Demand for legal pot hard to predict
Rogers expects a “huge curiosity spike” of people wanting to buy legal cannabis in the early days. “I don’t think there will be empty shelves, but there might be shortages of some strains.”
It’s hard to predict. The demand for legal pot will also depend on how many people continue to get their supply from illicit sources: dealers, dispensaries and friends. How quickly people shift to the legal market depends on a host of factors, including price and convenience, the range of products on sale, and whether police succeed in shutting down illegal dispensaries.
No one expects the huge black market to disappear overnight.
Even so, the numbers don’t look promising for a plentiful supply in the early days. If, for instance, only half of the estimated annual demand of 926,000 kilograms of cannabis is purchased legally, that would require a supply of 463,000 kilograms.
Cannabis growers now produce about 350,000 kilograms a year, according to an estimate from a CIBC World Markets report.
The big growers are expanding frantically and new companies are vying for licences. Billions of dollars are being invested as companies announce ambitious plans to become leaders in cannabis production. How much of that actually materializes remains to be seen.
“Construction and production promises in this industry are a dime a dozen,” notes the CIBC report, published in May.
Getting a better picture of the demand for cannabis is important, says the Health Canadacommissioned report. Demand will not only dictate how much cannabis will be required to stock legal stores, it will determine the amount of tax revenue that will be collected from cannabis sales and what the potential economic spinoffs, such as job creation, will be. It will also influence how many regulatory services will be needed, from licensing to public education and policing.
The federal government also wants to establish a benchmark of demand before legalization, so it can monitor what happens as Canada becomes the first major country to legalize recreational pot nationwide.
Health Canada commissioned the $90,000 study from Denver firm Marijuana Policy Group, which worked with another U.S. research firm, BOTEC Analysis, to provide a “comprehensive outline of the scope and scale of cannabis consumption in Canada.”
The report used data from a Health Canada cannabis-use survey done in 2017, but researchers made several adjustments. They only included data on people over 18 because they wanted to estimate the size of the adult market.
Statistical corrections were made for selection bias because people who use cannabis are more likely to agree to answer a survey about it.
The previous federal report on cannabis demand from the parliamentary budget officer relied on cannabis-use data from 2012, the most recent available at the time.
Estimating cannabis use is difficult. While techniques have improved since 2012, “actual demand remains unknown and there is no statistically proven method to know demand with statistical certainty,” warns the new report.
Private companies have also made estimates, but they vary widely and no consensus has emerged, the report said.
It surveyed eight reports released in 2016 from private companies, whose demand estimates ranged from a low of 370,000 kilograms a year by 2020 to a high of 800,000 kilograms by 2024. None of the private studies were published in scholarly journals, said the Marijuana Policy Group report. Some of the private reports relied on conjecture or problematic extrapolation of data from U.S. states, it said.
Consumption patterns and preferences are different in Canada, it noted. For instance, the rate of marijuana use in Colorado, the first state to legalize recreational pot, is higher than the Canadian average.
There are also political differences that complicate comparisons. Canada will legalize recreational pot across the country.
Data on cannabis sales in individual U.S. states where it’s legal are inflated by purchases made by tourists. And a “potentially large portion of legal sales” in those states is smuggled into neighbouring prohibition states and resold, said the report.