Published February 13, 2020

Think back to 2018. As we approached October 17th, everything in the cannabis industry seemed promising. Licensed producers were competing over who could build the biggest grow facility (a million square feet seemed to be the benchmark). Announcements were made about who would achieve the coveted $1/gram production cost. Stores got ready to open. Brands were unveiled. As a result, share prices surged. What happened to the cannabis gold rush? Why didn’t we see a flood of consumers start buying from the legal market? Are we in a cannabis recession?

Post-Legalization Bust

In October 2018, we found about 33% of Canadians surveyed had consumed cannabis at least once in their lives. This rate has stayed fairly consistent for the last 15 months, which means that very few Canadians have tried cannabis for the first time since legalization. The legalization of cannabis by itself has not inspired new consumers to join the market, which was predicted to be a major growth driver pre-legalization.

Graph showing the incidence rate of Canadians who report ever having consumed cannabis. The rate hovers around 33% over 6 quarters post-legalization.
This graph shows the rate of Canadians surveyed who report ever consuming cannabis, by quarter from October 17, 2018 to January 31, 2020.
Source: Cannatrack data, n=45,998

Barriers to Legal Market Growth

Based on evidence gathered in Cannatrack, we believe that the cannabis market hasn’t attracted new consumers for a few key reasons:

  • Cannabis was effectively decriminalized for a long time before legalization. The legal and mental barriers were not keeping people out of the market in a real way.
  • Black market cannabis has a robust supply chain like the legal market, with availability online, through storefronts that are almost indistinguishable from legal stores, and the traditional “I’ve got a guy”.
  • Cannabis 2.0 formats like edibles and vapes have been widely available in the black market for years. They also do not represent a substantial share of consumption in legal markets like Colorado, Washington, and Oregon.
  • Key purchase drivers like price, convenience, trust, and quality often favour the black market. The legal market has not yet been able to address these shortfalls.

Driving Legal Cannabis Growth

Are there still opportunities for growth in legal cannabis? Through our qualitative research, we have identified a number of ways for licensed producers to combat the cannabis recession:

  • Attract cannabis consumers who are not well served by the black market for reasons like safety.
  • Excel at formats that are more difficult to produce outside of an industrial setting, like capsules.
  • Convert therapeutic users to prescription medical users.
  • Address issues with perceptions of quality and adjust pricing to better compete with the black market.

Have questions about the cannabis recession? Contact us to find out more about available Cannatrack data. You can also sign up for the Cannatrack newsletter to receive monthly emails full of insights like this.