Canadas Cannabis Industry Continues to Bloom
Cannabis has been legal in Canada for just over two years now. For the first time in our country’s history it is available for public consumption, taxed, and regulated by the government. In a previous post, we talked about the long road to legalization, and here we’ll talk about the retail boom that followed.
Canadians are expected to spend around $2 billion on legal cannabis this year as the black market continues to shrink. The initial hurdles in making the legal market accessible and appealing to consumers are slowly fading away, and legal retailers are fast becoming the way most Canadians get their cannabis products. Consumers are happy about it too, as they see legal stores as safer and more convenient than the black market.
Even with an economic downturn and a fundamental shift in social practices due to Covid-19, the legal market is continuing to grow. Broader acceptance of cannabis and the continued growth of the industry will mean new opportunities and careers in all sectors, and a continued retail boom that can benefit the entire country.
Cannabis Growing Technology
Ontario Cannabis Retailers
There are currently over 1000 dispensaries open throughout Canada, but the path to accessible cannabis has taken years of hard work from provincial officials, legal teams, police forces, and business owners. Though the federal government made cannabis legal in October of 2018, it has been up to individual provinces and territories to regulate its sale and distribution. This means that access to cannabis remains patchy as provinces take varying approaches, with less than half of Canadians within 10km of a legal dispensary.
Provinces have taken varied approaches to licensing and distribution which has led to different issues for hopeful industry participants. In Alberta, for example, the province issued licenses directly to retailers. This created a supply problem as more licenses were issued than the supply chain was able to maintain, causing shortages and forcing the province to slow the allotment of store authorizations. Alberta has the most retailers in the country but is now facing market saturation. In the rest of the country, the rollout has been slow, and provinces continue to see demand and revenue increase despite some initial hurdles. Ontario waited a year to allow recreational sales due to anticipated supply shortages but still has not built out distribution capabilities quickly enough to meet demand.
Ontario Cannabis Store
Initially, legal cannabis stores were to be owned and operated by a crown agency called the Ontario Cannabis Retail Corporation (OCRC), an arm of the LCBO. But the election of a PC government just prior to legalization prompted a shift in strategy. The AGCO still regulates the market, and the OCRC still operates the only online store for cannabis in Ontario, the Ontario Cannabis Store (OCS).
Ontario Cannabis Lottery
But for brick and mortar stores, a ‘lottery’ was implemented to allocate licenses to private companies and individuals. This created a bottleneck as retailers were eager to enter the market, but only 25 Retail Operator Licenses (ROL) were initially granted, giving each holder the right to open 10 stores by the end of 2021, up to 30 in 2022, and a total of 75 after that.
The lottery system was scrapped in early 2020, however, and the government began accepting applications for ROL’s, increasing their issuing of Retail Store Authorizations (RSA) from 20 per month to a rate of about 40 starting this September. There remains a backlog, with an estimated 500 applications still waiting for authorization. And conditions such as requiring a lease in order to apply for an RSA means retailers still have plenty of work and waiting to do before their stores actually open. However, while it took nine months to open 100 stores, by the end of 2020 the province is on course for as many as 250, and annual sales are projected to be almost $2 billion by 2024.
As provinces adapt to the realities of a new market, Canadians can look forward to more access to cannabis and more competition in the retail space. With over 1000 dispensaries across the country and counting, the legal market shows no signs of slowing down. As operators look to make the most user-friendly experience for their customers, expect to see lower prices, more product variety, and higher standards throughout the industry. This all means easier access to quality products, making the aspects which kept the black market an appealing option start to fade away.
Cannabis Retail Competition
This doesn’t mean that every cannabis retailer will succeed, but the country has made its first forays into recreational sales and found a huge and demanding market. The lackluster rollout, particularly in Ontario, means that even two years after legalization, market share is still small, though legal spending is outpacing the black market overall. Independent operators (like DNCC) are in the process of opening stores all over the country, and the federal government has begun issuing micro-licenses for aspiring growers and those interested in processing their own product. So what ensures customers will keep coming back when more stores open every month? The industry’s unique position of being at the forefront of technology and culture means retailers have plenty of options at their disposal – and plenty of learning to do.
Dispensaries benefit from being novel and exciting places to see what’s changing in the industry. More and more products are becoming available as edibles, topicals, and infused drinks became legal for sale last year with Legalization 2.0.
These new products increase demand, and retailers become a source of information and education for consumers. Jobs and careers in cannabis are becoming more widespread with each new operation that opens up, often with pay and expectations greater than the average retail position. This is a lynchpin in their success; everyone involved should be knowledgeable, not just in the latest trends around cannabis, but the consumer and cultural trends and the technology that drives them. Accessibility will increase as retailers look to build the best experience for their customers and communities.
COVIDs impact on the Cannabis Industry
To survive in a post-Covid economy, staying connected is a must. Cannabis has been resilient to pandemic pressure so far, but that is in part because operators have been quick to adopt measures like curbside pickup or online ordering and delivery (where it’s legal). Operators are constantly experimenting with how to make the most of their resources while sticking to federal and provincial legislation. Informing consumers through information displays and booklets, a constantly evolving menu, and digital information campaigns all contribute to the sense that a good dispensary wants to take care of their customers – not just make money off of them. Retailers not only need to be savvy or competitive, but they have to be members of the community as well.
Cannabis Market
The country also looks to benefit not just from the domestic market, but also a global shift in laws and attitudes towards cannabis. Even as the medical market here in Canada plateaus, medical exports are on the rise. While new international players emerge, like Germany or the Netherlands, Canada’s unique relationship with cannabis has put it in a prime position to continue to cultivate a trade relationship that is beneficial to both parties. This is not limited to government work or foreign trade, legal cannabis creates jobs in primary industries, manufacturing, and the service sector.
Cannabis is proving to be a viable long-term source of jobs and revenue for Canadians despite the general economic downturn. It’s not just a retail boom, and it’s not only retailers and producers making all the money – established industries will continue to have demand for their products and services. The cannabis industry offers jobs in every sector, and workers can bring knowledge and experience from other industries into one that’s quickly evolving, where demand for their product or services is highly valued. Continued work with municipalities, local businesses, and artists will contribute to this sense of a community around cannabis and help destigmatize it in the public consciousness.
The Future of the Cannabis Industry
So where is the cannabis industry headed? Initial forecasts post-legalization were incredibly optimistic, predicting huge growth for years to come, but a staggered rollout followed by a global pandemic has made any projections even more uncertain. Growth is still happening as the country looks to rebound, and cannabis appears to be resilient in the face of a general economic downturn as a result of Covid-19. Improvements to the licensing and regulatory systems means more opportunities for Canadian consumers and operators and a continuing retail boom. If you’re interested in learning more about the Cannabis Industry visit our previous post about the history of cannabis.
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