Elsevier

Drug and Alcohol Dependence

Volume 228, 1 November 2021, 109071
Drug and Alcohol Dependence

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Relationships between increases in Canadian cannabis stores, sales, and prevalence

https://doi.org/10.1016/j.drugalcdep.2021.109071Get rights and content

Highlights

  • Changes in legal cannabis stores, sales, and users from 2018 to 2020 were compared.

  • There was a strong positive relationship between store growth and sales growth.

  • There was a weak positive relationship between store growth and prevalence growth.

  • Legal stores supported legal sales while having little apparent impact on prevalence.

Abstract

Background

This study estimated the relationships between increases in legal cannabis stores, legal cannabis sales, and cannabis prevalence in Canadian provinces between 2018 and 2020.

Method

Government data were used to calculate changes in licensed store numbers, retail sales dollars, and past-three-month users in 10 provinces across six time periods. The resulting N = 60 observations were standardized per million residents aged 15 and up, and then analyzed via linear regression.

Results

Store growth explained 46.3% of the variation in provincial sales growth; each added store was associated with added quarterly sales of $305 (95% CI: $208 to $402) thousand. By contrast, store growth explained only 7.7% of the variation in provincial user growth; each added store was associated with 696 (95% CI: 58–1334) added users.

Conclusion

From 2018 to 2020, Canada’s rapid cannabis retail expansion was strongly related to legal sales growth but only weakly related to prevalence growth. This implies prevalence growth during that period was related more to legalization’s other aspects and/or to the continuation of already-existing trends.

Introduction

When the Canadian government legalized recreational (i.e., non-medical) cannabis use nationwide in October 2018, its 10 provincial and three territorial governments became responsible for regulating cannabis retailing within their respective jurisdictions. Some of those governments in turn gave municipalities partial control over store numbers and locations, and/or let them opt-out of having them. All these governments consequently had to decide whether to restrict or promote cannabis store openings, given two competing policy goals: encouraging existing users to switch to legal products, while discouraging non-users from starting.

This study investigated that important issue by estimating the extent to which increased legal store numbers were associated with increased legal sales, and the extent to which increased stores or increased sales were associated with increased prevalence, in Canada’s 10 provinces between 2018 and 2020. The study’s results could help Canadian regulators develop better retailing policies. The results might also interest other countries considering national legalization, such as the U.S., Mexico, Luxembourg, and Israel.

When preparing for legalization, each Canadian jurisdiction approached cannabis retailing differently. Some opened government-owned stores while others licensed businesses; all allowed online sales in some form. Similarly, while some areas began with relatively few stores, others opened many (Myran et al., 2021). The country’s total legal store count rose rapidly from 168 in December 2018, to 643 in December 2019, and to 1318 in December 2020, though this store growth was not evenly distributed across all provinces.

After initial production shortfalls were resolved (Armstrong, 2021a), legal retail sales experienced similarly rapid increases. Total monthly sales (online and in-store combined) grew from $59 million (Canadian dollars) in December 2018 to $148 million in December 2019, and to $297 million in December 2020 (Statistics Canada, 2021b). They consequently surpassed legal medical cannabis sales in 2018’s 4th quarter and illegal cannabis sales in 2020’s 3rd quarter (Statistics Canada, 2021d). Although online sales initially were important in regions with few stores, by September 2019 they had declined to only 5.9% of the national total (Statistics Canada, 2019), and provinces with ample store coverage saw online sales under 2% (see e.g., Prince Edward Island Cannabis Management Corporation, 2019: 28).

By comparison, estimated prevalence increased more slowly. Prevalence had been rising before legalization, with self-admitted past-twelve-month rates among residents aged 15 and over increasing from 10.6% in 2013 to 12.3% in 2015, and to 14.8% in 2017 (Statistics Canda, 2018). More recent surveys of past-three-month rates showed similar increases, from 14.0% in 2018’s 1st quarter, to 17.5% in 2019’s 1st quarter, and 20.0% by 2020’s 4th quarter (Rotermann, 2021). The latter percentage represented some 6.2 million Canadians, including 2.4 million consuming daily or almost daily.

A relationship between cannabis stores and sales seems natural; indeed, Armstrong (2021a) found that provinces with more stores per capita tended to have higher sales per capita during legalization’s first year. There is also some evidence that sales changes in specific jurisdictions were attributable to store changes there: for example, Ontario’s sales more than doubled when it finally opened its first stores in April 2019 (Statistics Canada, 2021b). However, the strength of the stores-to-sales relationship has not previously been quantified.

The relationship of stores with prevalence is less clear. For example, Wadsworth et al. (2021) found that existing users in Canada who lived closer to legal stores were more likely to purchase cannabis legally, but not examine whether such proximity made non-users more likely to start. Rotermann (2021) had speculated that prevalence increases were largely due to expanded retailing but noted that other factors also mattered. For example, after legalization removed criminal penalties and perhaps reduced social stigmas, non-users might have become more willing to try cannabis, and/or existing users might have become more willing to admit to such use. Furthermore, the effects of store openings could have varied across demographic segments. For example, Turna et al. (2021) found that while previous non-users in Canada were more likely to report using cannabis after legalization, previous users were less likely to do so.

Canada’s prevalence estimates also included substantial margins for sampling error, especially when broken down by province. For example, Alberta’s 4th quarter 2020 rate was 21.7% (95% CI: 17.5, 26.6), meaning that the lower end of the confidence interval was fully one-third less than the higher end (Rotermann, 2021). The estimates also depended on respondents willingly admitting to cannabis use on government surveys. Both factors created some uncertainty regarding the extent to which usage had increased.

In the U.S., most research has confirmed only that prevalence rose, and perhaps only in some age groups, after states passed recreational cannabis laws (Cerdá et al., 2020, Kerr et al., 2018, Kim et al., 2021). One study did find larger prevalence increases among individuals living closer to legal stores (Everson et al., 2019), but another found no significant association between usage intentions and living near stores (Shih et al., 2021). U.S. research has also been complicated by cannabis remaining federally illegal there, meaning that U.S. results might not fully apply in countries like Canada that have legalized nationally.

The presumed but uncertain connection between stores and prevalence has important policy relevance, given provincial governments’ struggles to find the best balance of priorities for retail regulations (Staniforth, 2021). Similarly, some municipal governments continue to opt-out of allowing stores (Fox, 2021), while retailers themselves wonder how many stores each market can support (Hadley, 2021).

Given the above-mentioned issues, this study sought answers to two basic research questions regarding Canada’s legal recreational cannabis market:

  • 1.

    To what extent were increased numbers of stores associated with increased retail sales?

  • 2.

    To what extent were increased stores or sales associated with increased numbers of users?

Section snippets

Study design

The study analyzed aggregate government data via linear regression to estimate the relationships between changes in legal cannabis stores, legal cannabis retail sales, and total cannabis users, from 2018’s 3rd quarter to 2020’s 4th quarter. This study did not require research ethics approval, as it used publicly available data that did not pertain to individuals.

Data

Statistics Canada (2021a) conducted a National Cannabis Survey (NCS) each quarter in 2018 and 2019, plus in the 4th quarter of 2020;

Sales growth

The left side of Table 3 shows the regression from using store growth to explain sales growth. The relationship was highly significant and had good explanatory power; however, there was one potential outlier and White’s test suggested potential heteroskedasticity. The table’s right side shows the results of repeating the regression after excluding the outlier: the heteroskedasticity indication disappeared while the other values remained similar. The revised regression indicated that provincial

Overall conclusions

This study found a strong positive relationship between increased licensed stores and increased legal retail sales in Canada’s 10 provinces between 2018 and 2020. By contrast, it found only a weak positive relationship between increased stores and increased prevalence, and between increased sales and increased prevalence. These findings were robust with respect to alternative data sets and added control variables.

The minimal stores-to-prevalence relationship might have been due to many factors.

Role of funding source

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

Contributors

I am the sole author.

Data statement

Upon publication, a spreadsheet containing the data and intermediate calculations will be posted on my university’s Digital Repository web site.

Declaration of Competing Interest

None.

Acknowledgements

None.

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