Not only will the marijuana market be worth billions, but it’ll soon be bigger than the liquor industry.
Everyone knew weed would be big in Canada, but who thought it would get so big so fast? According to a report published by leading Canadian bank CIBC, the marijuana market will reach unprecedented heights by 2020. Just a couple of years after legalization, Canadians could be spending more on weed than alcohol. Here’s a closer look at the post-legalization boom.
Canadian Legalization Is Just A Few Months Away
According to the federal government’s new timeline, legalization should be in full force by early September. In the meantime, everyone from provincial governments to marijuana producers to large banks is preparing for the advent of the new cannabis market.
Setting aside the complications of dispensary permitting and local laws, many are wondering: How much will this all be worth? CIBC sought to answer that question in its report “Cannabis: Almost Showtime.”
The Legal Marijuana Market Will Be Worth Billions
On Monday, the Canadian bank released a comprehensive report on the Canadian marijuana industry. It predicts that the legal marijuana market will be valued around $6.5 billion by 2020.
This is partially due to increased weed smoking even prior to legalization. Between 1985 and 2015, consumption in Canada doubled. Though weed won’t be legally available for a few months, cannabis has become increasingly culturally acceptable over the years.
The report cites a Statistics Canada figure stating that “In 2017, about 4.9 million Canadians aged 15 to 64 spent an estimated $5.7 billion on cannabis for medical and non-medical.” The jump to $6.5 billion is reasonable when considering the increased accessibility and acceptance that accompany legalization. Marijuana sales will mirror the alcohol industry’s growth post-prohibition.
It’s important to note that marijuana use is most popular amongst the young and middle-aged. People aged 25 to 44 account for about 45 percent of cannabis consumption in Canada. As more young adults gain access to legal weed, the market will continue to blossom.
Canadians Will Spend More On Weed Than Liquor
The report states that some of this growth will detract from the alcohol market. “In droves [consumers] are substituting [marijuana] for alcohol and tobacco,” the study reads. This phenomenon is so significant that the report predicts a time when “liquor and tobacco giants begin to buy and build their own cannabis facilities.”
Not only is legal weed expected to decrease alcohol sales, it may eclipse them in value in just two years. The report definitively states that $6.5 billion “is greater than the amount of spirits sold in this country, and approaches wine in scale.” In other words, marijuana sales will top those of hard liquor, but not of all alcohol.
Beer and tobacco will still be bigger industries in Canada than marijuana, for the time being. However, the report posits that domestic marijuana production will exceed that of tobacco, which is largely imported.
People Prefer Legal Weed to Alcohol
Concerns that it may be dangerous to sell marijuana in the same place as liquor have been raised. The fear is that consumption of one could encourage use of the other. However, according to the Canadian Association of Medical Cannabis Dispensaries, “there is little research to confirm that there is a direct correlation between colocation and co-use.”
In fact, legal weed can have a negative impact on alcohol sales. A recent study by Scanner Data shows that alcohol sales have decreased in states with legal marijuana. In one case, sales fell by over 16 percent. Even in places that only legalized medical marijuana, alcohol sales diminished by around 13 percent.
Since marijuana use diminishes alcohol consumption, the CIBC study predicts that it’s only a matter of time before cannabis sales overtake those of liquor.
Who Will Benefit The Most From Legal Weed
Though you could say that everyone will benefit from legal marijuana, legalization will translate to major dollar signs for some.
CIBC’s report states that Canada’s provincial governments will benefit the most from marijuana taxation. The federal government can only take $100 million in taxes for the first couple of years., with any additional revenue going to the provinces.
Additionally, half of the provinces will control all marijuana sales. In Ontario, Quebec, Prince Edward Island, Nova Scotia and New Brunswick, the provincial government will run all dispensaries. The other provinces—Alberta, British Columbia, Manitoba, Saskatchewan, and Newfoundland and Labrador—will have some form of private distribution.
Private enterprise will also see a huge boom. The report says that approximately $1 billion will go to the private sector, with 85 percent going to large-scale cannabis manufacturers. Since the government will be sourcing marijuana from only a few sources, large cannabis companies stand to make a fortune.
Marijuana Policy in Canada Remains in Flux
There’s no guaranteeing what will happen with legal marijuana in Canada. It’s certain to differ from province to province. However, CIBC’s report offers a convincing, thorough analysis of how the legal marijuana market will grow.
Whether or not it takes two years for legal marijuana to reach a $6.5 billion market share, corporations and the Canadian government have plenty to gain.