Canada’s push to legalize marijuana could be a “game changer” for the recreational pot industry with the potential to reach C$6 billion in sales by 2021.
The federal government is planning to legalize recreational marijuana in Canada by 2017 with sales likely to commence in 2018. A vast illicit market exists that if brought into legal channels could result in demand of about 400,000 kilograms (882,000 pounds) of cannabis in its first full year, Canaccord Genuity analysts Matt Bottomley and Neil Maruoka said Monday in a note.
If legalization occurs along expected timelines there will be about 3.8 million legal recreational users of marijuana across Canada by 2021, according to the note. Demand for medical cannabis is growing at a significant pace and by 2021, combined annual demand for medical and recreational cannabis will be about 575,000 kilograms, the report said.
“Recreational upside could be a game changer,” according to the note.
Canada’s Task Force on Marijuana Legalization and Regulation will deliver its report to the ministers of health, justice and public safety by the end of November, Radey Barrack, spokesman for MP Bill Blair, parliamentary secretary to the Minister of Justice and Attorney General of Canada, said in a Nov. 25 e-mail. The report will be released once the ministers have had a chance to review the recommendations, he said.
The illegal marijuana industry is estimated at C$7 billion per year and costs governments C$2.3 billion to enforce, according to the federal government.
The rigorous process of becoming a licensed producer of cannabis in Canada imposes significant barriers to entry and there will be a shortfall of supply in a legalized market in the short-term until production capacities catch up by 2020, according to Canaccord.
Copyright Bloomberg 2016
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