The Canadian cannabis market has been through a lot, and while it has fallen somewhat short of the highest expectations, the impact of the industry on public perception cannot be underestimated. The liberalizing market to the south, in the US, offers even larger wins for enterprising Canadian cannabis companies, especially if public opinion trends hold as the world recovers from the pandemic.
In 2019, the cannabis industry in Canada collapsed. Layoffs and financial losses compounded as the bubble burst. However, the recovery since looks promising, and not just in Canada.
Companies in the cannabis sector are slowly regaining their footing and moving into a different North American market than before the pandemic. But when it comes to cannabis, Canada and the United States are very different markets.
In Canada, the bottom of the barrel was likely reached in the spring of 2020 when the number of manufacturing jobs in the cannabis sector stood at just 2,000. However, the Canadian cannabis market currently offers over 1400 cannabis vacancies, a remarkable number. Things are certainly looking up for the sector in this country.
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Positive polls are testament to shift in Canadian and US cannabis opinions
Recent polls in Canada also point to a brighter future. Canadians are apparently becoming more comfortable with the idea of living in a place where cannabis is a legal substance. In a latest Dalhousie University assessment, over 78% of respondents say they agree with legalization, up from 49% in 2019. As a result, Canadians’ approval rates for cannabis surpass those in most U.S. states. The percentage disagreeing with legalization, meanwhile, has dropped from 30% to just 14% compared to the previous study in 2019.
While 65% of Canadians say they don’t mind if restaurants put edibles on the menu, the share of “canna-curious” has dropped from 26% to 13% (perhaps because the curious got a chance to try it!). “Self-stigma” has also decreased in Canada, as fewer people are concerned that others know they are using cannabis.
In other words, we’re all collectively calming down since cannabis was first legalized on October 17, 2018 and edibles became legal a year later. The former market exploded into a bubble, while the second grew much more slowly, where is the real market growth? somewhere in between the two!
Even though cannabis is now fully legal in Canada, the regulations and the way edibles are recognized as a drug and not a food have made the Canadian edibles market more rigid and less attractive than the U.S. which is why a lot of attention in the sector is turning south!
Cannabis markets are on the rise in the US
Although cannabis is not legal everywhere in the U.S., the industry is simply booming. Naturally, many Canadian companies are eyeing the U.S. market and see great potential, but winning over this market will not be easy. The legal U.S. cannabis industry now employs over 321,000 full-time workers and has created over 77,000 jobs in 2020 alone.
The states of New York and Connecticut have just legalized recreational cannabis. Medical cannabis, meanwhile, is now legal in 36 U.S. states, while recreational users can use the drug legally in 17 states. According to some estimates, the U.S. cannabis industry is expected to be a $100 billion industry by the year 2030. In just a few years, edibles and topicals could take up more than 50% of that market. That’s a huge number and impossible to ignore.
Under the current regulatory regime, the edible market in Canada cannot reach similar proportions. It is simply too small and therefore represents a missed opportunity for Canadian companies.
Concerns over cannabis persist in Canada, but so does the market
While concern is diminishing in many respects, the Canadian government is fully aware that the public remains concerned about the impact of cannabis on public safety, particularly in relation to edible products. Over 63% of Canadians are also concerned about the safety of children and 60% are concerned about the safety of pets.
Both of these percentages are up from 2019 levels. The pet industry in Canada is nothing like it was before the pandemic. It is estimated that there are at least 4 million more pet owners in Canada as of March 2020. As a result, it seems likely that strict regulations related to edible products will be in place for some time.
Nevertheless, it will be interesting to see how the market evolves and how Canadians adopt (or not) cannabis in a more normalized economy. The size of the Canadian legal cannabis market grew by 120% in 2020 to C$2.6 billion. These are modest numbers compared to the United States, but still dramatic growth. An even larger increase is expected in 2021 as stigma continues to diminish over time.
The Canadian cannabis market is far from what Deloitte predicted when it suggested retail sales would be $7 billion in 2019. But things are gradually improving, and Canadian companies could still use the expertise and experience acquired in Canada across the border in the growing US cannabis sector!
Featured image by Ryan via Unsplash)
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First published in Le journal de Montréal, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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Henry Reed is a football fan, ramen eater, fender owner, and a financial journalist writing about the stock market. He also covers tech and innovation, as well as the exciting world of cannabis. An internet geek and a budding entrepreneur, he currently divides his time between Scotland and Chicago.