Demand for recreational marijuana in Canada will be “much stronger than expected“ – researcher

(FinancialPress) — Expectations set by industry officials operating in the recreational marijuana sector may be well below the real level of demand that will be reached, as per a report received by Health Canada.
Demand that the market is not properly bracing for could have repercussions all through the supply chain.
For example, cultivators could see a spike in sales if they can get ahold a share of the expanded market.
Retailers could find themselves in a tight spot, if the public expects them to move more product than the limited amount of government-run stores could handle. Quebec aims to have 15 provincial-owned stores operating by next summer – Ontario guns for 40.
Alcohol companies would find themselves facing stiffer opposition than expected in this scenario.
Miles Light, partner and co-founder of the Marijuana Policy Group — a firm specialized in analysis-based investment and policy advice — foresees that demand for unprocessed marijuana could be well over 992 tons in 2018.
The two most-cited estimates are Deloitte‘s 600,000 kg estimate for 2016, and 650,000 kilograms projected by the Parliamentary Budget Officer. The MPG‘s estimate stands at 40% higher than both.

 

While the commissioned study has not been published by Health Canada yet, Light did reveal some insights from it during November‘s MJBizCon, ran by Marijuana Business Daily.

“The difference between the (Parliamentary Budget Officer) estimate and us is that they used a survey from 2012 and we used a survey from 2017,” Light said. “The difference in these surveys is that very few people reported heavy use in the 2012 survey – only 12%.

“In (the 2017) survey, it’s double that – about a quarter of users are heavy users, and we also had a higher prevalence rate, so more people consuming.”

A phenomena observed in other markets where marijuana has been legalized – a small percentage of users accounting for a large by-demand share of the demand – is likely to be replicated in Canada – where MPG estimates that 25% of consumers will make up 80% of the total market demand.

As in other legal markets, a small share of heavier users accounts for most of the demand (by weight). In Canada, about 25% of users will account for 80% of recreational marijuana demand, according to MPG’s estimates.

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