What will the cannabis market look like in 2025?

An analysis by EY shows that one in the five Canadians will use the product, spending an average of $1,652 annually.

The months following legalization of recreational cannabis in Canada have been rockier than many in the industry would like. But as those hurdles are addressed, one in five Canadians are expected to be cannabis consumers by the year 2025.

That is according to a recent analysis of the Canadian cannabis market by EY.

As more Canadians enter the cannabis market, the average consumer is projected to spend $1,652 on cannabis products annually, up 30% from the $1,263 they are expected to spend this year. By comparison, data released by Statistics Canada last year estimated the average Canadian spends $755 on alcohol annually.

One factor commonly cited as holding consumers back from buying from legal cannabis suppliers is the higher price compared to the illicit market. But Zachary Pendley, cannabis real estate and valuation leader at EY Canada, said that is only one factor that’s holding back the legal market.

“The reality is that retail and distribution frameworks across Canada have been implemented much slower than anticipated, pushing many consumers to look for alternatives,” he said. “As the industry matures, access to product eases and higher margin derivatives come online, we’ll see a rise in consumer spending on legal cannabis.”

Roadblocks have included stores opening slower than expected in British Columbia, as well as the Ontario government moving from a public to a privatized cannabis retail model just months before legalization (the first physical retail stores in Ontario are expected to open next week). Those factors led interested consumers in two of the country’s biggest markets for cannabis to rely on online platforms for legal products, but high demand caused delays in shipping orders and concerns about a shortfall in product availability.

There are 14 million square feet of facility expansions currently planned by Canada’s licensed producer, and EY estimates that – if those facilities are completed and licensed in a timely manner – the supply of cannabis production in Canada will outpace demand in less than five years. That will, in turn, increase competition and drive down prices, resulting in the average wholesale price for dried flower to likely be between $4 to $5 per gram by 2025. According to Statistics Canada, the average price in Canada is roughly $7.43 for recreational cannabis and $8.18 for medical.

EY’s research also shows that the Canadian cannabis market will grow by 50% to $11 billion by 2025. While numerous companies have been looking at seizing the opportunities in edibles and cannabis-infused beverages – expected to be legalized for sale in Canada this fall – EY says consumption in 2025 will mostly be split between dried flower (46%, compared to an estimated 84% in 2019) and extracts (37%, compared to 10% in 2019), with a small percentage going to edibles (12%, compared to 5% in 2019) and non-edible derivatives (5%, compared to 1% in 2019).