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Recreational Cannabis Prices Dropping

Despite the rising costs of goods, new figures from Statistics Canada show the Consumer Price Index (CPI) for recreational cannabis has dropped from March 2022 to March 2023, while the CPI for medical cannabis has seen a sudden increase.

The CPI is reported with a base year index value of 100. It measures price change by comparing, through time, the cost of a fixed basket of goods and services.

Recreational Cannabis CPI

Products March 2022 February 2023 March 2023 February 2023 to March 2023 March 2022 to March 2023
Alcoholic beverages, tobacco products, and recreational cannabis 179.3 187.3 189.0 0.9 5.4
Recreational cannabis 75.8 73.7 74.0 0.4 -2.4

Source: Statistics Canada

In March 2022, the CPI for recreational cannabis in Canada was 75.8. This dropped by 2.4% to 74.0 in March 2023.

Medical Cannabis CPI

Products March 2022 February 2023 March 2023 February 2023 to March 2023 March 2022 to March 2023
Medicinal cannabis 73.1 81.1 81.0 -0.1 10.8

Source: Statistics Canada

In March 2022, the CPI for medical cannabis was 73.1. This increased by 10.8% to 81.0 in March 2023.

CPI Declining Since Legalization

The CPI for recreational cannabis has been declining since legalization. It was first reported in February 2019 at 100. It dropped by 10.8% to 89.2 in March 2020. This was followed by a drop of 7.3% to 82.7 in March 2021 and a subsequent drop of 8.3% to 75.8 in March 2022.

The CPI for medical cannabis had also been declining until this new increase in March 2023. It was first reported in February 2019 at 99.5. It dropped by 8.0% to 91.5 in March 2020. This was followed by a drop of 11% to 81.4 in March 2021 and another drop of 10.2% to 73.1 in March 2022.

Reasons Behind Fluctuations

George Smitherman, President and CEO of the Cannabis Council of Canada, says there are different influences behind the CPI for recreational cannabis declining versus the CPI for medical cannabis increasing.

“Retail cannabis has been significantly commoditized and seen extraordinary price degradation,” Smitherman says. “It is sold, distributed, and handled in volume. Medical cannabis is exactly the other way around. It starts with a referral from a medical practitioner and requires personalized support, individual paper and handling, and individualized shipping costs.”

The cannabis industry is very competitive and can be a difficult environment for most businesses. When asked how the declining CPI could impact retailers, Smitherman says, “The price compression means that if you’re working on a percentage basis, you might serve as many customers as before, but have less revenue.”

He goes onto explain, “When we look at the growth of cannabis retail data month over month, it has pretty much grown and grown, with the exception of the last few months. That growth has been occurring while the average price per gram has been rapidly declining. This disguised the volume of increase in sales that was out there. This can lead to lower margins if not lower earnings per package.”

On the positive side, Smitherman said these changes also mean the legal market is becoming more competitive than the illicit market.

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