In a bold projection, Ernst & Young (EY) anticipates that one-in-five Canadians will embrace cannabis by 2025. This optimistic outlook reflects the nascent industry’s potential for growth. Let’s delve into the details.
The Canadian Cannabis Market: A Rosy Future
EY forecasts a robust expansion, estimating that the Canadian cannabis market will surge by approximately 50% to reach $11 billion within six years. This growth hinges on several factors, including increased consumer spending and the emergence of higher-margin derivatives.
The Black Market Conundrum
Despite legalization, the black market continues to dominate cannabis spending. In the fourth quarter of 2019, Canadian households spent a staggering $5.9 billion on cannabis, with $4.7 billion flowing outside the legal system. Slow retail and distribution frameworks have driven consumers toward illicit alternatives.
Supply and Demand Dynamics
EY predicts that supply will eventually outstrip demand, especially if planned facility expansions materialize. With over 14 million square feet of expansions underway, competition will intensify, leading to lower commodity prices. By 2025, the average wholesale price for dried flower is expected to range between $4 and $5.
The Road Ahead
As the industry matures, legal cannabis accessibility improves, and innovative products hit the market, consumer spending will rise. EY’s bullish valuation underscores the sector’s potential, but challenges remain. Ottawa’s commitment to diverting funds from the black market remains critical for a thriving legal cannabis landscape.
