Opinion: Cannabis is the great social experiment that wasn’t
In 2019, the cannabis sector in Canada got its bubble burst; however, its comeback appears promising. Players in the field are slowly getting their footing back and settling into a different North American market versus pre-pandemic. More mergers and acquisitions are pointing to a more mature marketplace. But with cannabis, Canada and the United States offer two different tales.
In Canada, the low point was likely in the spring of 2020 when the number of manufacturing jobs in the Cannabis sector barely reached 2,000. According to the well-known career site, Indeed, the Canadian market presently has over 1,400 openings in the cannabis sector: a remarkable number. Things are certainly looking up for the cannabis sector in the country.
Recent polling numbers in Canada are also pointing to a brighter future. Canadians are apparently gradually becoming comfortable with the idea of living in an environment in which cannabis is a legal substance. In the latest assessment by Dalhousie University, support for legalization has surged to over 78 per cent of respondents, up from 49 per cent in 2019, placing Canadians’ cannabis approval levels above those in some U.S. states. Disagreement with legalization has decreased to 14 per cent from 30 per cent in the previous study in 2019. Fully 56 per cent of Canadians say they do not agree that municipalities should be able to ban cannabis outlets within their boundaries; almost a complete reversal of opinion from 2017. While 65 per cent of Canadians say they do not mind if restaurants put edibles on their menus, the portion of “canna-curious” has dropped to 13 per cent from 26 per cent. Self-stigmatization also declined in Canada, with fewer expressing concern about others knowing they consume cannabis.
In other words, as a country, we are all collectively calming down from when cannabis was first legalized back on Oct. 17, 2018. Edibles became legal a year later, but that market segment has grown ever so slowly. Unlike the United States, even though cannabis is legal federally in Canada, regulations and how edibles are recognized as a drug, and not as a food, has made the Canadian edibles market more rigid and less attractive than the United States.
Although cannabis is not legal federally in the United States, its cannabis industry is simply booming. Understandably, many Canadian companies are eyeing the American market and see great potential; pursuing that market is not going to be easy. The legal American cannabis industry now employs over 321,000 full-time workers and has added more than 77,000 jobs in 2020 alone. New York State, one of its largest markets, just legalized recreational cannabis. Medical cannabis is now legal in 36 American states, while recreational consumers can use the drug legally in 17 states, including Connecticut which just joined the group. According to some estimates, the U.S. cannabis industry is predicted to be worth $100 billion by 2030. In just a few years, edibles and topicals could account for over 50 per cent of that market. That is a massive number and impossible to ignore. Under the current regulatory regime, the edible market in Canada cannot reach similar proportions. The market is simply too restricted, and thus a missed opportunity for Canadian companies.
Although worry in many respects is declining, the Canadian government is fully aware that Canadians remain concerned about public safety related to cannabis, and particularly edibles. More than 63 per cent of Canadians are concerned for the safety of children. For pets, the portion of Canadians concerned is 60 per cent; and both are up from 2019 levels. The pet economy in Canada is very different now than before the pandemic. According to estimates, Canada has at least 4 million more pet owners since March 2020. Consequently, it seems probable that tight regulations related to edibles are here for a while.
Nonetheless, it will be interesting to see how the market evolves and how Canadians will (or will not) embrace cannabis in a more normalized, post-pandemic economy. The Canadian legal cannabis market size increased by 120 per cent in 2020, reaching $2.6 billion (CAD). Modest numbers compared to the U.S., but still spectacular growth. We expect more growth in 2021 as the stigma continues to temper over time.
The cannabis market in Canada is nowhere near what Deloitte predicted when it suggested retail sales would top $7 billion in 2019. However, based on how consumers are perceiving cannabis in North America, it seems clear the only way for the industry to go is up.
- Dr. Sylvain Charlebois is the senior director of the Agri-Food Analytics Lab at Dalhousie University. Written with Brian Sterling, Research Associate at the Agri-Food Analytics Lab, Dalhousie University
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