Anyone who has ever seen the film “Strange Brew,” which follows the McKenzie Brothers on an insane mission for free beer, might be under the impression that booze is the only liquid currency inside the Canadian inebriation culture. But it turns out that if Rick Moranis and Dave Thomas were making the same movie today, they’d have to incorporate a metric ton of cannabis into the mix to come even close to framing up an accurate portrait of what is going down in the northern nation.
It’s weed the people want, not liquor, according to the suits at the Canadian Imperial Bank of Commerce. Their latest analysis shows that once Canada finally launches its fully legal recreational marijuana market later this year, the population will drop more of its hard-earned dollars on legal weed than alcoholic beverages. They know this because consumers are already doing it, to some degree, in the black market.
The CIBC, which is one of the Big Five with respect to Canadian financial institutions, unveiled a report this week that shows how cannabis is destined to take over the national SIN market. It will only take two years for weed to become the country’s buzz of choice, the report finds. The population is expected to consume a whopping 1.7 million pounds of pot annually once lawmakers get the party started. The majority of this highness will come from citizens using the herb for recreational purposes.
“We believe that by 2020, the legal market for adult-use cannabis will approach $6.5 billion in retail sales,” the report reads, according to CBC.
“For context, this is greater than the amount of spirits sold in this country, and approaches wine in scale,” the report says.
The medical marijuana program currently in full swing in the Great White North is turning roughly 132,277 pounds of pot into smoke each year. But the country’s black market is still stronger. The nation’s medical marijuana sector “is a drop in the bucket compare to illicit purchases,” the report shows.
This means the citizens of Canada have very little interest in using the herb to combat the medical conditions that plague them. They want marijuana because it is fun and gets them high.
The CIBC says there is a plethora of cannabis users champing at the bit to sustain the legal market.
Somewhere around 5 million Canadians bought weed in 2017, according to Statistics Canada. These people spent almost as much on herb (90 percent illegal) as they did wine — a $7 billion industry. It only stands to reason that full-blown legalization is going to provide the cannabis sector with a mega-sales boost, forcing alcohol producers, many of which have been on easy street for decades, to fight much harder for their portion of the market share.
It should come as no surprise that cannabis legalization in Canada threatens to chip away at the profits of the alcohol trade. Ever since recreational marijuana hit the ground running in parts of the United States, reports have surfaced showing the carnage cannabis could have on booze if it goes much bigger. In fact, Wall Street analysts have been warning investors for the past couple of years that increased legalization is going to rock their portfolios for years to come.
“We believe alcohol could be under pressure for the next decade, based on our data analysis covering 80 years of alcohol and 35 years of cannabis incidence in the U.S.,” Cowen & Company analyst Vivien Azer wrote in a letter to clients. “Since 1980, we have seen three distinct substitution cycles between alcohol and cannabis; we are entering another cycle.”
It really comes down to price when it comes to predicting just how large Canada’s recreational pot trade will be compared to its black market. Some data published earlier this year shows that some Canadians are getting weed for as little as $7 a gram. So, obviously, if retail pricing gets out of hand, more consumers will continue to buy weed through illegal channels.
“Retailers who think $20 a gram cannabis is attainable will quickly find consumers walking out of their stores, pulling out their phones, and DM-ing their previous dealer to see if they can still get that deal on Bruce Banner at $8 a gram,” the report reads.
Some predictions show that Canada’s recreational marijuana industry could be an $8 billion market right out of the gate. But no one really knows exactly when prohibition will end. Some lawmakers have been trying to stall the necessary legislation for another year, but Prime Minister Justin Trudeau says that’s not going to happen.
Last week, Trudeau told reporters that “we have been working with our partners across the country to make this happen and we are going to be moving forward this summer on the legalization of cannabis.”
If this is true, it looks like Canadians will be toking legal style in a matter of months.
TELL US, do you spend more on cannabis than alcohol?