Canadian cannabis market has been steadily growing. The country has seen an average of a 10 percent increase each month in the number of Canadian patients signed up to receive medical cannabis. The sale of dried cannabis has grown steadily at 6 percent a month, and the sale of cannabis oil has been growing by 16 percent a month.
In 2017, about 4.9 million Canadians aged 15 to 64 spent an estimated $5.7 billion on cannabis for medical and non-medical purposes. This was equivalent to around $1,200 per cannabis consumer.
Canadian Cannabis Market Forecast
The federal government legalized recreational cannabis on October 17th, 2018 and projects that 450,000 customers a day would participate in Canadians cannabis market, making recreational cannabis in Canada a $900 million industry. The initial market demand would be 100,000 kg. The Canadian marijuana market also is expected to see rapid growth, with the number of cannabis users growing by more than a half million people within the first three years of legal cannabis sales in the country. It’s expected that 98 percent of all cannabis sales would come from Canadians who would consumer cannabis at least once per week, if not daily.
Leading cannabis industry researchers, ArcView Market Research expect Canada’s thriving medical market to peak in 2018 and start to descend in 2019 once the adult-use market is fully operational. Growth is forecast to be strong, with adult-use spending estimated to reach over $3 billion in 2021, driving a CAGR of 77.9% from 2018-2021.
Cannabis industry analysts predict that Canada’s cannabis industry ultimately would total between $4.9 and $8.7 billion Canadian. If the market meets prediction, Canada’s legal cannabis market would be comparable in size to its hard liquor or wine market.
The cannabis market is poised to have a major effect overall on Canada’s economy. One study from Deloitte Private pegged the potential economic impact of legalized recreational marijuana in Canada at more than $22 billion, including transportation, licensing fees and security.
The market for cannabis extracts
The demand for cannabis oil in Canada’s medical marijuana market is so high that suppliers report a shortage and are having a difficult time establishing a regular supply of cannabis oils.
Until a court ruling intervened, Canada’s licensed medical cannabis producers were able to sell only dried or fresh cannabis flowers. That changed in 2015, when licensed medical cannabis producers were legally permitted to begin producing and selling cannabis extracts. However, the sales of cannabis extras remain limited: Cannabis extracts must be in liquid form only, and they have a THC potency cap of 30 mg per ml. That means the laws prohibit the vaporization products that have been extremely popular — and fueled strong growth in recent quarters — in the U.S. cannabis market.
Despite their limited forms and supply, Health Canada’s most recent data showed that the sales of cannabis extracts grew 961 percent in the second quarter of 2017. That compares to an 89 percent increase in growth of dried cannabis during the same period. Within the same timeframe, the number of Canadians eligible to purchase medical cannabis grew by 233 percent, to 201,398.
In all, only 18 total companies are licensed to produce cannabis extract, and of those, only 16 are licensed to sell those extras. Registered producers and/or sellers of cannabis oils include Aphria; Aurora Cannabis; Broken Coast Cannabis; Canna Farms, CanniMed; CannTrust; Canopy Growth, which holds five licenses, including three for Mettrum, one for Tweed and one for Bedrocan Canada; Emblem, which holds a license for production only; Emerald Health; Hydropothecary; Maricann; MedReleaf; Organigram; Peace Naturals; THC BioMed; Tilray; WeedMD, which holds a production license only; and Whistler Medical Marijuana.
The market for cannabis edibles
A parliamentary committee amended legislation legalizing recreational cannabis to allow edibles one year after the new law takes effect. Allowing edibles is expected to be a gift for licensed producers – some of which have positioned themselves for the eventual inclusion of edibles – as well as extraction businesses, makers of concentrates and, potentially, owners of cannabis consumption lounges.
The poll by researchers at Dalhousie University in Halifax found that about 68 per cent of people across the country favour the impending legalization of pot, with the bulk of that support in B.C. and Ontario.
Just over 45 per cent said they would buy food containing marijuana, with 46 per cent saying they would purchase pot-laced baked goods like brownies and muffins if they were legal. That points to a potential market of 17 million consumers.
Fees and Taxes
Cost recovery for the regulation of cannabis includes four fees:
- Application screening fee: recovers the costs associated with screening new licence applications ($3,277 for standard licence applicants and $1,638 for micro and nursery licence applicants);
- Security clearance fee: recovers the costs associated with screening, processing, and issuing or refusing security clearances ($1,654);
- Import/export permit fee: recovers the costs associated with screening, processing, and issuing or refusing to issue an import or export permit for medical or scientific purposes ($610); and,
- Annual regulatory fee: recovers the aggregate costs of administering the cannabis regulatory program that are not covered under any of the other fees (2.3% of cannabis revenue for standard licence holders, or $23,000 if cannabis revenue is less than $1 million, and 1% on the first $1 million of cannabis revenue for micro and nursery licence holders or $2,500 in cases where cannabis revenue is less than $250,000).
- Licence holders who produce cannabis exclusively for medical purposes are exempt from the annual regulatory fee.
The federal excise duty rate will be 25 cents per gram of cannabis, or 2.5 per cent of the producer’s sale price of that product. An additional rate will apply for an agreeing province or territory.
|Cannabis product||Flat‑rate cannabis duty||Ad valorem cannabis duty||Flat‑rate additional cannabis duty||Ad valorem additional cannabis duty|
|Flowering material included in the cannabis product or used in the production of the cannabis product||$0.25 per gram||2.5% of the dutiable amount for the cannabis product||$0.75 per gram||7.5% of the dutiable amount for the cannabis product|
|Non‑flowering material included in the cannabis product or used in the production of the cannabis product (this includes flowering material that is industrial hemp by‑product)||$0.075 per gram||2.5% of the dutiable amount for the cannabis product||$0.225 per gram||7.5% of the dutiable amount for the cannabis product|
The adjustment rates for the additional cannabis duty required when packaged and stamped cannabis products are delivered to a purchaser in a listed specified province are the following:
- Alberta, 16.8%;
- Nunavut, 19.3%;
- Ontario, 3.9%;
- Saskatchewan, 6.45%.
It is important to note that excise duties are not paid directly by consumers. Rather, they are paid by manufacturers.
We offer Cannabis Financial Models and Cannabis Business Plan Templates which are specific to the Canadian market and regulations for a growing, extraction, manufacturing, retail and vertically integrated cannabis business.