The Negative Economic Trends that Follow Legalisation
Many cannabis users in Canada have not benefited from legalisation as much as they might have imagined. According to a recent crowd-sourced survey carried out by Statistics Canada, there have been steady increases in the cost of a legal gram of cannabis across the country following legalisation. The survey shows that the price of a legal gram has increased by an average of 17% across the country, with Northern states recording the highest increase.
Many Canadian cannabis companies are struggling to stay afloat, given the limitations on marketing imposed by current laws, and the decline in the advantages they’ve been enjoying as first movers in an expanding global legal market as US companies continue to consolidate. And while they struggle to maintain their advantage in the global markets, they face stiff competition at home from illegal black markets, where prices have been on a steady decline post-legalisation. Studies also show that adult-use legalisation appears to drive up housing prices in the legal areas. For many cannabis users, life has become more expensive.
How Pre-Legalisation Pot Prices Compares to Post-Legalisation Prices in Canada
Canada’s national statistics agency revealed that while the average price per gram of both legal and illegal marijuana stood at $6.85 prior to legalisation, the price of a legal gram has risen by 17% post-legalisation. The agency found that the average price of a legal gram of weed now costs $8.04. The survey took into account prices of cannabis products sold both online and in person, as well as in medical marijuana dispensaries and in the black markets. Price quotes were gathered through the StatsCannabis crowdsourcing application between Oct. 17 — the date of legalisation — and March 31. Nonetheless, the agency warned against faulty interpretation of the facts, since the samples were limited – especially in smaller provinces and the territories.
The increase varied significantly in different provinces and territories. While New Brunswick enjoyed some of the lowest legal weed prices prior to Oct. 17, it is currently faced with the biggest price hike — a whopping 30% — post-legalisation. The second largest price increase was recorded in Manitoba, which saw prices increase by 27.7%. However, British Columbia recorded only a 3.5% price hike — the lowest increment across the country. The Northwest Territories have the highest post-legalisation prices; at $14.45 per legal gram, cannabis prices have jumped 13.7% post-legalisation in these regions. The lowest average prices post-legalisation were found in Quebec, at $6.75 per legal gram, although this price is actually 15.9% higher than Pre-Legalisation prices in the region.
How Canadian Cannabis Companies’ Performance in Global Markets Affects Local Prices?
While Canadian Cannabis producers are currently grappling with domestic sales limitations, they’re also struggling to maintain their dominance as first movers in the international markets, including in the U.S market. Canadian producers were the first to enjoy legal patronage throughout a first-world country, and to have access to capital to venture into new legal markets across the world. However, they’ve been faced with stiff competition from their counterparts on the other side of the southern border, who enjoy an environment that’s more favorable for cannabis cultivation as well as a regulatory environment that’s less prohibitive to marketing.
Licensed Canadian producers might have a hard time tapping into a $50 billion cannabis market that could emerge in the US in the near future. According to Bloomberg, the market shares that Canadian companies stand to gain from markets in Europe and South America might not make up for the market share they might loose in the U.S market if the U.S producers continue to outperform them there.
The legalisation of hemp, a source of CBD for medical marijuana, on the federal level in the U.S is empowering medical marijuana companies in the country to expand and go global. This will most likely further erode the dominance of Canadian producers in the international markets. The growing competition in the international scene will come home to bite Canadians, as producers may hike local prices with the failing prospects of padding local sales revenues with profits generated abroad.
Rising Housing Costs May Add to Woes of Pot Users in Canada
A new study from Clever Real Estate, a valuation company, shows that cities where cannabis use has been legalised have been faced with an average increase of USD$6,337 between 2017 and 2019 in the prices of residential accommodation. The study, which made use of figures gathered from real estate site Zillow, also shows that the increase in housing prices is greater in cities with legal pot markets that are easier to access.
“States that legalise recreational cannabis see an immediate bump in home values following legalisation, even without retail dispensaries opening up,” says the study report. This implies that pot users may likely face housing problems in addition to the price hike in the wake of legalisation.
Legalising cannabis has many advantages – for users, they have extra assurance that the product they are buying is safe and meets the standards they are looking for, and the economy in general benefits from the reduction in the cost of policing cannabis use and the additional tax dollars. However, the benefits come at a cost that may have been unexpected by some users. The advantage of taking the control of cannabis out of the hands of black market dealers means safer, better products that are easier to regulate and obtain. However, users might just have to adjust their budget to compensate.