Canada: Cannabis sales to surpass alcohol sales by 2020

A new report from CIBC, one of Canada's leading banks, estimates that legal cannabis sales will reach $6.5 billion by 2020, more than Canadians spent on spirits in 2017 ($5.1 billion) and almost as much as on wine ($7 billion).

According to these forecasts, the market will be largely dominated by recreational cannabis consumption, which is expected to account for 95% of sales, with the remainder going to medical use.

CIBC bases its calculations on a quantity of 800 tons of cannabis consumed by Canadians by 2020 at a price of around 8$ per gram (and 10$ at the counter once taxes are added). This is slightly more than the 773 tonnes that Statistics Canada estimates were sold on the black market in 2017. CIBC therefore assumes that the legal market will be able to eat up a big chunk of the black market in no time.

For analysts, the sale price will be the key to the transition process from the black to the legal market.

«Sellers who think a price of 20$ per gram is possible will quickly see their customers leave their store, pull out their phone and contact their old dealer to see if he has any of that Bruce Banner left at 8$ per gram,» they write.

This doesn't mean, however, that licensed growers will make a huge margin, even at production prices of 2$ per gram. Most of the revenues will go to the provinces, around 70% according to the report, while the private sector will generate around 1 billion dollars, mainly on the production and cultivation side.

CIBC also plans to that the pace of mergers and acquisitions in the sector will accelerate at a frenetic pace, as producers seek to rapidly acquire expertise in this new market.

The Canada to legalize cannabis for adults this summer.