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Market Update for a Budding Industry

Canada’s adult-use cannabis market grew 118% in 2020, a trend that is expected to continue into 2021 and beyond, according to the Brightfield Group. In its March 2021 Cannabis Market Update, the research group outlined the factors leading, or impeding, the growth of Canada’s newest industry.

Retail Openings

Despite the issues caused by a global pandemic, 2020 was a year of expansion for retailers all across the country. Most provinces saw a surge in cannabis stores, which, on top of mounting curiosity from a bored, stressed-out public, contributed greatly to the growth of the market.

Since April 2020, the Alcohol and Gaming Commission of Ontario (AGCO) has increased its monthly output of licenses three times, now up to 30 approvals per week to try to keep up with applications. At the time, Ontario had around 145 stores, but now, there are over 565.

In October 2020, Alberta, which had 534 stores at the time, removed its market cap that had previously restricted retailers to up to 37 stores each. Over 50 new stores have opened in the province since.

Other provinces were hard at work adding access points as well. According to the report, between early 2020 and early 2021, British Columbia added over 100 new stores, bringing the province’s store count from 233 to 323. The province is starting to relax some regulations and include First Nations communities and other craft growers to help the industry thrive, and some municipalities, like West Vancouver, are changing their minds about retail.

M&A Activity

Some of the biggest news in the industry during 2020 was the mergers and acquisitions as companies attempted to make their businesses more efficient and fill the gaps in their offerings. These purchases and partnerships happened on both sides of the border—2020 was the year of cannabis for our American friends, as well.

Canadian companies took advantage of the more advanced Cannabis 2.0 market in the United States, utilizing partnerships with already established brands to bring new products to Canada. Some of these partnerships include Indiva creating edibles with Bhang, Wana, Kin Slips, and Ruby Sugar; 48North producing Apothecanna topicals; and Dosecann creating Dosist vape products. Other partnerships to note are, of course, Canopy Growth and Martha Stewart’s CBD line, as well as Truss Beverages and Tilray that launched some products in the United States.

While trying to get their slice south of the border, cannabis companies in Canada swapped capital amongst themselves, as well. The merger of High Tide and Meta Cannabis Co. was the first major sale to take place, and since then Fire & Flower acquired Friendly Stranger and others, Tilray and Aphria combined to create the world’s largest cannabis company, and HEXO acquired Zenabis.

More Affordable Cannabis

According to the report, the price of adult-use cannabis dropped 10% between the third quarter of 2019 and the third quarter of 2020, making it much easier for the legal market to compete with illicit dealers. On top of that, cost-conscious daily users were finally able to buy flower in bulk—sometimes for as low as $3.50 per gram. This ability to get the same deal at the store as customers got from their dealer changed the top reported purchase channel from “friend” in Q1 2020 to “private retail store” by the end of the year. This also helped dried flower and pre-rolls keep their top spot as the most popular format for consumers, making up 68% of products purchased. While edibles are still having a hard time gaining a foothold in the market, beverages grew in popularity in 2020, making up 2% of purchases by December.

In 2020, the Canadian cannabis industry pulled in $2.06 billion, a 118% increase over the $1.19 billion the year before, and Brightfield Group predicts that it could reach over $4 billion in 2021, and maybe even nearly $9 billion by 2026.