Cannabis in Canada has had a heck of a history. From the earliest days of North America’s First Nations peoples using cannabis for medicine & culture, to European settlers cultivating hemp crops, to the dark days of the 1950-70’s ‘Reefer Madness’ weed has gone through a lot of ups-and-downs. The Canadian marijuana experience has gone from one of cultural obscurity to the front-lines of controversy, and back again to being an average “everyday” part of life. Whether you trust in cannabis for its medical benefits or you just enjoy a good buzz now and again, weed is very much a part of modern living today.
Cannabis is not only a well-established part of millions of Canadians’ lives, it’s become synonymous with our national identity. We’ve always grown, smoked and shared high-quality weed in this country, something that we took to the next level back in October of 2018. Canada became the first G7 country to federally legalize cannabis both medically and recreationally.
You’d think that would mean a golden age for ganja in the Great White North, right? Unfortunately the progress for legal weed in Canada has had more issues than an unattended cannabis crop. There are lots of bugs to work out, balancing to do, some DIY and a lot of trimming of dead-weight before legal cannabis in Canada can truly be considered a success story.
Why are legal weed prices so high, while the cannabis doesn’t get you high enough?! What’s the differences between decriminalized vs legal weed like in other countries? Why are dispensaries so expensive compared to online buds for sale? Dispensary prices vs street prices in 2022 are as far apart as they’ve ever been, and without some drastic changes it looks like legal weed prices are destined to stay unaffordable for a long-time. Let’s get a sense of weed prices in Canada today and decide whether your hard earned dollars should be going to online dispensaries or retail stores.
Taxes. It’s that simple. Okay, thanks for reading this article, see you next week!...
In all seriousness, taxes, duties, markups and large overhead costs has made the legal cannabis landscape one of many peaks-and-valleys. It’s not cheap to get licensed, it’s not cheap to build facilities, and it certainly isn’t cheap to produce high quality buds. On top of all these factors, taxes, duties, THC potencies and promotional restrictions have wedged legal buds into a tough spot. Let’s break down each of these points further to better see why dispensaries are so expensive in Canada today.
To produce legal cannabis in Canada you need to have particular licenses to grow, process, research or sell. These licenses range from big LP’s (licensed producers) to micros (micro-cultivators), processors (making cannabis products from raw flowers) and licensed retailers. There are also strict guidelines on what can be grown, how it's grown, what you can derive from your crops and how they can be sold to customers.
All of this adds up to some significant costs to produce each and every crop. One of the most notable differences between decriminalized and legal weed systems is that everything is controlled/monitored in a legal weed country. This means the costs of doing business are significantly higher.
On top of these higher costs of operating, licensed cannabis companies are forced to limit certain things about their products: size, volume, cannabinoids potencies, etc. The most notorious example of this affects legal cannabis edibles in a very adverse way. Why are legal dispensaries so expensive? Because their edibles only have 10 mg of THC - MAX! - and they’re typically limited in size to accommodate this 10 mg/edible rule.
Dispensary prices vs street prices in 2022 are largely affected by rising costs to produce, but legal cannabis seems to be mired by this doubling-up of increasing operating costs in addition to limited sales. Customers still seem to be buying a lot of legal cannabis flowers and pre-rolls, but the industry is missing out on a ton of sales due to the doubling-up of their increasing costs and forced higher prices.
One of the reasons many legal weed producers are forced to charge a lot more for their buds has to do with the addition of taxes, duties and excises. Cannabis producers and sellers must pay GST, HST or PST - obviously - but there are a number of duties applicable to cannabis products in particular.
For starters, there are two distinct types of duties that apply to cannabis products in Canada:
Flat Rate duties: based on the quantity of cannabis flowers, non-flower, seeds and cannabis plant materials.
Ad Valorem duties: levied on cannabis products that are sold to purchasers/processors (i.e. between the licensed cultivator to another license holder).
Licensed cannabis companies have to pay the higher of these two duties as a default, on a per transaction basis. Certain provinces also have adjustment rates that apply to cannabis dealing within their provincial boundaries. These include:
Nunavut - 19.3%
Alberta - 16.8%
Saskatchewan - 6.45%
Ontario - 3.9%
But wait, there’s more! Yes, more additional duties that apply to all cannabis edibles, extracts and topicals. These types of non-flower, non-seed cannabis products are subject to flat rate duties that are calculated on THC potencies. This excise duty and others are organized on the following legal weed prices calculation chart:
Duties - Flat Rate ($0.25/gram Flowering, $0.08/gram Non-flowering), Ad Valorem (2.5%)
Additional Duties - Flat Rate ($0.75/gram Flowering, $0.23/gram Non-flowering), Ad Valorem (7.5%)
Duties - Flat Rate ($0.25/plant, $0.25/seed), Ad Valorem (2.5%)
Additional Duties - ($0.75/plant, $0.75/seed), Ad Valorem (7.5%)
Cannabis Edibles, Extracts, Topicals
Duties - Flat Rate ($0.003/mg of THC), Ad Valorem (0%)
Additional Duties - ($0.008/mg of THC), Ad Valorem (0%)
It’s clear to see why legal weed prices are consistently higher when you look at the number of taxes and duties applicable to cannabis-only. If it seems unfair, you’re probably not wrong. Alcohol, tobacco and other recreational substances face similar significant duties, but where cannabis differs from these is that it has medical benefits where these other substances do not. This should garner some leeway with taxation, but even in decriminalized vs legalized cannabis countries the problem of “paying your fees” to operate never seems to take this into account.
Now that we understand how higher costs and significant taxes/duties are affecting dispensary prices vs street prices in 2022, let’s consider something that isn’t adding to the problem but taking away the good stuff - THC limits. Whether explicitly stated by government regulators, or implied through controlling the new weights of particular kinds of cannabis products, THC is constantly the focus of some very harsh restrictions. As per the federal regulations, the following restrictions on THC contents apply to the following, by class of cannabis:
(Inhaled) - net weight of each discrete unit must not exceed 1 gram
(Ingestion/Absorption) - quantity of THC per discrete unit must not exceed 10 milligrams
(Absorption) - quantity of THC per container must not exceed 1000 milligrams
(Absorption) - quantity of THC must not exceed 10 milligrams per dosing unit (pump, spray, etc)
(Ingestion) - extracts in liquid form must not contain more than 90 milliliters of extract
(Ingestion) - quantity of THC per container must not exceed 10 milligrams
On top of these THC limitations, there are also a growing list of substances that are not permitted to be mixed/manufactured with cannabinoids like THC. These include the usual suspects like ethyl alcohol, nicotine and caffeine. However, the list now includes many supplements, vitamins or minerals that some people find perplexing to restrict. This doesn’t mean that any food-borne nutrition derived from a cannabis edible is restricted, but it does suggest that you can’t add in any vitamins/supplement like vitamin C or iron like you would for some fitness/health products.
Another major reason why legal dispensaries are so expensive with some of the highest weed prices we’ve seen in decades has to do with their inability to promote effectively. Selling cannabis to Canadians isn’t the toughest sell - a growing number of people in this country are using more and more cannabis products for an expanding list of reasons. What has become very difficult for legal cannabis retailers is the clamp-down on marketing, promotions and communication capabilities about cannabis.
Let’s look at the infamous Section 17 of the Cannabis Act, which is primarily responsible for a drawing a line in the sand when it comes to promoting decriminalized vs legal weed:
It is prohibited to promote cannabis products or services in certain ways, such as:
- Communicates information about price or distribution
- Promoting in any way that could be considered appealing to young persons
- Includes testimonials, endorsements or depictions of people, characters or animals
- Presents cannabis in ways that evoke positive and negative emotions, abouts certain ways of life (vitality, risk, glamor, daring, excitement)
- Includes sponsorship of a person, entity, event, activity or facility
If this is your first time seeing these incredibly restrictive parameters for marketing cannabis in Canada, you’re probably scratching your head and thinking: “if this is what’s not allowed… then what IS allowed?!”. You’re not far off in thinking this, as many legal cannabis producers, distributors, processors and sellers are all struggling to find ways to market their cannabis brands to the Canadian populace. Why are legal dispensaries so expensive? Well for one, they can’t have a friggen sale like any other store! Why is there such a disparity between dispensary prices vs street prices in 2022? Licensed cannabis sellers can’t tell you about the medical benefits of their cannabis, while legacy market stores and online dispensaries are more free to divulge the latest & greatest about their goods.
As is usually the case, the retail & online worlds are open markets where information exchanges are not only allowed, they’re an essential component of what makes an industry tick. You have to be extremely careful, creative, calculated and proactive when promoting cannabis products that are legally produced. Packaging requirements limit the colors, textures, tones and designs of your physical product packaging. Communications restrictions don’t allow you to make medical claims about cannabinoids. Endorsement or sponsorship limitations mean no Snoop Dogg or Willie Nelson stands promoting their favorite strains of cannabis. All-in-all, the landscape for marketing legal cannabis in Canada is a very tricky maze to navigate from harvest to sale.
It’s pretty obvious by now why legally produced/sold cannabis in Canada has significantly higher prices - it costs them so much more to do even less with their limited products. This triple-whammy seems harsh, and rightly so - cannabis legalization was supposed to throw open the gates and lead us to a world of weed freedoms, but in actuality we’re just looking through a crack in the door to that dreamworld beyond.
There’s still hope for a true cannabis future in Canada, and both the legal and legacy markets are continuing to provide top-notch products to people who need them. That being said, there’s a ton of work to do before we reach a point where dispensary prices vs street prices come closer together. Think of the legal cannabis industry like the life-cycle of the plant itself - we’re still just in the seed-planting phase, stuck in the dark, damp confines of the soil. It’s early in our life-cycle, and even though we want to burst forth and bloom, it takes time and a lot of careful attention to help us grow into the next phase - seedling.
We’ve got a lot of growing to do - literally and figuratively - but we should be proud of ourselves as Canadian weed pioneers. Canada is already being joined by our North American ally in Mexico as their legal cannabis regulations have recently come into effect. Perhaps together we can continue to grow and push the limits of what makes decriminalized vs legal cannabis a positive development.