Pot legalization was meant to hurt the black market. 'Hold my bong,' said Saskatchewan

Saskatchewan's legal pot sellers have complained for months about stiff competition from their entrenched black-market incumbents. 

Now they have some numbers to prove it. 

According to new figures released Wednesday by Statistics Canada, the average price per gram for illegally-obtained cannabis in Saskatchewan during the 10-month lead-up to legalization was $7.43 per gram. 

Then, during the year that followed the Canadian government's October 2018 legalization of recreational cannabis, that average price dropped by nearly two dollars to $5.57 per gram.

Gosia Wozniacka/The Associated Press

Saskatchewan experienced the second steepest black-market price drop in the country, behind only Prince Edward Island. Nationally, the price of illicit weed went from $6.80 pre-legalization to $6.12 post-legalization, an average price drop of 72 cents. 

Price of legal pot went up sharply

Meanwhile, the average price for legal pot in Saskatchewan — whether bought at a medical or retail store — surged by more than three dollars from the pre- to post-legalization period: from $7.11 to $10.42. 

CBC

Upon launch, several Saskatchewan pot retailers said a nation-wide supply crunch was affecting pricing. 

The new numbers come larded with major caveats.

Statistics Canada gathered them from anonymous contributors using its online Statscannabis crowdsourcing survey. Users were asked which city they bought the pot in, but beyond that, little other identifying attributes were sought. 

Also, the pool of respondents in Saskatchewan was very low compared to some other provinces, except for the pool of 384 Saskatchewan residents who reported the prices they paid for black market pot before legalization.

'Eroding the illicit market' 

Still, the numbers reflect what some of Saskatchewan's 30-odd cannabis retailers have said since they launched and struggled to match the low prices offered by established black market sellers.

Andrew Gordon, a senior vice president with Kiaro, one of the six retail cannabis stores currently operating in Saskatoon, said the prices his company has paid for wholesale cannabis has come down in recent months thanks to there being more supply on the market.

"Now is the time for the government to take advantage of the market shift with a strong push for lower federal taxation, in order to snuff out the price advantages the illicit market continues to enjoy," Gordon said. 

"Eroding the illicit market operators is a key aim of the Cannabis Act."

CBC

Jason Childs, an assistant professor of economics at the University of Regina, said that based on the new Statistics Canada figures, "[We're] going to need to do a lot better if we're going to call this policy a success."

"The legal market is currently having a really hard time matching its price with the illicit market," Childs said. 

"Looking at the Health Canada sales tracking data for June 2019, the legal market nationally captured [only] between 10 per cent and 20 per cent of demand."

Jim Southam, the owner of Prairie Cannabis — one of two legal pot stores operating in Prince Albert — said the Statistics Canada figures do not reflect the new reality, where legal cannabis prices have come down in recent months.   "I believe in the next three to four months we will see more significant price drops as more producers come online and existing producers learn to maximize efficiencies at their operations," Southam said.    "Also, suppliers are slowly realizing that if their prices are closer to the street price, we will attract more sales in our legal stores. Once prices come down we can then start focusing on more consistent quality."

Cannabis consumers who responded to the Statscannabis survey were asked to choose one of the following six categories when asked where they sourced their pot: 

  • A federally-licensed producer via mail delivery.
  • A government-licensed retailer via mail delivery.
  • A government-licensed retailer in-store.
  • Other — legal cannabis was too expensive.
  • Other — difficulty accessing legal cannabis.
  • Other — better quality of variety of cannabis.

Medicinal providers were the only source of legal pot in Canada before legalization.  

Online black market not well-policed 

Childs at the University of Regina said it's still easy for people to buy illegal pot from the comfort of their homes.    "The guy in the alley is a bit of a misnomer," he said. "This illicit industry is incredibly sophisticated and it's run online. You can get Canada-wide delivery of cannabis to your door at remarkably low prices."

That dark but competitive corner of the cannabis industry is not being policed "as strongly as we might think," Childs added. "And it wasn't being terribly strongly policed beforehand."

Why not? 

"The retail distribution of cannabis through the mail or other means is not deemed to be a priority for a variety of reasons," he said. "It's not your violent drug gang."