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Legal cannabis 57% more expensive than black market: Statistics Canada

(AP Photo/Mark Thiessen, File)

Black market cannabis continues to undercut Canada’s legal market by a wide margin, according to the latest crowdsourced price data released by Statistics Canada.

The federal agency found the underweight average price per gram of legally purchased dried cannabis has been $9.99 since legalization, compared to $6.37 per gram from illegal sources.

The purchase price from legal sources was on average 56.8 per cent higher than the purchase price from illegal sources, according to StatCan’s crowdsourced data released on Wednesday.

The price of the drug overall has increased by about 17 per cent post-recreational legalization to an average price of $8.02 per gram, up from $6.83 in 2018.

Nick Pateras, vice president of strategy at cannabis data firm Lift & Co. (LIFT.V)  said the premium for legal cannabis is “inadequately high.”

“This is why there are a number of consumers who will have to be convinced to return to the legal category. They came in to buy once, but then were discouraged enough by the prices that they’ve not returned,” he told Yahoo Canada Finance.

Customers at in-store government-licenced retailers paid $10.73 per gram on average, making this source category the most expensive.

“All customers, no matter the frequency of their use, were paying more for dried cannabis after legalization,” StatCan said in a news release.

“Infrequent consumers, or those who use a few times a year, were paying 27.2 per cent more per gram of dried cannabis, while more frequent users, or those who consume daily, were paying 14.8 per cent more since legalization.”

The figures released Wednesday compare to an average price of $9.70 from legal suppliers reported between recreational legalization on Oct. 17 and Dec. 31. That was 49 per cent more than the $6.51 for illegal purchases.

Pateras said Canadian consumers will always pay a premium for legal, safe and tested products purchased though authorized channels. He said U.S. market studies have shown consumers are willing to pay a 20 per cent premium for the same product if they know it is legal versus illegal.

Pateras said black market prices fall well beneath legal sales due in part to the fact that illegal buyers tend purchase in large quantities that cannot be sold legally in Canada.

The legal market, on the other hand, often deals in small quantities like individual grams and pre-rolled joints.

“I just bought a half-gram pre-roll (joint) from the Hunny Pot (a downtown Toronto retail store) yesterday. Dollars-per-gram, it worked out to about $19 for a 0.5 gram joint,” Patreas said. “On the black market, I know friends who will easily buy a full ounce or several ounces, and get a volume discount.”

The good news for Canadian buyers is he doesn’t expect prices to continue climbing.

“Cannabis will never be as expensive as it is today again. We just need more facilities to get licensed,” Patreas said. “We need the supply chain to be sorted. It is going to take several quarters.”

(Yahoo Finance Canada, data from Statistics Canada)

New Brunswick, where prices were among the lowest in Canada prior to recreational legalization, saw the largest price increase since Oct. 17. The price per dried gram has climbed by 30.5 per cent to $8.27 per dried gram.

Meanwhile, prices in British Columbia have jumped just 3.7 per cent to $7.15 after recreational legalization.

StatCan has said caution should be used when interpreting crowdsourced findings, noting a limited and self-selected pool of data.

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