[Canniseur: I’ve always believed it would take years of legal cannabis to move the black market into the background, but Canadian bureaucrats have their heads firmly up their terminal sphincters. If legal cannabis is more expensive than the black market, guess which one will win out? The Canadian market is upside down for price, and probably upside down for product quality, as well.]
Canadian researchers documenting the country’s transition to nationwide cannabis legalization released a new report this week comparing legal and remaining illicit marijuana markets. The report highlighted an issue that has plagued cannabusiness across emerging post-prohibition markets: price conscious customers.
According to the latest deep dive from Statistics Canada, and first reported by CBC, nearly 60% of Canadian cannabis consumers purchased weed from the black market during April, May, or June of this year. The reason for their loyalty to the illicit industry? Canada’s legal weed costs nearly twice the price of black market bud, and the disparity is still growing.
After surveying 572 Canadian cannabis users and tracking pricing data from both legal and illicit online pot sellers, Statistics Canada found that the price of a fully licensed gram averaged to about $10.65 during the second quarter of 2019. Conversely, the same quantity of black market weed costs only $5.93 on average. With a $4.72 per gram difference between licensed distributors and local street dealers, it is no surprise that Canadians are ditching the sparse selection found in dispensaries for the tried-and-true ziplock bag.
And compared to the first quarter of 2019, the price of legal weed and the gap between the two sectors of the market have only grown larger, with the first three months of the year seeing legal and illicit pot prices sit at $10.21 and $6.23 per gram, respectively.
In addition to supply shortages in the legal market, and localized barriers to access, experts also pointed to the steep costs associated with legalization as an impetus for the massive price gap. Without product testing, packaging, or taxes, black market pot can arrive at market for much cheaper than its licensed counterpart.
“There’s an excise tax built in. Then, depending on the province, there’s GST and HST on top of that,” Brad Poulos, a lecturer in the Ted Rogers School of Management at Ryerson University in Toronto, told CBC. “There’s compliance costs that legal cannabis producers have that the illicit market doesn’t have to worry about. Add it all up and there’s quite a cost disadvantage.”
Thankfully, Canada’s initial legal cannabis supply drought is expected to shore up before the year is out, with fully stocked dispensary shelves hopefully shifting the price of licensed pot to a more reasonable average.