The Canadian cannabis market grew steadily through 2022 despite facing challenges from excessive taxation and black market competition. In Q3 2022, the market showed improvement over 2021, driven by record production figures and expanded delivery options. Understanding these market dynamics helps cannabis retailers adapt their strategies for sustainable growth.
Major developments in 2022 include cannabis delivery partnerships with Uber Eats and DoorDash, plus the federal government’s long-overdue Cannabis Act review. These changes signal meaningful progress in market maturation and regulatory evolution.
Canadian Cannabis Market Growth in 2022
The Canadian cannabis market moves steadily toward greater market saturation, with production reaching record levels. According to a report released by Ibisworld in July 2022, cannabis production hit a record $12 billion. Ibisworld predicts 26.7 percent growth this year and 83 percent annualized market size growth from 2017 to 2022.
Cannabis Sales by Province
MJBizDaily reported that cannabis sales reached $2.55 billion by July 2022. Manitoba and Newfoundland were the provinces that saw the most significant sales increase from the previous year and now represent the regions with the greatest opportunity. Production data and sales figures demonstrate growth across all provinces, with Manitoba and Newfoundland emerging as growth leaders due to increased consumer adoption and retailer expansion.
Cannabis Delivery Through Major Food Apps
Cannabis delivery through major food platforms has become reality in select Toronto locations, marking a significant shift in market accessibility. In 2022 DoorDash partnered with Superette and Starbud, while Uber Eats works with Tokyo Smoke.
UberEats and Leafly Integration
UberEats partnered with Leafly to enable Toronto residents to order cannabis through the Leafly online store with at-home delivery. UberEats ensures order fulfillment through CannSell-certified local staff members.
Both services currently operate as limited pilots in Toronto, establishing the foundation for broader cannabis ecommerce solutions for online ordering expansion. And likely one that will expand to other provinces that allow for cannabis delivery, like BC.
Infused Pre-rolls: Rising Cannabis Product Category
According to a recent report by MJBizDaily, one of the hottest products in the Canadian cannabis market is the relatively new infused pre-roll. Infused pre-rolls play off the popularity of conventional pre-rolls but elevate the product with additional concentrates and terpenes for a premium product.
Infused Pre-roll Sales Growth
Infused pre-roll sales surged more than 1,000% in one year, reaching $16.6 million in total annual sales, making this category attractive for retailers seeking trending products. Retailers can use cannabis retail analytics for tracking product trends to identify and stock high-performing inventory.
Pre-roll Multi-pack Preference Emerges
Another shift in consumer demand, as noted again by MJBizDaily, is the move towards larger pre-roll multi-packs over single pre-rolls. The two pre-roll brands currently capturing the largest share of the Canadian pre-roll market are Hexo Corporation’s Redees (cigarette-style joints) and Weed Me (Ontario-based producer).
Cannabis Retailer Concerns About Taxation
Across the country, but especially in Ontario, retailers oppose the current restrictive supply and excessive taxation model.
Ontario’s Markup and Tax Impact
The Ontario government collected over $500 million in cannabis revenue in 2021, reducing retailer profit margins and pressuring their operational viability. As CBC reported in September 2022, the Ontario government pulled over $500 million from cannabis sales in 2021.
The Ontario Cannabis Stores, the only provincial distributor, applies a 31% markup. Retailers report that 44 cents of every dollar spent on cannabis flows to the government through taxes and markup. Understanding costs to open a cannabis dispensary in Canada is critical for realistic profitability planning.
Taxation as Black Market Driver
Retailers across Canada report that high taxation limits their competitiveness against the black market. Legal retailers face significant cost disadvantages in competing with illicit cannabis suppliers, who avoid government markup and taxation entirely. When legal cannabis costs $100 per ounce and illicit options cost $50, consumers lack incentive to purchase legally.
Cannabis Act Federal Review Delayed Until 2023
Producers, retailers, and consumers awaited the federal Cannabis Act review, originally scheduled for 2022 but delayed until September 2023 due to the pandemic.
Federal Review Scope and Goals
The federal government’s review examines which aspects of legalization succeeded and which failed, with goals to assess health and safety impacts on Canadians and evaluate legal market performance.
Industry Priorities for the Review
Cannabis businesses prioritize changes to THC limits, marketing restrictions, and the taxation scheme that currently limits retailer profitability.
There is currently no release date for the finalized report, but the government is taking feedback through an online questionnaire until November 2022.
Market Maturation and Long-term Growth Outlook
Market forecasts indicate steady cannabis consumption growth through 2030. Market maturation reduces price volatility and helps resolve supply and distribution challenges. Cannabis delivery and federal regulatory review represent key infrastructure improvements for long-term market stability.
Cannabis retailers need technology solutions that adapt to regulatory changes and strengthen customer relationships regardless of federal review outcomes. Smart printed menu solutions for compliance and other integrated tools ensure retailers maintain flexibility as regulations evolve.
TechPOS provides an integrated solution that enables retailers to build brand loyalty, improve customer service, and maintain compliance across evolving regulations. Cannabis retailer profit margins and income analysis demonstrate that retailers with efficient systems can compete more effectively. TechPOS extends beyond point-of-sale functionality, continuously evolving to provide retailers with competitive, adaptable tools for success.