Peak pot? Cannabis sales growth is going up in smoke

For much of the past five years, legal cannabis sales have been in hyper-growth mode. Yes, the early days of legalization were rough – there was a sluggish rollout of stores and the product was expensive – but that’s all changed. As more outlets and more products (for example, vapes) became available, consumers were steadily drawn away from the black market. Licensed retailers now sell upward of $400-million of cannabis products every month.

But those days of heady growth appear to be over. Sales have not only stagnated in the industry, but recently they’ve faded from all-time highs, according to Statistics Canada data.

Michael Armstrong, an associate professor of business at Brock University in St. Catharines, Ont., offered several theories for what’s happening. He noted that retail expansion has slowed and that product availability hasn’t changed much of late. (During the first couple of years of legalization, regulators gradually allowed more product types – such as edibles – to be sold legally.) And because growth is weaker, certain events – such as supply chain disruptions – can have an outsized effect on the monthly numbers.

“Put another way, cannabis is becoming more ordinary, i.e., like other established retail sectors,” Dr. Armstrong said in an e-mail.

Another factor is that cannabis is much cheaper than it used to be, in part because of excess supply in the market. The industry relied on volume growth to bolster sales. Thus, if consumers are cutting back on their volume of purchases – perhaps for budgetary reasons – that would make it challenging to boost revenue.

Dr. Armstrong noted that cannabis sales have dipped before, only to grow again.

“So, perhaps we will see a jump in December, thanks to holiday season spending,” he said. “And then a January slump as people pay their credit card bills.”

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Editor’s note: An earlier version of this story said Statistics Canada’s cannabis sales data are seasonally adjusted, but in fact, there are no adjustments.