Celebrating 5 Years of Legal Cannabis in Canada
In 2018 Canada rewrote history by becoming the first G7 nation to legalize recreational cannabis. This milestone marked a significant shift in the country's approach to cannabis, moving from prohibition to regulation. In this blog post, we will explore how the legal cannabis industry in Canada has evolved over the past five years and discuss its current state.
The Early Hype
Five years ago, Canada was buzzing with excitement as cannabis legalization finally became a reality. Investment was flowing into a brand new market that many thought would make them rich. Fast forward five years, and the cannabis landscape in Canada has changed considerably, presenting unique challenges, and economic struggles far removed from the enthusiasm of those early days. Industry giants like Aurora Cannabis and Canopy Growth have ventured into uncharted territories, selling orchids and shedding multi-million dollar assets to cut costs. Layoffs have become a painful reality as companies grapple with profitability. Yet, the legal cannabis market in Canada has managed to thrive despite these challenges.
A Mixed Landscape
Despite recent layoffs, Canada's legal cannabis industry has created more than 151,000, with over 48,000 jobs attributed to Ontario since the advent of legalization, according to a 2021 report produced by Deloitte Canada and provincial distributor, the Ontario Cannabis Store. This is a remarkable upswing from what StatsCan reported in August 2019, with 9,200 people currently working in the Canadian cannabis sector, up from 2,630 in the fiscal 2018 year and 1,438 in fiscal 2017.
The report also underscores the significance of the cannabis industry, revealing contributions of $45.5 billion to Canada's GDP and $13.3 billion to Ontario's GDP since legalization. Since 2018, Canadians have purchased $11 billion worth of cannabis, while the companies responsible for the production and sale of legal pot have spent $29 billion in capital expenditures during that time, Deloitte stated.
Growth in the Legal Market
Canada's foray into cannabis legalization has undeniably yielded remarkable achievements in curbing the illegal market, expanding the range of legal cannabis products, and reducing cannabis-related offences.
Initially limited to a handful of products, the market later broadened to include extracts, edibles, and topicals. This expansion provided consumers with a broader choice while maintaining stringent quality and safety standards. Legal sources now account for over 70% of cannabis consumption, highlighting the effectiveness of Canada's regulatory approach.
Industry Struggles
Despite the successes, the Canadian cannabis industry has faced its share of challenges. Experts and industry leaders argue that overregulation, aimed at balancing public health and economic growth, is stifling the sector. The absence of a global roadmap also made early missteps difficult to avoid.
The industry's early days were characterized by empty shelves and an inability to meet the soaring demand. In response, producers increased their output, leading to a surplus. According to the Cannabis Council of Canada, today Canada has around 3,600 licensed retail cannabis stores and 970 licensed producers, with only 20% of these producers showing positive cash flow.
Moreover, overregulation continues to plague the industry, restricting advertising and branding opportunities for cannabis companies. Retail locations conceal their products behind tinted windows, and cannabis is sold in plain government-approved packaging. To add to the challenging landscape, these businesses pay higher regulatory fees compared to other controlled legal substances.
The Road Ahead
There are many important opportunities for the cannabis sector to focus on, in order to make a greater contribution to Canada. The Canadian government has continued to refine and adapt its regulatory framework for cannabis. This includes changes to packaging and labelling requirements, the introduction of new product categories, and adjustments to tax structures. These ongoing developments aim to strike a balance between ensuring public safety and fostering a competitive industry.
Programs and initiatives have also been introduced to encourage participation from individuals from communities disproportionately affected by cannabis prohibition. Promoting diversity and inclusion within the industry is a key priority for many stakeholders. Looking outside of the country, Canada has also positioned itself as a global leader in the cannabis industry.
As we celebrate the five-year anniversary of legal cannabis in Canada, it is evident that the industry has come a long way, and it is still evolving. The lessons learned from the successes and struggles of the past half-decade will continue to shape the path forward. With the right balance of regulation, innovation, and inclusivity, the future of Canada's legal cannabis industry is one filled with potential, growth, and a commitment to making a positive impact on the nation and the world.
