pesticides change flavour

This October will mark five years of Canadian cannabis legalization. The analytics firm Headset has compiled a report that looks at sales growth, pricing, brand development, and product innovation.

Cannabis sales throughout Canada have grown by 157% since May 2020. But despite this growth, the last three years have seen slower growth.

The saturated Ontario market has also seen sales drop by 20% while the number of stores has grown by 40%.

Canadian legalization began with flower as the dominant product category. But pre-rolls have increased their share in the last year to reach parity with flower.

Between 2020 and 2023, the number of cannabis brands in Canada has increased by 369%. However, the market is becoming more concentrated. In 2020, 21% of brands captured 80% of total sales.

In 2023, the top 12% dominate 80% of the market.

While the price for edibles and flower fall, infused pre-rolls and vape pens are popular.

Canadian Legalization: Five Years Later

Source: Headset

While the Headset report looks at the Canadian cannabis market five years after legalization, their data only began in late 2019. Therefore, it’s more of a three-year review.

For example, between May 2020 and May 2023, sales totals throughout the country grew by 157%.

Ontario and B.C. saw the most significant increase, 295.8% and 140%. Saskatchewan and Alberta saw smaller increases at 71.5% and 62.6%, respectively.

This growth is slowing. As we’ve covered before, the covid cannabis bubble has popped. Since 2020, sales growth has consistently shrunk from 88.3% between 2020 and 2021 to 29.9% in 2022.

In May 2023, Canadians saw an 11.8% increase in sales growth. But this is significantly smaller than previous increases.

For a broader picture, we can look to Ontario. During the covid hysteria, Ontario experienced a 144.2% increase in total sales. But from 2022 to 2023, the province’s cannabis industry grew by 7%.

Only Saskatchewan saw high sales increases (24%) from 2022 to 2023. Whether this has anything to do with their freer cannabis economy (i.e. No government monopoly distributor) was outside the report’s scope.

No Increase in Demand

Five years after Canadian legalization, there’s no new consumer demand. Growth is coming from new stores serving untapped markets. (Or markets previously served by the underground market).

Since June 2022, Ontario has seen a 29% increase in store count.

But while store counts increase, the average sales per store has decreased. Between 2022 and 2023, Ontario‘s average monthly sales per store dropped by 13%.

Of course, new, opening markets such as Mississauga offset some of this. Ontario‘s third-largest city had previously banned cannabis stores.

Brand Growth Five Years Later

Five Years of Canadian Legalization 

Five years after Canadian legalization, brand growth has increased by 369%. But like other categories, growth has slowed since 2022. That said, there was still a 27.1% increase in brands between 2022 and 2023.

While the number of stores has helped these brands, actual sales data is disproportionate. Between 2022 and 2023, median total sales per brand dropped by 70%.

In 2020, the Canadian market followed the 80/20 rule, where 21% of brands accounted for 80% of sales. In 2023, the top 12% of brands dominate 80% of sales.

As we’ve predicted here at CLN, the Canadian cannabis market was always intended to be a cartel dominated by Laurentian elites. Just like every other major industry in this country.

Pricing plays a role in this consolidation of Canadian legalization five years later.

Falling wholesale prices are eroding margins for retailers and brands. In the five years since Canadian legalization, prices in all categories have fallen.

Non-inhalables such as beverages, edibles, and tinctures initially increased. But by the end of 2019, it was clear the edible market in Canada was a bust—no doubt due to the arbitrary 10mg THC cap.

By May 2023, the price for non-inhalables had dropped by 25.3% compared to the previous year.

Consumer Preferences Five Years Later

Source: Headset

How have consumer preferences changed in the five years since Canadian legalization?

Canadian cannabis consumers have dethroned flower from its number-one position. Flower dominated the market at one point, making up half the total sales.

Now, flower only takes a third of all sales. Vape pens have become popular, most likely due to convenience and lack of smell. But the pre-roll category is on par with flowers as one of the most popular products in Canada.

Again, we can explain this by convenience. For many, it’s easier to grab flower that’s ready to smoke. While we’re not complaining, it’s surprising that Health Canada hasn’t cracked down on pre-rolls.

No doubt, in their minds, the only reason to buy a pre-roll is for the convenience of smoking while you drive or operate heavy machinery.

Other categories, like tinctures and sublingual, continue to lose their little market share.

Five years after Canadian legalization, consumers buy discount flower brands and “connoisseur/infused” pre-rolls.

Five Years of Canadian Legalization

Five Years of Canadian Legalization 

Five years of Canadian cannabis legalization have been a mixed bag. While the new industry created jobs and opportunities, growth has been haphazard and handicapped by stringent rules. Rules that are subject to change based on the whims of public health bureaucrats.

Headset suggests current sales growth is likely due to increases in the number of stores than any actual increase in consumer demand. Along with razor-thin margins and 12% of brands accounting for 80% of sales, the cannabis industry faces significant hurdles.

What will Canadian legalization look like five years from now? Without changes in regulations, prices, and punitive taxes, Canadian legalization may create an industry like our banks, telecommunications, oil, or even maple syrup.

That is, a made-in-Canada cartel. Owned and controlled by our Laurentian elites.

Little wonder this country has the same productivity as Alabama, the U.S.’ poorest state.