Significant growth, uncertainty for licensed producers, and a 30% increase in average annual cannabis spend are all in store for Canada’s cannabis industry.
Six months post-legalization, Ernst & Young is predicting what Canada’s cannabis sector will look like in 2025. One in five adults are expected to be cannabis users by 2025. Consumers are projected to spend an average of $1,625 on recreational and medical cannabis products annually – up by 30% from $1,263 in 2019.
Zachary Pendley, EY Canada Cannabis Real Estate and Valuation Leader explains why: “The reality is that retail and distribution frameworks across Canada have been implemented much slower than anticipated, pushing many consumers to look for alternatives. As the industry matures, access to product eases, and higher margin derivatives come online, we’ll see a rise in consumer spending on legal cannabis.”
Because of this, EY also expects the Canadian direct cannabis market will grow by over 50% in 2025 to $11 billion.
While dried flower is most popular among consumers now, EY says that consumer spending will eventually be split between dried flower and extracts, with a small percentage to edibles and non-edible derivatives.
However, with rapid growth comes greater challenges, increased competition, and rising capital costs for producers. EY suggests strategic joint ventures and partnerships in new markets will be critical for success.
Download the full Defining the Cannabis Sector in Canada by 2025 analysis here.
Photo courtesy of Matteo Papanelli.