Recreational marijuana usage will officially be legal in Canada in just 8 days, but demand may well outstrip supply as the industry shifts away from the black market to legal storefronts.
The new regulations that arrive with legalization will force drastic changes in existing dispensaries, with many expected to actually close by Oct. 17 while owners attempt to comply with the Cannabis Act.
News outlet CP24 obtained an upcoming analysis from the C.D. Howe Institute – an independent not-for-profit research think tank – indicating that legal supply won’t be able to keep pace with demand anytime soon.
According to the CP24 report, at current production levels, legal dispensaries will only be able to meet between 30 to 60% of demand across the nation.
University of Waterloo economics professor Anindya Sen and C.D. Howe analyst Rosalie Wyonch issued this statement: “The important policy conclusion is that there will not be enough legal supply, especially during the first half of the year following legalization, primarily because of the slow rate of licensing producers.”
Legal supply will eventually meet demand as licensing issues are dealt with in each individual city and province. The short-term lack of legal supply will have consequences for the industry, however, as noted by Wyonch:
“Our results show that both pricing and supply shortages will contribute to maintaining the black market, resulting in lost tax revenues and a continued need to spend significant resources on law enforcement activities related to the market.”
A previous memo from C.D. Howe particularly stressed the importance of luring customers away from black market connections and over to licensed storefronts:
“Minimization of the black market should be the first priority of government at the outset of legalization, as its continued existence will only serve to undermine efforts to control and regulate the substance to the detriment of public health goals.”
That same memo concluded that setting minimum age requirements above 19 – such as the CAQ’s proposed bill to raise the minimum smoking age in Quebec to 21 – will also interfere with efforts to move the cannabis industry fully away from the black market.
Wyonch wrote in the memo: “Setting a prohibitively high minimum age will only maintain the black market, as a large portion of consumers would not have access to legal supply.”