US Insights

Canada Legalizes Marijuana and Opens a New Door for Brands

Catherine Lang

Analyst

Retail 10.18.2018 / 12:00

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Canada’s recreational cannabis market is expected to be worth $3 to $5 billion.

Recreational cannabis became legal in Canada this week under the country’s Cannabis Act, making the nation the first G7 country to legalize recreational consumption. Here’s what you need to know about Canada’s cannabis legalization:

Who can consume?

Canada’s domestic cannabis market will be fueled by recreational and medical users alike. Adults 18 and older (legal ages vary by province and territory) will be allowed to possess and share up to 30 grams (the equivalent of thee packs of cigarettes) of dried cannabis with other of-age individuals. Medical users will be permitted to possess 150 grams.

What about product?

The following cannabis product forms will be legal across recreational and medicinal retail outlets:

  • Fresh (dry form) cannabis
  • Edibles, such as gummies
  • Liquid, such as vapor liquids
  • Concentrated THC in solid or liquid form
  • Origin seeds

To discourage the illegal market, individuals cannot possess more than one flowering or budding plants, or more than four non-flowering plants.

Where to purchase?

Canada’s provinces and territories are responsible for the distribution and sale within their borders, each with their own excise stamp. Dispensaries are divided among government-run and privately licensed stores, yet all geographies will have access to purchase cannabis online. With Canada’s legislation working to regulate government, private and online sales the country is using omnichannel to their advantage across educational, sales, and fulfillment initiatives.

Why does this matter in retail?

Canada’s recreational cannabis market is expected to be worth USD3 billion to USD5 billion in consumer sales by 2021.  Edibles and infused products, which are anticipated to be legally introduced to the market in October 2019, are expected to drive the market.

The Canadian cannabis industry is currently dominated by key pharmaceutical players with interest peaking from Molson Coors, Diageo, and Constellation Brands in category expansion. As retailers clamor for newer and differentiated assortments across categories, midsize to large CPG brands will need to better understand what makes these emerging smaller cannabis products unique from a health standpoint. The authenticity factor will be a challenge for larger brands that will need to overcome increased localization and new category products that have first infiltrated micro economies in areas of early legalization. We see mainstream hemp and CBD infusions are already a common occurrence, but recreational legalization expands the product mix for a greater experiential shopping and consumption experience.

Kantar Consulting Point of View

CPG suppliers should consider the following as they measure the impact of legalized recreational cannabis in Canada:

The cannabis consumer: The consumer is undergoing a rebranding less akin to “Dazed and Confused” and more aligned with holistic well-being needs (Figure 1). Giving in to the stoner stereotype is a dated approach that will limit growth.

Supplier implication: Understand moments and use cases to identify where you can play – or where you need to compete. These seemingly more authentic and trustworthy brands are a stark contrast from newly interested national brands, making the lifestyle play evermore relevant. With consumers reporting lifestyle and emotionally motivated factors for consumption in Canada:

Canada Rec Weed

Product development: There continues to be apprehension about the recreational component of the cannabis market. How brands position themselves through new product development and in understanding the holistic value that cannabis can provide to consumers will shape their success in the category.

Supplier implication: Understanding the evolution of the market is hard. Those CPG brands willing to lean in and educate themselves and align with the holistic lifestyle of the cannabis consumer will be best-positioned to grow in an uncomfortable place.

Source: Kantar Consulting

Editor's Notes

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