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Legal Cannabis Outsells Ontario Illicit Market for First Time

Sales of legal cannabis outpaced the illicit market in Ontario for the first time ever during the second quarter of this year, according to new data from the province’s only licensed online cannabis retailer. 

“Ontarians chose to purchase more than half of their cannabis through legal channels, as Ontario’s legal market share increased to 54.2 percent, up from 47.1 percent the previous quarter,” the Ontario Cannabis Store (OCS), which is also the province’s sole licensed cannabis wholesaler, wrote in its latest quarterly report.

This figure was based upon data from Statistics Canada that Statistics Canada collected from consumers who reported purchases of cannabis from licensed sources. Jennawae McLean (co-founder) of Calyx + Trichomes cannabis dispensary chain in Kingston, Ontario, stated that this number was possible.

“When it comes to the unregulated market, (sales) are a difficult number to pinpoint, but assuming the reporting is true, it’s not hard to believe,” said McLean. “The number of stores in Ontario has grown exponentially over the last… two years. It’s really just completely exploded.”

Over the last few months, Ontario’s number of cannabis retail licenses has risen to 1,115. Last year there were only 183 licensed dispensaries and 53 of them were operating two years ago.

Between July and September, licensed cannabis retailers sold nearly 394million Canadian dollars (CA$306.7 million), compared with CA$204.3 millions in the previous year. A record 56,000,000 grams of cannabis was sold in the third quarter across all product categories. The majority, or 96 percent of all sales were made by brick-and mortar dispensaries. Online sales make up the rest.

In Canada, licensed marijuana retailers made up only 5.4 percent in the recreational cannabis market. By the end of 2019 licensed retailers’ share of the market had risen to 19 percent, and by the end of 2020, it totaled 44.1 percent. Sales of regulated cannabis in Ontario, Canada’s most populous province, were the nation’s highest, according to the report.

“Ontario continued to sell more legal cannabis than any other province or territory, with nearly 39 percent of all legal cannabis sales in Canada occurring through the province’s licensed retailers and online store,” the report noted. “A record 56 million grams of cannabis across all product categories was sold this quarter with sales reaching nearly $394M, resulting in a 28 percent increase in sales compared to the first quarter of the fiscal year.”

McLean credited the regulated cannabis industry’s success in Ontario in part to the large selection offered by retailers compared to the illicit market. During the second quarter of 2018, more than 1,800 products licensed in the province, with nearly 400 added recently by OCS. Pre-rolls, dried flower and vapes are the most sought after product types.

“Yesterday I was working at one of my stores and I had this guy come in, and he was overwhelmed with the size of our menu, which, to be fair, is 27 pages long,” McLean told The Canadian Press. “He had no idea where to even start and he said that was because since he started smoking cannabis, he got it from a guy and didn’t know what it was or what was available.”

Lori Hatcher is the marketing head for Truss Beverage Co. A joint venture between Molson Coors Canada brewer and Hexo Corp. cannabis company, Truss Beverage Co. said cannabis beverages helped to drive sales through legal channels in Ontario. 

“This is a category that doesn’t really exist in illicit, so it was really important to actually help bring those consumers into the legal market,” Hatcher said.