Market stabilization is years away, but with every province regulating cannabis in its own way, we’ll start to discover what works and what doesn’t.
The first year of legal cannabis sales in Canada did not go smoothly. To be fair, introducing a federally regulated legal supply chain that operates across 13 different retail systems for a product that has been illegal for almost 100 years is an extremely complex undertaking. But the sky hasn’t fallen. And other countries, including Luxembourg and New Zealand, are looking at Canada to inform their own legalization approaches. We definitely have lessons to share, and we might even have got a few things right, including restricting advertising, promoting lower-THC products, and investing in data collection and research.
Here’s what we have learned after one year of legalization.
Creating a stable legal market is going to take time
Under Canada’s confederated model of governance, the federal government is responsible for licensing production, while the provinces and territories are responsible for retail sales and distribution. Each province and territory has established its own model of private, government or hybrid sales. Some provinces have moved more quickly than others. Nova Scotia, for example, had its full allocation of 12 publicly operated stores open in October 2018. After Ontario had its provincial election in June 2018, the province changed from a public to a private model for storefront sales. Online retail sales from the publicly operated Ontario Cannabis Store began in October, but physical stores did not open until April 2019. Once storefronts were open, Ontario’s monthly sales jumped from $7.7 million to $19.7 million.
Initial supply shortages hurt retailers across Canada. Federal licensing capacity was overwhelmed by demand. It takes time to grow, process, test and approve a plant product. Many retailers under both public and private models resorted to reducing store hours and staffing levels. Because of these challenges, sales did not meet optimistic year-one estimates. As federal licensing catches up and production expands, this situation may become one of oversupply. For example, the finished inventory of dried cannabis increased from 18,481 kg in October 2018 to 60,872 kg in August 2019, with an additional unfinished inventory of 328,187 kg (84 percent of the total).
The introduction of edible cannabis products and cannabis extracts and topicals this month will further disrupt the emerging market. In Colorado, for example, where recreational cannabis was legalized in 2014, edibles captured 13 percent of the legal market by 2017, with concentrates capturing 23 percent.
Market stability is an important consideration in assessing the impact of legalization, particularly at this early stage. The success of legalization should, however, be measured against the government’s objectives: to prevent youth from using cannabis, protect public health and safety, deter criminal activity, and reduce the impact on the criminal justice system.
New consumers tend to be older adults rather than youth
More Canadians are trying cannabis since legalization, according to the National Cannabis Survey, to which Canadians voluntarily report their past-three-month use. But these new consumers are more likely now than before legalization to be 45 or older.
Cannabis use in the 15 to 24 age group has been fluctuating over the past few years, but has not significantly increased since legalization. Canadians over 65 remain the least likely to consume cannabis, and they consume less often and in lower quantities, but rates of use in this age group have been accelerating more quickly than among younger Canadians. The older age group is also more likely to report using cannabis for health purposes, which is of concern given the lack of evidence supporting many of the health claims being made, particularly for products high in CBD. Figure 1 illustrates these trends among different age groups.
Edibles and concentrates bring new public-health concerns
Youth access is a key concern with extracts, topicals and especially edible cannabis products, which can enter the market any day now. A child is more likely to accidentally eat a cannabis cookie than to eat dried herbs – and they would have significantly different effects depending on the potency. To reduce this risk, the government has restricted marketing and advertising of extracts, topicals and edible cannabis products, and they cannot be targeted at youth. Just what that means is open to interpretation and will likely be tested by the cannabis industry as it looks to broaden its market. Quebec has taken a particularly conservative approach by prohibiting cannabis chocolates, other sweets and desserts. Regardless of product format, consumer education about safe storage is essential. This includes keeping products in a secure container and out of reach of youth and pets.
Recent fatalities and illnesses associated with vaping have created additional concerns over the potential for extracts to be used in vaping devices. These cases — and uncertainty regarding which ingredient is causing the harm — illustrate the importance of monitoring the public health impacts of new products and practices, and responding quickly as evidence emerges. In this respect, Nova Scotia has prohibited flavoured cannabis vaping products, and Quebec and Newfoundland and Labrador have banned cannabis vaping products altogether. Such prohibitions carry the risk of perpetuating supply through the illegal market, where product composition and quality control are uncertain at best.
The regulations for cannabis edibles, extracts and topicals use packaging and taxation to promote lower-risk use, modeling best practices by applying public-health evidence from the experience of alcohol and tobacco. The new products will be taxed according to the quantity of THC they contain. That means lower-risk products will also be more affordable. THC limits of 10 mgs per package of edibles or dose of concentrate (oral sprays, for example) and 1,000 mgs per package of concentrate will help consumers regulate consumption. The effects of THC can be felt at 2.5 to 5 mgs depending on a person’s body and experience with THC, so it is still important to “start low and go slow” and not assume that a package of edibles represents a single dose.
Providing consumers with accessible, factual education is essential for reducing the risks associated with the new products. For example, consumers need to know that it can take some people up to 2 hours to feel the effects of eating an edible cannabis product, and they can be impaired for up to 12 hours and have residual effects up to 24 hours. (See 7 Things You Need to Know about Edible Cannabis for more information.)
Displacing the illegal market will take time
Immediately replacing the illegal market with the legal one was never a realistic goal, especially considering the uneven access to retail stores and products during the first year of legalization. Nonetheless, among Canadians reporting cannabis use, there is some early success: there has been an increase in those reporting purchases from legal sources only and a decrease in those reporting purchases from illegal sources.
Product quality and safety, not price, is the primary factor for Canadians deciding where to purchase cannabis, according to the National Cannabis Survey. This finding verifies the importance of strong quality assurance as an effective way to shift consumers to the legal market. The Cannabis Act and regulations provide basic product quality standards, but we are primarily relying on industry self-regulation to provide quality assurance. Establishing benchmark laboratories to standardize testing is recommended to ensure consistent results across licensed testing facilities.
As for cannabis-impaired driving, 15 percent of Canadians who have used cannabis in the past three months report driving within two hours of use, according to the National Cannabis Survey. This has not increased since legalization, which is positive, but the target is to reduce the number through prevention and education, learning from our success in reducing alcohol-impaired driving.
More capacity to detect cannabis-impaired drivers is good for road safety, but there is a cost in terms of police services for training drug-recognition experts and purchasing new equipment. For example, about 270 officers completed the training program between October 2018 and October 2019, incurring costs for training and for staff to replace those taking the two-week, in-class program.
Provincial and territorial regulations vary in terms of age of access, retail models and places of use (see the interactive map, by the Canadian Centre for Substance Use and Addiction). Some introduce possession limits (1,000 grams in British Columbia and 150 grams in Quebec) and some prohibit home cultivation (Manitoba and Quebec). Over time, the variations among jurisdictions will enable us to compare the public-health results of the varying regulations across Canada and identify best practices for a public-health approach. Even at this early stage, the research shows that provinces adopting a private model for retail sales have a higher density of retail outlets than those that have applied a public model.
Criminal justice impacts will be better understood in the coming years once post-legalization arrest and court data are available. Exploring the impact on youth contact with the criminal justice system will be particularly important, given the different approaches such as fines, diversion programs and warnings adopted in the provinces and territories.
It is too early to draw many conclusions about the impacts of cannabis legalization. Market stabilization is still several years away. Fortunately, existing data collection and the fact there is considerable research interest will help us to quickly identify emerging concerns and best practices. Legislative public health and safety objectives and a mandatory review after three years provide the opportunity to hold policy-makers and industry accountable for the impact of their efforts on the public health and safety objectives of cannabis legalization in Canada.
This article is part of the The Making of a Cannabis Industry: Year One special feature.
Photo: Shutterstock, by Kym MacKinnon.
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