A new report from Deloitte and Canadian cannabis data analytics company Neobi compares Canada’s legal and illegal cannabis markets, highlighting the advantages and challenges that the legal market faces.
On average, the price of cannabis flower in the legal market was about 10% more expensive than from illegal market. While the average cost of 3.5 grams on the legal market was $9 and $6 on the black market, the average price for 7 grams was $5.84 and $5.35, respectively, while 28 grams was $4.32 and $4.24.
The study scanned products from 624 legal private recreational cannabis stores and 57 illicit online stores in May and June 2023. Unsurprisingly, the scan found a greater variety of products in the illicit market, with more of a focus on cannabis flower and extracts, as well as larger package sizes than its legal counterparts.
This greater variety was highlighted by cannabis edibles, often with more THC and in more recognizable candy formats than legal edibles. Illegal stores were also not held back by SKU size limits like the 30-gram purchase limit for legal stores, which also likely helps the illicit market out-price the licit one.
Although both sides of the market show a majority of flower products sold in 3.5 gram SKUs, there was a more even balance of different sized SKUs at illegal stores than in the legal market. Legal stores were far more likely to carry 3.5 gram SKUs.
In the illicit market, 17.3% of flower products were in greater-than-28-gram package sizes, including a small amount as large as 56 grams (0.6%), 112 grams (6%), 224 grams (6.1%), and 448 grams (4.6%).
While unregulated, illegal websites had a high number of flower and extract products listed, they were also less likely to carry pre-rolls, beverages, and vapes compared to legal recreational stores.
The price difference between the scanned legal and illegal sources of dried cannabis flower was about 20% on average, with illegal online stores being cheaper than their heavily regulated and taxed counterparts. This price difference was more evident in smaller SKUs, while those at 7 gram and larger were
The average price a gram of cannabis flower in the illicit market was $6.24 per gram, while it was $7.96 per gram in the legal market. On average, illicit flower product prices were 78.4% of those in the legal market indicating prices in the legal market are catching up to the illegal market as compared to a 55% difference in 2019.
This price difference was most pronounced in smaller SKUs like 3.5 gram, where the illegal market was 67.8% cheaper than the legal market. The pricing for 28 gram offerings was almost the same, with average illicit prices 98.1% of the average legal recreational prices.
For a 28 gram SKU, the legal and illegal market prices were $4.32 and $4.24 per gram, respectively.
All of the sampled illegal cannabis websites allowed e-transfer as the primary payment method, with even accepting Bitcoin—only a few accepted credit cards. Unsurprisingly, 78% of illegal sites had no age gate, and many products used “common television, film, and other media brands,” potentially adding to buy appeal.
Products like psilocybin mushrooms, LSD, and DMT were found on 63% of illegal websites.
The report also says there were many instances of these illegal websites containing malware and even possible identity theft phishing schemes.
All the websites selling illicit cannabis added tax for all products at checkout, although the report says it’s uncertain whether these taxes are remitted to the government.