Given the extensive levels of boredom and stress we are all experiencing during this pandemic, it comes as no surprise that people are resorting to recreational substances to stave off the monotony. As a result, the Canadian marijuana industry is facing an unprecedented boom despite the collapse of many other industries.
The Canadian Cannabis Index is clearly reflective of this. After hitting a record low in March 2020, legal cannabis bounced back in an unprecedented manner compared to most industries. Following a 52-week low of 85.13 on March 18, the Index soared to 263.32 in a span of just two months. Since then, the price has remained relatively steady and hit a 52-week high of 274.22 on January 18, 2021. Experts attribute this sudden rise in Cannabis stocks to the extended lockdown caused by the pandemic.
“Because people are spending more time at home, they’re perhaps more comfortable with consuming cannabis,” said Terry Kulaga, the founder of Weed Me, a legal cannabis production company based in Pickering, Ont.
“As people work from home, they probably have more time to actually consume cannabis"
However, the uptick in legal marijuana sales is still surprising, as legal cannabis initially had trouble competing with the black market for revenue. So aside from being forced to stay at home, what factors have contributed to the vast majority of Canadians ditching the black market for legal cannabis?
There are a few reasons for this sudden shift. Firstly, increased accessibility and growing efficiency is making legal prices much more competitive. At the outset of marijuana legalization in Canada, legal market prices were significantly higher per gram on average compared to the black market. Since the pandemic hit, the tables have turned. Legal cannabis now sells for an average of $7 per gram, while black market cannabis sells for an average of $8 per gram.
In addition, increased competition has subsequently increased the quality of legal marijuana.
“(When) the legal market came on prices were quite high,” said Kulaga. “People had complained about not only the price but the quality (too), and what we’re seeing is as more growers come on you’re getting a better product and you’re getting more product. As a result, we’re now seeing some economies of scale.”
Finally, there is the health and safety aspect brought on by the pandemic. More and more people have become uncomfortable meeting their black market dealers when it is potentially unsafe and could require breaking covid protocols. Alternatively, government regulated stores have government mandated safety protocols in place, making it a much more comfortable purchasing environment during this time.
So far, the pandemic has been the great equalizer for the Canadian legal cannabis market. Increased accessibility and product quality along with decreased prices have led to unprecedented prosperity for the legal market. Revenue is all about the product, and now that legal products are better and safer than most black market alternatives, it seems that many cannabis users will stick to legal cannabis for good.
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