‘I’m stunned’: Deloitte says legal recreational pot could produce up to $4.3B in sales
OTTAWA -- Canadians who currently use cannabis expect to buy nearly two-thirds of their pot from legal retailers once recreational marijuana becomes legal in Canada, a new survey suggests.
Moreover, respondents to the survey say they expect to buy cannabis more often and are prepared to pay more for the legal product, generating up to $4.34 billion in total sales next year.
"I'm stunned at the size of the market," said Paul Taylor, chief investment officer, asset allocation, at BMO Global Asset Management, in an interview with BNN Bloomberg Tuesday. "Is the market ahead of itself, or is it the right size for what the addressable market will be?"
The findings were drawn from an online survey of 1,500 Canadians, conducted by Asking Canadians from March 6-20.
It was commissioned by accounting giant Deloitte, which provides audit, consulting, financial advisory, risk management and tax services for its clients.
"What is certain is that legalization will open the doors to a dynamic and sophisticated industry that will create new jobs, new opportunities for businesses and new revenue for government," Deloitte concludes in a report on the survey.
"Executed well, legalization will also help shift a considerable proportion of cannabis consumption to legal channels in the years to come."
The Trudeau government intends to have retail sales of cannabis up and running by late summer, assuming the legalization bill is passed by the Senate in a vote scheduled for June 7.
Overall, the survey suggests 63 per cent of respondents expect to move from illegal suppliers to legal retailers. That includes 47 per cent of frequent users and 69 per cent of periodic users.
"Legalization alone won't persuade most current cannabis consumers to completely abandon their existing suppliers," the report says. "But our research suggests the right mix of quality, price and safety could just do the trick."
Among the things that would persuade current users to switch to legal retailers, 55 per cent of respondents cited better quality products, 54 per cent cited a range of prices, 47 per cent cited products with a range of potency and 41 per cent cited products certified to be safe.
Based on the survey, Deloitte says the current average price for illegal cannabis is $8.24 per gram. Respondents said they're willing to pay a bit more -- an average of $8.98 per gram -- for legal weed.
Current consumers said the price would have to rise to almost $14 per gram before they'd stop buying while respondents who said they're likely to become consumers once cannabis is legalized said they'd stop buying at about $11 per gram.
"Being responsive to consumers' price sensitivities is essential if producers, manufacturers and retailers are to be successful -- and if governments are going to persuade a rising number of Canadians to purchase through legal retailers," the report concludes.
According to the survey, frequent users expect to make 22 per cent more purchases of cannabis under the legalized regime, although they expect to spend about the same each month as they do now -- just less than $100.
However, respondents who are currently infrequent users expect their purchases to rise by 121 per cent, with their total spending increasing by almost 70 per cent to roughly $28 every three months.
While Canadians may purchase cannabis more often, the survey suggests they still won't necessarily indulge all that often: 41 per cent of cannabis consumers said they'll use it less than once a month. Just 20 per cent said they'll use it every day -- unchanged from current usage.
- With files from BNN Bloomberg