Data released by Statistics Canada last week shows that after recreational cannabis was legalized in Canada on October 17, 2018, the price of legal marijuana increased by approximately 17 percent.
However, the Canadians who are buying pot from the licensed suppliers are paying about 57 percent more for the product when compared to those who are getting their weed from the black market.
Statistics Canada (StatsCan) arrived at these figures after collecting data from residents who were asked to volunteer information without any fear that they would be victimized for revealing their cannabis buying habits.
This creative approach helped StatsCan to get badly needed information about not just the legal cannabis market but most importantly the illegal market.
19,433 people volunteered information about their purchase of cannabis on the black market before recreational marijuana became legal in the country. The responses show that Canadians paid approximately $6.85 for each gram of cannabis on the black market.
After legalization, the average cost of a gram of marijuana increased to about $8.04. This is an increase of about 17.3 percent.
However, Statistics Canada cautions that their findings should not be wholly relied upon even if they cleaned the data and remained with only 936 responses from those that came in from the volunteers.
The Canadian official data collection agency says that the information could still suffer from statistical bias due to the limited number of responses and also because the responses were self-reported.
Smaller provinces and territories were particularly noted for the limited number of responses submitted. For example, just a handful of responses came in from Nunavut. In contrast, a disproportionately high number of responses were submitted from Quebec and Ontario.
Nevertheless, the data collected paints a believable picture of the Canadian marijuana industry. For example, the post-legalization average price of $8.04 for each gram of cannabis based on the data collected is a true reflection of the average cost of cannabis on the legal market and the black market combined.
Most importantly, the statistics show that the cannabis on the black market isn’t just more affordable, but its price is dropping fast. The data shows that the illegal weed cost $6.79 before marijuana legalization and it has now dropped to $6.37 a gram.
The data also shows that government-run marijuana retail stores were the most expensive with the average price being $10.73 for a gram of weed.
233 of the respondents admitted that they have continued to buy marijuana from the black market because the price of the legal stuff is too high for them. This provides some food for thought for the regulated marijuana market since the black market will continue to thrive if prices don’t reach affordable levels. U.S. states where recreational marijuana is legal can also learn from these findings and do some introspection about how to bring down the cost of cannabis on the regulated market.
Net Element, Inc. (NASDAQ: NETE) and Phivida Holdings Inc. (CSE: VIDA) (OTCQX: PHVAF) advise the cannabis industry to analyze the findings of Statistics Canada and use the information to make decisions that will take the legal cannabis industry forward.
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