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Cannabis Spending Nears $6 billion in Second Quarter

Cannabis products were in high demand in the second quarter.

Less than a month away from when recreational cannabis is officially legalized for use and sell purposes in Canada, dispensaries are hard at work developing custom durable labels, in addition to blank labels, that distinguish the recreational variety from the medicinal.

A new report suggests that their preparatory work won’t be done in vain, as spending on cannabis was substantial during the second quarter.

Based on estimates from Statistics Canada, proceeds on cannabis purchases reached $5.7 billion between April 1 and and June 30, The Canadian Press reported. That’s a 1.2 per cent increase on an annualized basis compared to the corresponding three-month period a year earlier.

Given that recreational cannabis use isn’t yet legal in Canada – although it will be nationwide come Oct. 17 – the vast majority of the purchases were contraband, 85 per cent of it, StatsCan reported. That’s down from 98 per cent in during the same quarter in 2014.

The uptick in spending comes as good news for suppliers and dispensaries, as some prognosticators contend that demand for cannabis won’t be as plentiful as investors suspect. The Parliamentary Budget Office predicts demand will reach 734,000 kilograms by 2021. Producers are capable of developing much more than that, perhaps as much as 1.8 million kilograms as soon as 2020, the Ottawa Citizen reported.

But as archived figures from Statistics Canada show, cannabis spending has risen at a 1 per cent average rate every quarter for more than three years, meaning the 1.2 per cent increase in the second quarter was roughly on par with what’s been typical.

Medical Marijuana Sales Up Three Fold From 2016

Although retailers are preparing barcode labels for the expected increase in recreational cannabis purchases, medical labels are getting plenty of use as well. Consumption of cannabis for pharmaceutical purposes has more than tripled over the past 24 months, according to Statistics Canada, boosting profits for business owners.

Canada’s economy is expected to get a shot in the arm as well when Oct. 17 rolls around, based on estimates from Toronto-Dominion Bank. Indeed, the legalization of cannabis for all purposes could tack $8 billion on to the country’s economy, Bloomberg reported.

What dispensaries will charge for their cannabis – affecting their labeling strategy – may largely depend on where they’re located. With demand highest in the territories, it’s little surprise that the Northwest Territories charge approximately $11.89 per gram, based on data obtained by CBC News. The average prices in Nunavut and Yukon are $10.24 and $7.91 per gram, respectively, with Newfoundland and Labrador charging the most among the provinces at $7.87. Quebec sells at $5.89 per gram, nearly a dollar less than the nationwide average.

New Brunswick and Quebec are the only two provinces where cannabis sells for less than the nationwide average, which is $6.79.

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