Despite Canada’s cannabis legalization approaching its third anniversary, some municipalities still ban licensed stores. Other countries that have talked about legalizing cannabis also tend to curtail legal access. But my research suggests that those policies are probably counterproductive.
Canada legalized recreational cannabis on October 17, 2018. After initial product shortages eased in spring 2019, store openings and retail sales increased. Monthly sales in July 2021 are $339 million and national store total sales now exceed 2,600.
The number of users has also increased. In 2018, 14 percent of the population aged 15 and older admitted to using cannabis. This jumped to 20 percent in 2020, which equates to 6.2 million users.
Canada’s approach to cannabis is very different from that of the US. But the two countries share one detail: municipal governments refuse to allow cannabis shops.
Read more: What the United States can learn from Canadian cannabis clarity
local store restrictions
Several million Canadians live in places that ban licensed stores, including cities such as Mississauga, Ont., and Surrey, BC.
Meanwhile, in the US, most municipalities in California opted to allow stores after recreational sales began in 2018. Most recently, 71 percent of cities in New Jersey and 90 percent in Maine did the same. Communities in New York have until December 31 to make a decision.
Licensed shops can provide economic benefits. But some politicians and residents worry that they will also promote cannabis use and crime.
This obvious trade-off inspired my research.
Stores, Sales and Users
My study compared the per capita growth in store numbers, recreational cannabis sales dollars, and user numbers in Canada from 2018 to 2020.
Stores and sales were closely related. The difference in provincial store growth explained 46 percent of the difference in sales growth. That’s a lot, considering that many other factors, such as pricing, consumer taste, and season, also affect sales.
In contrast, store growth accounted for just eight percent of user growth. A simple quarterly trend better explained user growth.
In other words, no matter how many shops were open, there was almost the same user growth. But where shops were plentiful, users increasingly made purchases legally.
One reason for the weak store and user relationship was that user estimates came from government surveys with large error margins. They cannot detect subtle changes.
legal vs illegal market
The black market provides another possible reason. Licensed shops clearly extend access to legal products. But they only marginally increase overall reach if illegal dealers are already widespread.
Consider the southern Ontario city of Hamilton. In January 2019, there were 34 illegal dispensaries and countless online dealers in the city.
So when the first licensed store opened three months later, it suddenly made legal products accessible. But the city’s total cannabis supply barely increased.
Advertising restrictions probably played a role. Cannabis retailers could not use advertising explosions or free samples to drive demand.
Canada’s 2018-20 user growth may instead come from the removal of the criminal penalty of legalization. This could have encouraged non-users to start even if nearby shops were open.
Or maybe the growth just represented ongoing trends. Cannabis use in Canada has been on the rise since 2010.
My study analyzed province-level results. But it also affects other government levels.
Are opt-outs mostly cop-outs?
At the municipal level, politicians banning licensed shops may think they are protecting residents.
But my study implies that communities will see similar user growth after legalization whether they allow stores or not.
Those users will be buying legally when local shops open. But without such stores, users would continue to visit illegal sources where products could be misrepresented or contaminated.
This means a ban on community stores could lead to more crime and health problems, rather than lessen them.
It’s okay for politicians to briefly delay store licensing while updating local rules. But beyond that, retail opt-outs run the risk of becoming political cop-outs that hide rather than address problems.
Similar arguments apply at the national level when countries are legal.
Countries doing legalization need legal access
For example, the courts in Mexico ruled in 2018 that cannabis must be legal there. But its Congress still hasn’t passed the law. A proposed bill would have legalized cannabis but made it very inaccessible.
South Africa has similarly been slow to implement its court’s 2018 ruling.
Both countries should reconsider their reluctance. If they do not provide practical legal access to a theoretically legal substance, they risk incurring the pain of legalization without the benefit of it. The main winners will be illegal dealers.
Switzerland and the Netherlands should also consider this issue during their cannabis pilot studies next year. As other countries like Luxembourg, Italy, Germany and the US should consider legalization
Of course, there’s more for sale than just stores. Research shows that adequate supplies, convenient shopping hours, and competitive prices also matter. And don’t forget product quality or package design.
Read more: Give cannabis producers more packaging and labeling flexibility
Cannabis legalization is complicated. Canada is still learning from its experiences. Hopefully other countries can learn from them as well.