Article by Jeff Lagerquist,
One-in-five Canadians are expected to consume cannabis in 2025, according to a new analysis by Ernst & Young outlining the firm’s upbeat take on the nascent industry.
EY is calling for the Canadian cannabis market to grow by about 50 per cent to $11 billion in six years time. Average consumer spending is expected to surge by 30 per cent. And wholesale prices are projected to land between $4 and $5, if enough capital is fed into the sector.
Zachary Pendley, the global accounting giant’s Canada cannabis real estate and valuation leader, is also confident that black market dominance will abate as legal retail sales ramp up from a sluggish start.
“As the industry matures, access to product eases and higher margin derivatives come online, we’ll see a rise in consumer spending on legal cannabis,” he said in a news release on Tuesday. “The reality is that retail and distribution frameworks across Canada have been implemented much slower than anticipated, pushing many consumers to look for alternatives.”
So far, Canadian cannabis spending has overwhelmingly flowed to the illegal market. Canadian households spent $5.9 billion on cannabis in the fourth quarter, according to Statistics Canada. The federal agency found $4.7 billion of that figure was spent outside the legal system.
The situation has prompted calls for Ottawa to do more to live up to its commitment to divert cash away from illicit sources, and into the newly-legal adult-use market. OrganiGram Holdings Inc. (OGI.V) chief executive Greg Engel recently expressed frustration about robust black market competition in an interview with Yahoo Finance Canada.
Lack of supply has been the biggest headwind for Canada’s legal market since adult recreational sales were introduced on Oct. 17 of last year. The situation has delayed the roll out of brick-and-mortar retail locations in Ontario, and caused government-run stores in Quebec to close on certain days of the week.