illegal transactions, with regulated expenditures exceeding estimated illicit sales by CA$59 million.

Canada’s legal, taxed, and regulated, cannabis market benefited significantly from an increase in retail options in 2020. The Toronto area, which leads Canadian cities in cannabis sales, experienced significant growth in retail cannabis sales businesses. In 2020 Toronto started with 7 regulated cannabis sales operations, and increased to 87 by year’s end. Gross revenues increased correspondingly from CA$17 million in January, to CA$40 million in December.

Regulated sales similarly benefited from a wider breadth of consistent inventory and improved product selection. Sales of extracts and concentrates tripled in 2020, and ended with CA$324 million in retail sales, according to data provided by Statistics Canada, the nation’s official statistical agency.

Recreational edibles also helped increase legal sales volume, along with profits and tax revenues, which was the first full year of sales. Sales of edibles grew from CA$12.7 million in the first quarter, to CA$42.2 million in the fourth quarter. Last year was also the first full year of sales for products such as cannabis vaporizers.

The legal market is also being buoyed significantly by falling prices and improved product selection. While legal sales are increasing, in contrast, the illicit market is diminishing correspondingly. Statistics Canada estimated that spending on illicit adult-use cannabis peaked at about CA$1.5 billion at the end of 2013, while the latest estimate has illicit spending at half that amount.

Medical cannabis sales, which are recorded separately by Statistics Canada, were mostly stable, but continued a very slow, minor downward trend. And in the 4th quarter 2020, Canadians spent roughly CA$135 million on medical cannabis products, while they spent a total of CA$587 on medical cannabis last year. That figure includes all medical cannabis products sold by federally licensed producers directly to consumers, and includes cannabis grown at home for medical purposes, according to the agency.

Statistics Canada told MJBizDaily that data on illicit cannabis is estimated using a number of sources, including:

• The National Cannabis Survey;
• Crowdsourcing, and;
• The Canadian Tobacco, Alcohol and Drugs Survey.

More information on how illegal cannabis spending was estimated before Canada legalized cannabis nationally can be found in Statistics Canada’s report “A Cannabis Economic Account – The Framework“.

This story, which has been edited for clarity and style, appeared first on MJBizDaily May 19, 2021 headlined as “Canada’s legal cannabis market continues to erode illicit market’s share,” and was written by Matt Lamers, Marijuana Business Daily’s International Editor, who is based near Toronto, and can be reached at MattL@mjbizdaily.com.