Why the demand for illegal cannabis is still rising in Canada

The demand for illegal cannabis is still on the rise despite widespread legalisation of the drug across Canada, according to a recent report by CBC.

Some 60 per cent of Canadians are continuing to purchase weed on the black market or from illegal sources, one year on from the legalisation of recreation cannabis in the country.

The shocking news details how Canadians are still more likely to purchase cannabis from illegal drug dealers as opposed to legal dispensaries.

The black market remains a $4 billion-a-year industry, despite the amount of sales from illegal products decreasing since October last year.

There are a number of reasons as to why this may be the case, the first and most important of which is the price. Illegal cannabis dealers don’t have to pay for licenses or regulatory approval, where as legitimate firms are forced to spend millions in order to abide by regulatory standards.

In the province of New Brunswick, Jay LeBourque runs a lounge where he sells cannabis in spite of the fact that he disagrees with the practices of the government-operated stores, which often sell high priced weed of a weaker-strength product.

Gift to customers

LeBourque has admitted that he doesn’t grow his own cannabis but chooses to buy it from someone who produces it illegally, and goes on to “gift” it to customers in exchange for buying a sticker at his lounge, from around $3 up to $30.

He gets around the law by offering the cannabis as a gift as opposed to a direct sale, stating that he’s “pushing it, yeah” adding “because I do not agree with it”.

Another reason is the lack of physical stores in Canada. In Ontario just 25 stores obtained licenses to sell cannabis in January of this year, a further 50 were added but it is still a relatively small number compared with the likes of California, where they are situated on almost every street.

Back in New Brunswick, the only government authorised retailer of recreational cannabis is Cannabis NB. It charges a premium price for the product, which consequently pushes potential customers back into the arms of illegal street dealers.

Earlier this year, Cannabis NB released its first 166 day sales report, which totalled at $18.6 million, a disappointing 58 percent lower than what the company had initially projected for itself before the stores were launched.

Lack of supply

A spokesperson from Cannabis NB insisted in a statement that “price point is not the driver of sales shortages – lack of supply is”. However, their website has more than 80 cannabis products listed, which suggests that stock remains plentiful, although the company has certainly suffered from national shortages in the past.

Price is still a big issue for potential customers of Cannabis NB, as the cheapest available product it sells currently is the dried bud from the company Plain Packaging which retails at $8.57 per gram and can only be purchased in seven gram packages totalling to $59.99, with a single gram being worth $1.20 more than the national average in Canada for legal cannabis. 

With Canada being at the forefront of the legalisation of cannabis, the product it produces is highly valued as an exported good, and is worth a high price from countries purchasing the Canadian-grown cannabis for medicinal products, if the government is then selling the same product to consumers in the country for the same high price as it’s being shipped out for, they could maybe look at balancing it out by demanding a lower price from citizens for the homegrown product.

There are hopes that the upcoming cannabis 2.0 legalisation movement, which will see edibles and food products sold in licensed environments, will help push people towards purchasing cannabis legally.

How law enforcement need to target the black market

As the black market in Canada continues to rage on, local law enforcement needs to ensure that illegal growing operations are still being sought out and shut down. In order to do this, a smart way would be to contact stores that sell lighting and growing equipment and ensuring that they are doing the correct checks on customers to guarantee they are selling to people with licenses.

Canada is one of the world’s largest cannabis producers, meaning there is also significant demand from countries abroad. Local customers and border force need to step up their game to ensure illegal cannabis doesn’t find its way to being exported out of the country as it will ultimately continue to fund illegal operations.

How can dispensaries tempt users to move towards the legal market?

Cannabis has a huge amount of medicinal properties but as a result of its illegal status over the past few decades education on the plant is simply not up to standard.

If a movement started to educate users on the potential benefits of cannabis, as well as the possible risks of unregulated and potentially tainted cannabis, it could encourage users to move towards dispensaries and away from the illegal nature of black market weed.

Another way of doing it would be to lower the prices. The average price of weed in Canadian dispensaries is currently around $7.37 per gram, which has actually lowered by 6.4% since the second quarter of 2018 when legal weed was priced at around $10.65, however these prices still can’t compete with the average street price of cannabis, which was last valued in the third quarter of last year at $5.59.

In order to incentivise users to utilise the legal dispensaries, the price should be dropped, which would even itself out to most likely bring in the same amount of profit, if not more once more customers flocked to the legal stores.

With the upcoming movement to allow for edibles, drinks and concentrates to be sold by legal cannabis retailers, companies could use this as a unique selling point as many black market dealers most often sell the flower version of weed.

This could mean that if companies prioritised the new wave of products and market them sufficiently, they could take back a large number of customers from the black market and transfer the profits into the hands of legal businesses, as edibles are predicted to contribute $1.6 billion to the cannabis market in Canada.