Last week, Canada took a definitive stance to end nearly a century of prohibition and became the second country after Uruguay to legalize recreational marijuana. No, the sky didn’t fall and there doesn’t appear to be a complete and total moral degeneration of society as of yet. But there are trends that are worth looking into now to see how the legal market is taking shape and to gauge our expectations for the future.
There have been a lot of reports coming out of Canada in the first week, including a made-up donut shortage, but the experts will be watching Canada closely as the country has taken the monumental step to decriminalize cannabis possession and use, as well as regulate and tax its growth, distribution, and sale.
While marijuana is now legal at the federal level in Canada, provinces are allowed to impose tougher rules. This means that the roll-out has been different depending on the individual location.
Supply Outstrips Demand
In Canada’s largest province Ontario, for example, weed sales are only available through one online store known as the Ontario Cannabis Store (OCS). According to CBC, the provincially-run online retail website accepted 100,000 orders in the first 24 hours on Oct. 17. So far, dozens of customers have contacted the media to report delays, cancellations, incorrect product shipments, and lack of follow-up for order details.
In other regions of the country, cannabis shortages were widely reported less than a week after marijuana was made legal. Somehow demand for marijuana was higher than expected, and various shops had to close their doors when they ran out of product on the first day.
While demand was strong across the country, not all dispensaries experienced supply shortages. Matt Ryan, who is VP of Marketing at National Access Cannabis, said that the opening of the company’s retail store in the Manitoba province — the Meta Supply Co store — was greeted with a “line around the block.”
“It’s been extremely busy for the first week of business so far, and that’s kind of what we were expecting,” said Ryan. “Line-up in the morning when we’re opening-- we’re opening at 10 A.M. by the way, so those are some pretty dedicated people… It’ll be interesting to see how the industry balances out over time because the initial excitement of legalization is certainly still there.”
While there are short-term supply concerns, Ryan said that the licensed producers and the government are working the “best they can get product to our retail stores or to our online stores.”
“It is a reality that there is a shortage. We’re fine with it, the reality that our industry has so much to do in such a short amount of time. We’re thankful there is product that is available and we’ll be patient as the industry gets to that point of balancing supply with demand.”
Ryan expressed gratitude that product is being delivered in the first place, and said the company would remain patient as the industry continues to mature. While supply outstrips demand, the Meta Supply Co has been able to maintain inventory and has not yet had to shut down due to lack of product.
Black Market Concern
The legalization of marijuana in Canada was designed to replace the unregulated or marijuana black market. Federal researchers at Statistics Canada estimated the country’s marijuana market to be worth $5 billion — 90 percent comprising unregulated sales. The federal data suggested nearly five million Canadians spent money on marijuana, each spending an average of about $1,200.
According to an estimate from CIBC analysts, legal pot sales could top $6.3 billion by 2020, eclipsing the amount Canadians paid for spirit liquor sales. A report from the Parliamentary Budget Officer found legal weed sales could generate upward of $618 million in tax revenue by 2021.
Still, with nearly a century of prohibition fomenting the growth a multi-billion-dollar black market, the informal industry is unlikely to go away quietly into the night. Cannabis Lawyer and Consultant Harrison Jordan told the Stash that he expects it be challenging for the legal market, at least at first, to match the black market prices.
“There is always going to be at least a little bit of a black market. Especially because you can get $150 ounces on the black market, or even less. It’s going to be hard to see that kind of pricing in the legal market, although I predict that most consumers will be relatively elastic and at least want to try the legal system”
In Toronto, police shut down five pot shops in a coordinated raid after marijuana became legal last week. While Ontario will eventually issue licenses to legally operate dispensaries, the framework won't be instituted until April 1, 2019.
Jordan said that until the Alcohol and Gaming Commission of Ontario approves licenses under the new law, any dispensary that remains open within the province is illegal. According to Jordan, even customers who shop at illegal dispensaries would be committing a federal and provincial offense and could be subject to prosecution.
“If you see a dispensary in Ontario, they’re illegal. There isn’t one legal dispensary in Ontario right now. At this point, the only authorized location to purchase from is online from the Ontario government.”
Right to Possess, Use Cannabis in Public Spaces
According to Jordan, it is now permitted in Ontario to use marijuana in places where tobacco is permitted. There are certain exceptions such as vehicles, residences that double as workplaces, and long-term care facilities, that may permit tobacco but not marijuana use.
“There are certain places where you can’t consume, but generally on sidewalks and in parks you can, but not near playgrounds or anywhere children frequent. Generally speaking, anywhere you can smoke tobacco.”
However, Jordan points out that most provinces require users to keep their cannabis fastened closed while in a vehicle.
“It has to be fastened closed when you’re possessing it in a car. If it’s not fastened while you’re in the car, even if you’re not consuming, you can still get charged provincially.”