Cannabis: The Numbers Behind the Smoke

Article by Bill Howatt and Matthew Stewart, Globe and Mail

Cannabis: The numbers behind the smoke BILL HOWATT AND MATTHEW STEWART SPECIAL TO THE GLOBE AND MAIL

While the cannabis industry is just getting off the ground in Canada, it has already become a major part of our economy. The first batch of economic information released since recreational use was legalized shows that more Canadians are consuming cannabis and the industry is ripe for growth.

Awareness

Some people may be surprised by how many Canadians are consuming cannabis. According to the latest data from Statistics Canada, almost 18 per cent of Canadiansover 15 years old used cannabis in the first few months of 2019. This is up from 14 per cent before legalization.

Men are the biggest consumers, with 22 per cent reporting consuming cannabis – nearly double the share of women (13 per cent). Consumption is also higher among younger Canadians. Among young people (aged 15 to 24), 30 per cent reported consuming cannabis. The share drops to 24 per cent for those 25 to 44 and then declines significantly for those older than 45.

Given that more Canadians are consuming cannabis, it’s not surprising that spending has also risen substantially. Canadians now spend as much on cannabis as on wine. According to the latest numbers, Canadians spent almost $2-billion on non-medical cannabis in the first quarter of 2019, putting sales on track to top estimates of $7-billion this year. That would be a third of the amount spent on alcoholic beverages in 2018.

Spending at retail cannabis stores has also been increasing quickly. In March, Canadians spent an average of $2 for every adult in the country. Adjusted for the number of people over 18 in each province, adults living in Yukon spent the most per person on cannabis, followed by those in Prince Edward Island. Adults in Ontario and British Columbia spent the least per person, but this will likely change; the first storefront retailers in Ontario only opened in April.

Legalization is almost certainly helping to boost consumption and spending, but it’s probably not the only factor. Consumers paid an average of about $7 per gram in 2018, down from $9.40 in 2008. When adjusted for inflation, this plunge is stunning; a gram of cannabis now costs less than one-fifth of 1961’s price. Cannabis has never been cheaper.

Accountability

While there has been a rapid shift in the market recently, legal cannabis sales are still less than half of all purchases. One reason for this could be the higher prices charged by legal suppliers. Those who purchased from illegal sources paid on average $6.37 per gram, compared to $9.99 from legal outlets.

Despite the price difference, the licensed industry is growing. There are now more than 260 companies operating in the cannabis industry, according to Statistics Canada. While most are in agriculture or retail, some are in manufacturing as well. Overall, the cannabis industry was responsible for $6.7-billion in GDP as of March. While the licensed industry made up only $2.3-billion of that total, this share has been rising and will likely continue to as consumers shift toward legal sources. Between January and March, roughly 2.5 million consumers purchased cannabisfrom a legal vendor, up from 954,000 over the same period in 2018.

Action

While there are economic benefits to more people consuming cannabis, such as generating new revenue, the social cost and societal impact will only become apparent in the coming years. As will the impacts for employers.

Read the full article here.

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