Will Canada Be Able To Supply The Legal Demand?

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All across the country everyone wondering how the legal Canadian producers will fill what is expected to be an enormous demand. After the state of Nevada famously ran out of recreational cannabis in less than two weeks of running a recreational program, many are questioning how the current licensed producers will be able to support the inevitable demand. The latest perspective implies that if there is an issue with supply, it will be due to distribution, not due to the lack of cannabis available.

 

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Currently, Health Canada has approved 80 licensed cannabis producers while hundreds continue waiting for their verdict. A previous forecast from the investment firm Mackie Research Capital predicted a demand of almost 800,000 kg in 2018. The issue is that producers are currently set to cap out their production in 2017 at 100,000 kg, which doesn’t even begin to support those estimates. This firm believes that supply won’t be able to catch up with demand until the year 2020. If recreational cannabis isn’t available at legal stores, it will fuel a thriving black market, which is the opposite effect that regulators were hoping for – however, this is just one opinion of course.

Recently, VICE Money interviewed Miles Light, co-founder of Marijuana Policy Group (MPG), whose opinion seems to differ from the aforementioned estimates. The Denver-based research economist gives advice on cannabis-specific policy to both varying governing bodies and the private sector. He was also hired by Health Canada this year to analyze the efficacy of proposed regulations.

 

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Light believes that the current infrastructure will support around 40% of the recreational users, with 10% of users growing their own. That leaves 50% of the recreational users going to the black market, a vast improvement from those that would need to go to the black market after a complete shortage. The reality is that it is virtually impossible to completely eliminate the black market in one move, it will be a process. In the state of Colorado, the legal market captured 65% of recreational users from the black market. But when Washington State first came on-line their recreational program only captured 18% of recreational users. Why the difference? Light says that it is due to availability and price between the legal and black markets.

The real issue will be in how Canadians get their cannabis. If the stores in each province are stocked and easily accessible, the recreational market should capture a good number of cannabis users from the black market. However, if provinces like Ontario and New Brunswick – who have chosen to only allow government operated dispensaries – can’t support their populace, it could lead to a thriving black market.

These new models and predictions show that although the industry is already picking up, there is still work a lot of work and growth that needs to take place prior to legalization.

December 13, 2017

by Cara Wietstock

Profile photo of Cara Wietstock
Cara began working in the retail cannabis industry of San Francisco, CA in 2011 and continued in that sector for years. In 2015 she put down her budtender hat and dedicated herself to writing full-time. Her passion for the written word and deep respect for the healing properties of the cannabis plant fuel the passion in her posts.

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