A new report projects that upon legalizing adult use cannabis, Canada will reach $4.5 billion in marijuana sales by 2021.
Canada’s recreational marijuana market could tally $4.5 billion (C$6 billion) in sales by year 2021, according to a new report from investment bank and research firm Canaccord Genuity. Financial analysts Matt Bottomley and Neil Marouka predict that with adult use legalization, by 2021 there will be about 3.8 million legal recreational users throughout the country.
“Recreational upside could be a game changer,” Bottomley and Marouka said in their report, according to Bloomberg.
Canaccord Genuity’s projections are close to aligning with those published earlier this year by professional services firm Deloitte and RIWI Corp. Their “Recreational Marijuana: Insights and Opportunities” report estimated that Canada’s annual legal marijuana sales would reach $4.9 billion to $8.7 billion.
Prime Minister Justin Trudeau and the Canadian government have said they will legalize recreational marijuana sometime in 2017, with sales beginning January 2018.
Canada’s Task Force on Marijuana Legalization and Regulation, which includes medical, academic and law-enforcement experts, had been studying the economic, public health, criminal justice and road safety issues related to legalization. The task force delivered its report, outlining recommendations for the country’s cannabis framework, to Trudeau’s cabinet on November 30. After being translated into English and French, the report will be provided to federal ministers and the public sometime later this month.
The Canaccord report did highlight a concern for Canada’s upcoming adult use market. Bottomley and Marouka foresee that at the outset of legalization, demand will exceed supply due to a lack of producers caused by Canada’s strict licensing system. The report predicts that demand will reach 882,000 pounds in the first full year of the program before growing to about 1.27 million pounds in 2021.
“We believe the rigorous process of becoming a licensed producer of cannabis in Canada imposes significant barriers to entry,” the report reads. “To date, Health Canada has approved 2 percent of the applications from growers seeking to supply the medical market.”
The task force is expecting the country’s current medical marijuana growers to be significantly involved in the production of recreational cannabis. However, Canada currently has just 36 producers licensed to grow and distribute marijuana for medical purposes and demand is expected to grow significantly.
A recent poll found that 57 percent of current Canadian recreational marijuana users would abandon the way they get cannabis now to purchase it from a licensed store, while another survey found that nearly a million Canadians who don’t smoke cannabis would likely begin to after it’s legalized.
Canaccord’s report expects that there will be a shortfall of supply until production capabilities catch up around 2020.
Trudeau ran for office on the promise that he would legalize recreational marijuana, but has made it clear that his interests in doing away with prohibition are related to social rather than economic benefits. Still, the federal government is expected to save about C$2.3 billion that is currently being used to enforce prohibition.