When Canada legalised recreational weed a few years back, green fever took off across the country, but it looks like the business has not turned out the way everyone expected.
Legalisation failing in Canada? A surplus of 1.1 billion grams left unsold
All that glitters is not gold. It looks like the legalisation plan in Canada is turning out to be a dud: three years have gone by since weed was legalised in the North American country and the numbers do not look promising. Just like with the gold rush of 1850, the good news disappeared fast: today 75% of consumers in Canada buy on the black market.
Wholesale weed prices have crashed by 17%, which has kept profit margins very low, and the ones who have mainly paid for it are the growers. According to Statistics Canada, the country's official statistics agency, sales have slowed down, and the domino effect did not take long to arrive: the share prices of listed cannabis companies keep swinging up and down.
When legalisation came in, back in October 2018, the main problem was that there was not enough supply to meet demand. Canada was kicking off its legalisation process and the picture was pretty grim: huge queues, backlogged orders in the online shops and a lot of frustrated customers.
Those problems, together with growers not being sure which strains would be the most popular and a poorly structured distribution chain, are what set off the current situation. Canadians got tired of queueing at the grow shops, carried on buying weed on the black market and the rest is history.
In September, Canadians bought 11,707 kilos of buds. But the growers had around 165,000 kilos of product ready to be sold.
Some authoritative voices, such as Rade Kovacevic, president of Canopy Growth, argue that "the lack of points of sale across the country slowed down the transition from the black market to the legal market". "There is very strong resistance to legal shops because it is more expensive and there are not enough shops", says Robin Ellis, co-founder of the retailer The Friendly Stranger, in Toronto.
The retail price of legal cannabis went up from 7.49 to 8.16 dollars a gram in July 2019, according to Statistics Canada. At the same time, the illegal price fell from 4.99 to 4.54 dollars. That, together with the long queues and the waiting times at the dispensaries, has kept Canadians scoring on the street.
One curious point is that, contrary to what the detractors of the law thought, legalising weed did not significantly increase the number of consumers.
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