By / February 23, 2024

Recreational Cannabis Sales in Canada Surpass $5 Billion in 2023

According to Canadian government data on cannabis sales in 2023, the sector experienced a notable increase, reaching 5.07 billion Canadian dollars ($3.5 billion euros) in adult-use cannabis retail sales, a rise of 12.2% compared to the previous year.

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Market Maturation and Slowing Cannabis Sales Growth Rate

As the Canadian cannabis market matures, it is experiencing a natural slowdown in growth rates, reflecting a period of stabilization after the initial surge following the legalization of adult-use cannabis in 2018. Brad Poulos, a professor of entrepreneurship at Metropolitan University of Toronto, noted to MJBiz that “the vast majority of legal cannabis sales growth comes from consumers transitioning from the illicit market.”

Despite the growth in legal cannabis sales, the illicit market still holds a significant share, estimated at about 40% by Mr. Poulos. Other projections place it at around 30%. Mr. Poulos believes that narrowing the gap between legal and illicit markets is largely due to the expansion of product formats and improved access to legal stores.

Product Preferences and Price Trends

Consumer preferences for cannabis have evolved, and notable changes have been observed in product categories. Pre-rolled joints, in particular, have seen exceptional growth, capturing 31.4% of total sales in 2023, almost on par with dried cannabis flowers.

Furthermore, while cannabis prices have decreased across most categories, the rate of price compression has slowed compared to previous years. This trend indicates a certain stabilization of the cannabis market, with pre-roll prices remaining stable due to strong demand.

Monthly sales data reveal fluctuations in consumer behavior and market dynamics. Despite a general decline in sales until December, monthly sales experienced a resurgence, reaching 441.2 million Canadian dollars, an increase of 3.6% year-over-year. Ontario was the main driver of this growth, with a notable increase of 19.3% in sales in December.

Persistent Industry Challenges Could Slow Cannabis Sales Growth

Despite overall growth, the Canadian cannabis industry continues to face significant challenges. High excise taxes and the persistent presence of the illicit market are major obstacles to the growth and viability of the legal market. Additionally, the sector anticipates a legislative review of legalization, with uncertain outcomes for producers and retailers.

Looking ahead, industry experts predict continued growth in cannabis sales in Canada, albeit at a more moderate pace. Poulos estimates a potential growth of 10% in 2024, mainly due to the continued transition of consumers from the illicit market and the expansion of legal cannabis stores in underserved areas such as Quebec.

(Featured image by GRAS GRÜN via Unsplash)

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