Cannabis Market in North America

Legal cannabis sales reached $9.2 billion in North America in 2017, according to a new report from cannabis industry analysts Arcview Market Research, in partnership with BDS Analytics. That represents an unprecedented 33% increase over 2016. New cannabis industry report also predicts the entire legal cannabis market to reach $24.5 billion in sales – a 28% annual growth rate by 2021.

The industry employed 121,000 people in 2017. If cannabis continues its growth trajectory, the number of workers in that field could reach 292,000 by 2021, according to BDS Analytics.

Statistics

Canadian cannabis market has been steadily growing. The country has seen an average of a 10 percent increase each month in the number of Canadian patients signed up to receive medical cannabis. The sale of dried cannabis has grown steadily at 6 percent a month, and the sale of cannabis oil has been growing by 16 percent a month.

In 2017, about 4.9 million Canadians aged 15 to 64 spent an estimated $5.7 billion on cannabis for medical and non-medical purposes. This was equivalent to around $1,200 per cannabis consumer.

Canadian Cannabis Market Forecast

The federal government legalized recreational cannabis on October 17th, 2018 and projects that 450,000 customers a day would participate in Canadians cannabis market, making recreational cannabis in Canada a $900 million industry. The initial market demand would be 100,000 kg. The Canadian marijuana market also is expected to see rapid growth, with the number of cannabis users growing by more than a half million people within the first three years of legal cannabis sales in the country. It’s expected that 98 percent of all cannabis sales would come from Canadians who would consumer cannabis at least once per week, if not daily.

Leading cannabis industry researchers, ArcView Market Research expect Canada’s thriving medical market to peak in 2018 and start to descend in 2019 once the adult-use market is fully operational. Growth is forecast to be strong, with adult-use spending estimated to reach over $3 billion in 2021, driving a CAGR of 77.9% from 2018-2021.

Cannabis industry analysts predict that Canada’s cannabis industry ultimately would total between $4.9 and $8.7 billion Canadian. If the market meets prediction, Canada’s legal cannabis market would be comparable in size to its hard liquor or wine market.

The cannabis market is poised to have a major effect overall on Canada’s economy. One study from Deloitte Private pegged the potential economic impact of legalized recreational marijuana in Canada at more than $22 billion, including transportation, licensing fees and security.

According to the CIBC analysts forecast, by 2020, the cannabis industry will have a retail value of $6.8 billion, larger than the hard liquor market and almost as large as the wine market.

Within two years the cannabis industry will be making about $1 billion in earnings before interest, taxation, depreciation and amortization (EBITDA, a measure of operating profit), CIBC predicted.

But the provinces stand to make around $3 billion in income a year, both in profit from the retail outlets some provinces will be running, as well as from taxes levied on cannabis.

Fees and Taxes

Cost recovery for the regulation of cannabis includes four fees:

  • Application screening fee: recovers the costs associated with screening new licence applications ($3,277 for standard licence applicants and $1,638 for micro and nursery licence applicants);
  • Security clearance fee: recovers the costs associated with screening, processing, and issuing or refusing security clearances ($1,654);
  • Import/export permit fee: recovers the costs associated with screening, processing, and issuing or refusing to issue an import or export permit for medical or scientific purposes ($610); and,
  • Annual regulatory fee: recovers the aggregate costs of administering the cannabis regulatory program that are not covered under any of the other fees (2.3% of cannabis revenue for standard licence holders, or $23,000 if cannabis revenue is less than $1 million, and 1% on the first $1 million of cannabis revenue for micro and nursery licence holders or $2,500 in cases where cannabis revenue is less than $250,000).
  • Licence holders who produce cannabis exclusively for medical purposes are exempt from the annual regulatory fee.

Taxes

The federal excise duty rate will be 25 cents per gram of cannabis, or 2.5 per cent of the producer’s sale price of that product. An additional rate will apply for an agreeing province or territory.

Rates of cannabis duty and additional cannabis duty
Cannabis product Flat‑rate cannabis duty Ad valorem cannabis duty Flat‑rate additional cannabis duty Ad valorem additional cannabis duty
Flowering material included in the cannabis product or used in the production of the cannabis product $0.25 per gram 2.5% of the dutiable amount for the cannabis product $0.75 per gram 7.5% of the dutiable amount for the cannabis product
Non‑flowering material included in the cannabis product or used in the production of the cannabis product (this includes flowering material that is industrial hemp by‑product) $0.075 per gram 2.5% of the dutiable amount for the cannabis product $0.225 per gram 7.5% of the dutiable amount for the cannabis product

The adjustment rates for the additional cannabis duty required when packaged and stamped cannabis products are delivered to a purchaser in a listed specified province are the following:

  • Alberta, 16.8%;
  • Nunavut, 19.3%;
  • Ontario, 3.9%;
  • Saskatchewan, 6.45%.

It is important to note that excise duties are not paid directly by consumers. Rather, they are paid by manufacturers.

Cannabis legalization in Canada.

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