Legal Cannabis in Canada Costs 80% More Than Black Market Alternatives

Eight months after the legalization of cannabis in Canada, significant price disparities remain between legal and black market cannabis. The costs incurred by legal producers, such as licensing fees, labor, and facilities, are reflected in the higher prices for consumers. Consequently, many consumers continue to purchase cannabis from illegal dealers, who offer more competitive pricing

The average price for a gram of legal cannabis in Canada stands at $10.65, compared to $5.93 on the black market. David Clément, an advocate for consumer rights, attributes these inflated prices to the taxes and fees imposed on legal producers, alongside a lack of competition that prevents prices from decreasing gradually. He highlights the substantial financial burden of implementing cannabis regulations, which requires half a billion dollars over five years, leading to the imposition of fees and licenses on authorized producers to generate revenue

This price difference results in legal cannabis being approximately 80% more expensive than its illegal counterpart, with the black market still capturing 71% of consumer demand in 2019. However, projections suggest that this figure might drop to 37% by 2020. Consumers cite prohibitive prices as a primary reason for avoiding legal purchases, as noted by Jennifer McLeod Macey, vice president at Ipsos, who remarked that expectations for a shift in purchasing behavior post-legalization were unrealistic

Fiscal returns from the legal cannabis trade have fallen short of expectations, with only certain provinces like Alberta reporting better-than-expected revenue increases. In contrast, British Columbia and Ontario have had to revise their revenue forecasts downward by tens of millions of dollars. This discrepancy highlights the uneven financial impact of cannabis legalization across Canada

Looking forward, the Canadian government and legal cannabis producers face the challenge of making the legal market more attractive to consumers. This could involve reducing production costs, lowering prices, and increasing the availability of legal cannabis products. Such measures are essential for the legal market to compete effectively with the black market and to increase its share of consumer demand

Experts suggest that the Canadian cannabis industry must address these key issues to ensure its long-term viability and success. By improving accessibility and affordability, the legal market can gradually erode the dominance of illegal sales. The path forward involves strategic adjustments to pricing and supply chain efficiencies to align legal cannabis with consumer expectations and preferences