Whoa, Canada! Retail Marijuana Market Could Top $4.5 billion

Canada
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Canada is slowly but steadily inching towards becoming the second country on earth to legalize cannabis on the national level, with dreamboat Prime Minister Justin Trudeau’s government promising to present a plan to do just that sometime next year.

But unlike tiny Uruguay, which technically legalized a few years ago but where retail recreational marijuana stores are still nothing more than a nice-sounding idea, Canada’s Liberal government says sales could begin as soon as 2018.

And when they do, oh—the billions will flow.

A legal Canadian cannabis marketplace has the potential to record sales in excess of $4.5 billion—that’s in American dollars—by 2021, according to an industry estimate cooked up by Canaccord Genuity, a Vancouver-based financial services firm.

And assuming that a federally licensed retail-marijuana marketplace captures the demand currently being fulfilled by the black market, Canadian marijuana consumers could buy about 882,000 pounds in the first year of retail sales, analysts with the firm told Bloomberg News.

Canada already has medical marijuana dispensaries operating in several major cities, but they’re doing so in violation of federal law, which leaves them prone to being the subject of police raids. (But again, since this is Canada and not America, raids appear to do little more than temporarily interrupt business.)

At least some of that marijuana is coming from one of the 36 producers with cannabis-cultivation licenses from Health Canada (though not every licensed producer is necessarily selling product).

It’s not known how many of these will start producing recreational cannabis or how many more producers will be allowed to turn on the lights, but together, demand for recreational and medical cannabis is expected to exceed one million pounds by 2021, Canaccord guesses.

All that weed will be purchased by 4 million users—which, at an average of four ounces a year per user, sounds feasible.

And Canaccord’s estimate is conservative. Other estimates peg the Canadian cannabis marketplace at a few more billion, with eight million consumers.

Keep in mind nearly every estimate of marijuana’s market potential throws around figures in the billions like a grower does grams of purple at a Cannabis Cup, and every estimate is based on other estimates—namely, the size of the black market, which has none of the benchmarks regulated, licensed industries enjoy.

Also keep in mind there are fewer people in all of Canada (35 million) than there are in California (38 million), where state tax collectors are planning on raking in as much as $1 billion in cannabis taxes, based on a 15 percent excise tax.

But Canada’s big problem could turn out to be supply-sided—as in not enough marijuana to meet the demand. The current licensing system was set up by the prior Conservative government, and is notoriously difficult to navigate. The government granted those 36 licenses out of a field of more than 1,200 applicants, according to Huffington Post Canada.

If it’s still excessively difficult to produce legal weed after legalization, demand will be fulfilled by the black market, Canaccord warns, a situation similar to what Americans saw in Washington state in legalization’s early days.

Or by the local friendly outlaw marijuana dispensary, the same place Kush-seeking Canucks are patronizing now.

Check in daily for all of  HIGH TIMES’ marijuana news.

 

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