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T
he world is watching as Canada steps into the spotlight as the first
G7 country1 to legalize recreational cannabis nationwide. This year,
cannabis will become legal at the federal, provincial/territorial, and
local levels. Public officials are balancing health, safety, and revenue as they
strive to undermine the illegal market, ensure a safe and controlled supply,
and keep cannabis out of children’s hands.
If successful, Canada will win global acclaim and set an example for other
nations. The federal government’s push for legalization has already had a
powerful effect, sparking a wave of innovation and entrepreneurship that
shares the fast-growing, can-do spirit of our technology sector.
What will the legal market look like? How will public officials balance health,
safety, and revenue priorities? And who’s going to be buying? To shed
some light on the subject, Deloitte surveyed current and likely recreational
cannabis consumers across the country in early 2018 to gain insights into
how consumption levels may change, what kinds of products consumers
would be interested in, and how and where they’d like to purchase—in
short, what consumer demand means for the cannabis market.
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A society in transition | The cannabis era dawns
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A society in transition | The cannabis era dawns
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A society in transition | Canada’s new growth industry
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A society in transition | Canada’s new growth industry
Canada’s new
growth industry
A sizable market awaits
The total cannabis market in Canada, including Overall consumption through legal channels
medical, illegal, and legal recreational products, is expected to rise by up to 35 percent, as
is expected to generate up to $7.17 billion in likely new consumers offset the proportion
sales in 2019—up to $4.34 billion of which of current ones who elect not to transition to
will come from the legal recreational market. legal channels. The cannabis spend overall
Medical cannabis is anticipated to generate an is also expected to rise by up to 58 percent,
additional $0.77 billion to $1.79 billion in sales, owing primarily to the fact that prices for legal
with the illegal market bringing in a further products will be higher.
$0.51 billion to $1.04 billion.
$0.42–0.87 billion
West $150–500 million
$0.57–1.37 billion
$0.52–1.06 billion
Ontario $180–620 million
$0.70–1.68 billion
$0.31–.64 billion
Quebec $30–110 million
$0.42–1.00 billion
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A society in transition | Canada’s new growth industry
Proportion of cannabis
products likely to be purchased
through legal channels
Eliminating the
illegal market is one
of the objectives
of legalization.
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A society in transition | Canada’s new growth industry
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A society in transition | Canadian consumers: demographics and behaviours
Canadian consumers:
demographics
and behaviours
Who’s going to be buying when cannabis is legal?
O
ur research indicates that But legalization is bringing in an
tomorrow’s likely cannabis older consumer. This consumer is
consumer will be somewhat more of a conservative experimenter—
different from today’s. This provides typically middle-aged, with a university
some clues as to what the post- or graduate school education. They
legalization environment will look like. don’t tend to put their personal
interests before family needs or other
Today’s consumer is what we describe responsibilities. They’re unlikely to
as a risk taker. They’re young, typically have a big social network. And they’re
with a high school or college education. more likely to consume less than
In their quest to live life to the fullest, once a month.
they’re more likely to put their health
or safety at risk, even going so far as to That said, probable consumers
skirt or break the law. And they often aren’t neophytes: 74 percent of
consume several times a week. them have had prior experience with
recreational cannabis, and 41 percent
have consumed it in the past five
years. Legalization may provide some
Canadians with the opportunity to
occasionally return to their younger
days—legally.
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A society in transition | Canadian consumers: demographics and behaviours
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A society in transition | Canadian consumers: demographics and behaviours
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A society in transition | Canadian consumers: demographics and behaviours
Retailers that are able to secure the supply chain, only 16 percent say a familiar brand
would play a part in persuading
protect and analyze customer data, and promote public them to completely move to legal
health and safety will be well positioned to achieve a cannabis outlets.
Other 6%
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A society in transition | Canadian consumers: demographics and behaviours
Expect more frequent According to our survey, purchases by We see a more significant change
purchases after legalization current and likely frequent cannabis in behaviour among less frequent
Producers and retailers, take consumers are set to rise up to consumers, both current and likely.
note: consumers of all types expect 22 percent after legalization, to just After legalization, purchase frequency in
to buy cannabis more often after over three times a month, although the this group is poised to rise 121 percent,
legalization, and less frequent overall amount spent each month is set with the average total spend rising
consumers expect to spend more. to remain relatively steady, hovering nearly 68 percent (to $27.87) roughly
This strongly suggests that cannabis around $99. Likely frequent consumers every three months. Current consumers
consumption will become a normalized appear ready to buy more often will likely buy products slightly more
activity more quickly than many might than those who are already frequent often and spend slightly more than
have anticipated. consumers (3.4 times per month versus probable future consumers.
2.9), but they’ll probably spend a little
less each month ($98.13 versus $99.15).
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A society in transition | Canadian consumers: demographics and behaviours
Pre-legalization
current users
20% 33% 24% 23%
Post-legalization
current users 20% 35% 27% 18%
Post-legalization
likely users 4% 14% 19% 63%
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A society in transition | Channel and purchase preferences
Channel and
purchase preferences
Customers will likely prefer to walk into a store to buy products
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A society in transition | Channel and purchase preferences
A
pproximately half of those buying online is understandable, given
surveyed say they’re interested the stigma that continues to surround
in purchasing from government cannabis consumption; this option
or licensed private retail stores. enables customers to maintain their
Consumers also expressed interest in privacy, thereby avoiding disclosure to
buying directly from licensed producers friends, family, neighbours, co-workers,
or manufacturers, but they will be employers, media, and others.
unable to do so. Our research also
indicates that almost half (47 percent) of Notably, current daily cannabis
all recreational products will be bought consumers are much more likely
from physical locations. to continue purchasing products on
the illegal market compared to less
Roughly a third of cannabis consumers frequent consumers (53 percent versus
are also interested in buying online 19 percent). Daily consumers today
from government retailers and licensed are also more likely to grow their own
private retailers (consumers won’t (53 percent, compared to 31 percent
be able to buy online from licensed of less frequent consumers). Those
producers or manufacturers, either). in Atlantic Canada are also keen
We estimate that 35 percent of products on growing their own: 44 percent
will be purchased through these online say they’d do so, compared to just
and mobile channels. The interest in 27 percent nationwide.
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A society in transition | Channel and purchase preferences
Price and product variety will Product variety is also important. until a year after dried cannabis and
be key purchase drivers Sixty percent of current consumers oils make their legal debut, 58 percent
What will factor into purchasing and 49 percent of probable ones of likely consumers plan to purchase
decisions? For current and probable consider the range of available products and use edibles. While one in three
consumers alike, price is key: 75 percent (e.g., edibles, pre-rolls, oils) to be an (34 percent) current consumers say
of current consumers and 65 percent important purchasing criterion. Today, they’re likely to try new and different
of likely ones say they’ll be looking for 64 percent of consumers typically products, only one in five (20 percent)
products offered at reasonable prices. partake through rolled joints. While of probable future consumers say
edible products won’t be available they’ll do the same.
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A society in transition | Channel and purchase preferences
75%
Offered at a price deemed reasonable
65%
Type of cannabis product 60%
(e.g. joint, edible) 49%
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A society in transition | Channel and purchase preferences
Edible products won’t be There’s a strong appetite Overall, we expect six out of 10 likely
for edibles cannabis customers will choose to
offered for at least a year The federal government intends to consume edible products. For current
after legalization, despite make only fresh or dried cannabis, consumers, edibles could comprise
limited oils (including capsules), plants, 18 percent of their overall intake after
an explosion of interest in and seeds available upon legalization. legalization, up from 14 percent today.
them in recent years. Edible products won’t be offered for
at least a year afterward, despite an
explosion of interest in them in recent
years. Nearly two-thirds (64 percent) of
current and likely consumers are aware
of cannabis-based baked goods, such
as brownies, and 51 percent say they’re
interested in trying them. Forty-three
percent are interested in sampling the
chocolate, while 37 percent say they’d
eat the hard-candy product.
64%
Baked goods/cookies/brownies etc.
51%
35%
Chocolate 43%
45%
Hard candies, lollipops, or gummies
37%
28%
Beverages
31%
15%
Honey
25%
10%
Popsicles and freezies
24%
9%
Ice cream 23%
5%
Potato chips 22%
11%
Crackers/biscuits 20%
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A society in transition | Section title goes here
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A society in transition | Channel and purchase preferences
Willing to pay more, What Canadians want from As well, cannabis consumers want retail
but still sensitive to price legal retailers stores to be located in a safe area,
Our research shows that cannabis Canadian consumers have high and also away from schools and other
consumers expect—and are willing— expectations, and their needs and child-oriented areas. For one in 10, this
to pay more after legalization. It’s also behaviours are constantly evolving. Like is the most important consideration.
clear that price is an important factor any other retailer, those selling cannabis It’s also a reminder that while cannabis
influencing purchasing decisions, will need to meet or exceed those will be legalized, it remains a valuable
especially for likely consumers. expectations and needs if they intend commodity with a strong illegal market.
to succeed. Retailers, producers, and other cannabis
Current consumers consistently show industry organizations will need to
they’re more willing to buy at all price By far, the most critical feature for ensure they prioritize security—both
points than likely consumers. The price cannabis stores is having staff with physical and cyber—and work closely
would have to reach nearly $14 or more strong product knowledge: 71 percent with police services and justice agencies
per gram for half of current consumers of current consumers and 69 percent to keep themselves, their customers,
to stop buying; for likely consumers, it of likely ones consider this a must-have, and society at large protected and safe.
would only need to reach roughly $11 while 24 percent overall say it’s the
or more per gram. Being responsive most important consideration. Stores
to consumers’ price sensitivities is will also want to have their prices
By far, the most critical
essential if producers, manufacturers, clearly and prominently displayed for all feature for cannabis stores
and retailers are to be successful—and products, which is a mandatory feature
is having staff with strong
if governments are going to persuade a for 70 percent of current consumers
rising number of Canadians to purchase and 69 percent of probable ones. product knowledge.
through legal retailers.
While cannabis stores will undoubtedly
We anticipate that it won’t take long prioritize cyber and physical security,
for the cannabis retail sector to mirror they will also need to ensure they
the evolution we’ve seen in other retail provide the positive, engaging shopping
sectors, splitting into discount and experience consumers expect and
premium segments to meet the needs demand of any modern retailer.
of very different consumer groups. Fifty-two percent of all customers
want to feel welcome upon entering
a store—this rises to 61 percent for
likely consumers—and 46 percent
overall want to be able to easily enter
and leave. For two-thirds (65 percent)
of the survey respondents, convenient
store hours are also important. This
is especially true for current daily
consumers, 83 percent of whom say
convenient hours are essential.
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A society in transition | Channel and purchase preferences
24%
Store employees are knowledgeable about products 71%
69%
9%
Store is located in a safe area 56%
49%
8%
Clearly marked prices for all products 70%
69%
8%
Effective visible physical security and cybersecurity 48%
44%
6%
Retailer can be trusted with personal data 50%
39%
5%
Has convenient hours 65%
65%
4%
Made to feel welcome 55%
61%
Free shipping, clear pricing, Like the rest of the retail industry, those Two-thirds of cannabis consumers also
and robust cybersecurity: selling cannabis will find that customers say clearly marked prices are a must-
vital for online sales have high expectations about how and have feature for prospective online
A sizable proportion of cannabis when they get their products. Two- retailers. More than half (58 percent)
consumers say they would prefer to thirds of cannabis consumers say free of respondents with a high school
buy online from licensed producers shipping is essential. They’d like speedy education or less want to see organized
or manufacturers (33 percent), delivery, too: 63 percent expect their product groupings as well, to smooth
licensed private retailers (30 percent), purchases to arrive within two days, and their shopping experience. Daily or
or government retailers (28 percent) 34 percent say they’d be willing to pay frequent consumers are more likely
after legalization—though it won’t a higher price for expedited delivery. (39 percent) to feel the availability of
be possible to order from producers Current consumers are more willing accessories—such as pipes, bongs, and
or manufacturers at the onset of (41 percent) to pay for faster delivery rolling papers—is necessary, compared
legalization. than likely consumers (27 percent); to those who consume less frequently
respondents aged 54 and younger are (26 percent).
twice as likely to pay more for expedited
delivery (38 percent) than those aged
55 and older. Online retailers may
find that getting pricing right will be a
delicate task.
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A society in transition | Channel and purchase preferences
But what consumers want most in data security and privacy isn’t
from online cannabis retailers is surprising, given numerous high-profile
privacy and data security. One in five cyber breaches in recent years and
(22 percent) say that mature, robust consumers’ understandable desire
data management, privacy protection, to keep their personal and financial
and cybersecurity for their e-commerce information secure. As well, cannabis
business is the most important feature, consumers are likely to want to ensure
while it’s a must-have for 52 percent their consumption isn’t made public
of current and 58 percent of likely because of the potential for personal,
consumers. This strong interest professional, or reputational damage.
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A society in transition | Implications and considerations
Implications and
considerations
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A society in transition | Implications and considerations
For retailers, legalization represents And while the federal government, Governments at all levels will also need
new opportunities and challenges. through Health Canada, is committed to establish a strategy to encourage
Successful retailers will be those who to tracking legal recreational cannabis the cannabis industry to continue to
learn quickly from their counterparts “from seed to sale,” the plans to date do develop in a safe, healthy, secure, well-
in other retail sectors, who have not include the detailed analytics and regulated, and professional manner.
experienced a wrenching evolution in tracking that could provide the system In part, this will involve making a
recent years as power has shifted to with a springboard. Clarity on this issue determined effort to reduce the stigma
the consumer. is needed. surrounding cannabis consumption to
make those who consume—and those
For all involved in this budding It’s also clear that while federal and who don’t—more comfortable with the
industry, there will be lessons to learn, provincial governments have largely idea. Yet at the same time, they must
implications to comprehend, and many sorted out their respective roles do so without appearing to actually
issues to consider as we embark on the and responsibilities, municipalities encourage consumption itself.
first step of the legalization journey. aren’t nearly as ready. Cities are still
coming to grips with such matters as
Government plays a key role in whether to allow people to consume in
ensuring public safety public spaces, where to allow physical
Migrating the cannabis trade to legal storefronts to set up shop, how to deal
channels offers numerous advantages with cannabis lounges and cannabis-
to the country’s federal and provincial/ themed events, and whether justice
territorial governments: a regulated agencies have the tools and technology
industry, safer products, investments required to deal with public safety
in justice agencies, improvements in issues such as cannabis-impaired
public education and harm reduction, driving, illegal sales, illegal sales to
and a curb on illegal sales. It also means minors, and organized crime. We should
tax revenues. However, given that sales expect to encounter some bumps along
of cannabis are likely to cut into those of the road after legalization, and trust
beer, spirits, wine, and even tobacco, it’s that we will find solutions to them.
important that governments ascertain
the ultimate impact of legalization on
so-called sin tax revenues.
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A society in transition | Implications and considerations
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A society in transition | Implications and considerations
Online channels will need to Security and justice It’s also important to note that
safeguard privacy and security considerations must not be governments at all levels—federal,
Cannabis retailers’ online channels will overlooked provincial/territorial, and municipal—
be an important source for consumers Cannabis is a valuable product will be developing, introducing, and
to research and discover products. with a well-established illegal market enacting legislation, regulations,
While many will buy from physical and sizable public health and safety and by-laws regarding the newly
locations, a substantial number of concerns. That means cannabis legalized market. These new rules will
people will choose to buy online for organizations at all levels—from help ensure that Canada’s licensed
the simple reason of privacy. Many regulators to licensed producers and producers, distributors, retailers, and
won’t want to run the risk of being seen retailers—face unique physical and other cannabis organizations do their
buying cannabis while doing so still has cybersecurity challenges, and all have a part to help proactively address issues
a trace of stigma about it. critical responsibility to protect the end related to crime, public safety, and
consumer and the public at large. community health. They will also ensure
This desire for privacy extends to the sector coordinates with relevant
online sales. Consumers want to be These new cannabis companies must justice agencies and complies with all
able to trust that their personal and adopt a multi-disciplinary, enterprise- applicable legislation and regulations.
financial information, from login wide approach to help identify, assess,
credentials to credit card numbers, and address the dynamic security risks
are kept very secure—and very they face. Those that take steps to
private. Online retailers will need to be implement a full security strategy stand
painstakingly clear about what data to improve their enterprise risk-
they collect and why, and how that management performance overall,
data will be stored, used, and shared. increase the organization’s value, instill
Cannabis consumers are especially public trust, and achieve an important
leery of having their data shared or sold competitive advantage.
in such a way that they end up being
characterized as a drug user, an unfair It’s vital that cannabis organizations adopt a
description for a person consuming a
legal, if controlled, substance. multi-disciplinary, enterprise-wide approach to
help identify, assess, and address the dynamic
Consumers are also concerned
about the potential for cybersecurity security risks they face in both the physical world
breaches. Given that hardly a week and the online domain.
goes by without yet another report of
such a breach, this worry is completely
understandable. Cybersecurity risk is
constantly evolving, and companies
all along the cannabis supply chain
will need to regularly update their
data management and cybersecurity
programs to ensure both client privacy
and corporate data protection.
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A society in transition | An industry poised for growth
A society in transition, an
industry poised for growth
The legalization of recreational cannabis will mark an important change
in Canadian society. In time, we expect legalization will legitimize
consumption and diminish the stigma that surrounds it today. After
all, we’ve been here before—and we’ve shown that we have the
maturity to develop strong, thriving industries based on tightly
regulated, controlled substances such as beer, wine, and spirits. It
was not all that long ago that these were regarded in a vastly different
light. In our view, cannabis will prove little different. Recreational
consumption will eventually become normalized and mainstream,
eliciting about as much reaction as having a pint of craft beer.
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A society in transition | An industry poised for growth
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A society in transition | Contacts and endnotes
Contacts
Jennifer Lee Tom Peters
Partner Partner
National Cannabis Sector Leader Insights and Analytics Leader
Consumer Advisory & Analytics Practice Leader Customer Advisory
jenniferlee@deloitte.ca tompeters@deloitte.ca
Endnotes
1 Uruguay was the first country in the world to legalize recreational cannabis, in July 2017.
https://www.nytimes.com/2017/07/19/world/americas/uruguay-legalizes-pot-marijuana.html
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A society in transition | Notes
Notes
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A society in transition | Notes
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A society in transition | Section title goes here
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