Ontario is Canada’s largest recreational cannabis market — and after years of astonishing sales growth, it is now showing signs of saturation. The province boasts the highest number of cannabis retail stores per capita of any province in the country. It’s why the Ontario cannabis market has been the one to watch.
Cannabis retailers considering Ontario should understand the market before opening or expanding. Are you a cannabis retailer thinking about opening up or expanding into the Ontario space? Read this first.
Ontario’s Cannabis Market Hits Key Sales Milestones
Ontario’s cannabis sales figures show the scale of Canada’s largest recreational market. By the end of 2021, Ontarians were spending a whopping $145.7 million worth of legal grass, according to October sales data published by MJ Biz Daily. Toronto, Canada’s largest city, unsurprisingly topped the list with $49.5 million in sales in October 2021. Ottawa, our nation’s capital, was not that far behind, with $14.5 million.
At the start of 2022, Global News reported that retail sales of cannabis in Ontario had added a total of $13.3 billion to Canada’s economy since legalization. The province has also earned about four billion in tax revenue.
Few updated statistics exist on the number of provincial residents who admit to consuming cannabis recently. But, at least 18 percent of Ontarians admitted so much in 2018.
As of September 2021, there were 1,000 open cannabis retailers in Ontario, with most locations concentrated around the Greater Toronto Area (GTA). Since the 1,000th store opened its doors, retailers have likely opened dozens more new locations.
CBC reported in early 2022 that there was a renewed focus on Northern Ontario and other rural areas in the province. There were already 88 dispensaries operating in the North, including “4 in Greater Sudbury, 17 in North Bay, 11 in Sault Ste. Marie, ten in Timmins and at least one or two in most fair-sized towns.”
Ontario’s rapid growth signals that market saturation is approaching for cannabis retailers. The market will reach saturation soon, and not every cannabis retailer will survive.
Ontario Cannabis Market Faces Three Key Shifts
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Black Market Still Threatens Ontario Cannabis Sales
In 2021, the Ontario Cannabis Store (OCS) estimated that most of the province’s cannabis sales were still happening through the black market. By the end of the first quarter of 2021, only 44 percent of cannabis purchases happened at a licensed retail location.
With the boom in dispensary openings throughout the last year, legal sales will likely see a slow increase. The slow increase is because more Ontarians get easier access to legal sources. However, Ontario’s black market continues to threaten the long-term success of the adult-use market.
As a retailer, your competitive edge over the black market counts. Offer better services, prices, selection, and experiences. The more you offer, the more likely you’ll prevail over the lingering black-market businesses in your community.
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Cannabis Retailers Face Likely Store Closures
One look at the AGCO map of retail locations currently open for business and Ontario is clearly flooded with weed.
Experts disagree on how many cannabis retailers a region can support before the market tips. It may be as low as one store per 7,500 people or as high as 50,000.
But with 1,000 stores and counting, many analysts are predicting a market correction in the coming years. Too many cannabis retailers now operate, combined with low-profit margins and stagnating interest. All of them can’t remain profitable in perpetuity.
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Consumers Still Love Flower
Dried flower and pre-rolls continue to dominate Ontario cannabis sales despite new product launches. But flower remains king.
In one analysis of the Ontario market from BNN Bloomberg, more than 70 percent of all sales in 2021 came from dried flower and pre-rolls alone.
The report indicated, “That the dried flower category remains competitive among retailers and producers alike, while pre-roll sales likely saw a boost due to “impulse/convenience” purchases at retail stores.”
Cannabis retailers may want to pay attention to this ongoing consumer trend. While exciting new products tend to get a lot of media attention, high-quality flower continues to drive steady sales.
Ontario Cannabis Retailers Must Prepare for Correction
For cannabis retailers in the Ontario market, the tsunami of store openings isn’t likely to slow down any time soon. More than a hundred new locations are currently in the “In Progress” phase of an application, according to the AGCO interactive map.
Ontario cannabis retailers should prioritize profit margins, customer retention, store experience, and loyalty programs to cement their current market share.
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