Soft-baked cookies from Aurora Cannabis Enterprises are photographed at the Ontario Cannabis Store in Toronto on Friday, January 3, 2020. The arrival of legal cannabis edibles, vapes and other products in Ontario won’t necessarily meet the government’s stated goal of cutting into the black market, according to industry observers. THE CANADIAN PRESS/ Tijana Martin

Soft-baked cookies from Aurora Cannabis Enterprises are photographed at the Ontario Cannabis Store in Toronto on Friday, January 3, 2020. The arrival of legal cannabis edibles, vapes and other products in Ontario won’t necessarily meet the government’s stated goal of cutting into the black market, according to industry observers. THE CANADIAN PRESS/ Tijana Martin

New cannabis products may not eat into black market, experts say

Experts say the legal products will have to differentiate themselves somehow

The arrival of legal cannabis edibles, vapes and other products in Ontario won’t necessarily meet the government’s stated goal of cutting into the black market, according to industry observers.

The Ontario Cannabis Store, the province’s pot distributor, has announced that a raft of new products is slated to start appearing in brick-and-mortar retailers on Monday and be available for online purchase 10 days later.

But those keeping an eye on Canada’s burgeoning cannabis industry said a combination of federal health regulations and Ontario’s own track record around product prices may fail to make the legal wares as enticing as alternatives still readily available through illicit channels.

“I know the OCS wants to move towards a thousand stores, but eventually you’re going to have to have a thousand people willing to participate in the legal market,” said Omar Khan, national cannabis sector lead with Hill+Knowlton Strategies. “They’ll only do that if they can be price-competitive with the illicit market.”

READ MORE: Cannabis cookies, vapes, beverages, creams arriving in B.C. stores

Edibles and comparable cannabis products became legal across the country in October, marking the second wave of the federal government’s legalization scheme launched the year before, but Monday will mark the first time such products are available for government-sanctioned purchase in Ontario.

The OCS said 59 new products, including a variety of vapes, edibles and a tea, will hit store shelves on Monday and be available for sale online effective Jan. 16. The province’s pot distributor said the number of products is expected to rise to 100 as they receive regulatory approval in the next few months.

But the OCS warned that supplies will be tight during the first few weeks of edible sales, echoing warnings that sounded across the country in the early days of legalization.

While industry observers said the supply crunch may have kept the black market thriving early on, they cite different potential hurdles facing Ontario this time around.

Khan said federal health regulations that limit the amount of cannabis contained in legal products will pose a likely barrier.

He said the rules currently limit consumers to a maximum purchase of 30 mg worth of products at a time and don’t allow any individual item to contain more than 10mg. The United States, by contrast, have allowed products to be sold in up to 100 mg packets in jurisdictions where cannabis has been legalized.

“This makes it more difficult to get regular consumers to shift away from the illicit market where ingestible products are readily available without these restrictions,” he said.

But Khan said a more formidable barrier comes from the way Ontario’s cannabis market has evolved, with the OCS acting as both an online retailer and wholesaler of all cannabis products.

The OCS has the power to purchase goods from their producers, set prices and distribute them to retailers, Khan said, noting such a system isn’t conducive to lower prices.

He cited the system in place in Saskatchewan, which sees producers negotiate directly with retailers to set prices, as more likely to keep retail costs down.

For its part, the OCS argues that its new slate of products can cut into black market sales. Edibles will cost between $7 and $14, beverages are priced at between $4 and $10, vape products will sell for between $25 and $125, topicals will be available for between $15 and $55, and concentrates are expected to sell for between $30 and $70.

“We’ve compared our offerings to similar products in the illegal market to ensure that our initial retail will be competitive,” OCS Senior Director of Merchandising Kevin Lam said when the new products were unveiled last week.

READ MORE: Quebec raising legal age for cannabis to 21, the strictest in the country

But Michael Armstrong, an associate business professor at Brock University who analyzes cannabis market data, said Ontario has a history of pricing products on the higher end of the spectrum.

Numbers he calculated after the first six months of legalization suggested Ontario implemented a 70 per cent markup on goods available at the time. That figure, while shy of the 90 per cent markup seen in Newfoundland, was also well above rates set in other provinces such as Quebec and New Brunswick.

Federal records show that Ontario’s current cannabis excise tax of about 11.4 per cent also falls in the top half of the national range, though considerably lower than jurisdictions such as Alberta and Nunavut.

Armstrong cautioned, however, that assessing prices on edibles is more complex than comparing costs of raw cannabis products.

He said producers will be working hard to distinguish themselves and their offerings through quality control, formulation and other factors, noting some consumers may well prove willing to pay a premium for what they perceive to be a better product.

That quality issue, he said, may prove fruitful in combatting illicit sales even if prices stay high.

“The producers are hoping that these new products are going to allow them to differentiate themselves,” Armstrong said. “If they can come up with a cookie or a tea that people really like, then they can charge a higher price than the black market and still attract customers.”

Michelle McQuigge, The Canadian Press


Like us on Facebook and follow us on Twitter.

Just Posted

An ambulance waits to pick up an elderly couple injured in a vehicle collision in Christina Lake Monday, June 14. Photo: Laurie Tritschler
Christina Lake collision under investigation, say Grand Forks RCMP

No one was seriously hurt in a two-car collision on Highway 3 Monday, June 14

The Kootenay International Junior Hockey League met for their AGM and announced a number of new initiatives, new awards and changes in their executive committee, as well as the starting date for the 2021-22 season. Paul Rodgers file.
KIJHL announces start dates for 2021-22 season

Season set to begin Oct. 1 with league still following all health guidelines

South Slocan’s Ti Loran is among the recipients of this year’s Neil Muth Memorial Scholarship. Photo: Submitted
Neil Muth Memorial Scholarships awarded to 4 students

Students in Creston, South Slocan and Revelstoke are sharing the honour

The Independent Investigations Office of BC is looking into a Castlegar incident. File photo
Police watchdog investigating Castlegar incident

IIO: Woman sustained a reportedly self-inflicted injury

West Kootenay Regional Airport. Photo: Betsy Kline
Central Mountain Air leaving Castlegar airport in July

The airline says market can’t handle two airlines

Canadian Prime Minister Justin Trudeau participates in a plenary session at the G7 Summit in Carbis Bay, England on Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada donating 13M surplus COVID-19 vaccine doses to poor countries

Trudeau says the government will pay for 87 million shots to be distributed to poor countries

Montreal Canadiens goaltender Carey Price (31) is scored on by Vegas Golden Knights defenseman Alec Martinez, not pictured, during the second period in Game 1 of an NHL hockey Stanley Cup semifinal playoff series Monday, June 14, 2021, in Las Vegas. (AP Photo/John Locher)
Habs fall 4-1 to Vegas Golden Knights in Game 1 of NHL semifinal series

Match was Montreal’s first game outside of Canada in 2021

Kelowna-Lake Country MLA Norm Letnick, assistant deputy speaker at the B.C. legislature, presides over committee discussions. The legislature is completing its delayed spring session this week, with most MLAs participating by video conference. (Hansard TV)
B.C.’s daily COVID-19 infections dip below 100 over weekend

Only 68 new cases recorded Monday, four additional deaths

B.C. ambulance station in Revelstoke is expected to get a new system called the Scheduled On-Call (SOC) this fall. (Liam Harrap - Revelstoke Review)
B.C. ambulance changes could put Revelstoke residents at risk, warn local paramedics

Paramedics said to expect a substantial increase in ambulance response time starting this fall

The BC Ferries website went down for a short while Monday morning following a provincial announcement that recreational travel between health authorities can resume Tuesday. (Black Press Media file photo)
BC Ferries’ website crashes in wake of provincial reopening announcement

Website back up now, recreational travel between health regions to resume as of Tuesday

The Kamloops Indian Residential School is photographed using a drone in Kamloops, B.C., Monday, June, 14, 2021. The remains of 215 children were discovered buried near the former school earlier this month. THE CANADIAN PRESS/Jonathan Hayward
Communities grapple with what to do with former residential and day schools

Some tear them down as a tool to help healing, others repurpose them as tools for moving forward

FILE – Provincial health officer Dr. Bonnie Henry talks about B.C.’s plan to restart the province during a press conference at Legislature in Victoria, Tuesday, May 25, 2021. THE CANADIAN PRESS/Chad Hipolito
B.C. watching U.K.’s COVID struggles but don’t think province will see similar pitfalls

Studies show that one dose of vaccine is only 33 per cent effective in preventing B.1.617.2 spread

RCMP Const. Shelby Patton is shown in this undated handout photo. RCMP say that Patton was hit by an allegedly stolen truck that he had pulled over on Saturday morning in Wolseley, east of Regina. THE CANADIAN PRESS/HO, RCMP
Pair charged in Saskatchewan Mountie’s death make first court appearance

Const. Shelby Patton was hit by an allegedly stolen truck that he had pulled over Saturday morning

David and Collet Stephan leave for a break during an appeal hearing in Calgary on Thursday, March 9, 2017. THE CANADIAN PRESS/Todd Korol
Appeal Court rejects stay for Alberta couple facing third trial in son’s death

Pair accused in their earlier trials of not seeking medical attention for their son sooner

Most Read