Is Growing Cannabis Profitable in Canada?

In recent years, Canada has become one of the world’s leading producers and exporters of cannabis. The country’s favorable climate and skilled workforce have made it an ideal place for growing cannabis.

Of course, there are some risks associated with growing cannabis. These include the potential for criminal activity and the challenges of operating in a highly regulated industry. However, these risks can be mitigated with careful planning and a commitment to compliance.

For domestic sellers, the industry is moving at a slow but steady pace. But overall, cultivating marijuana in Canada is a profitable financial venture in the long term, particularly for producers who export their products. 

Online businesses through strong social media campaigning and by making use of effective local SEO in Canada have managed to take their cannabis business to the next level.

This article serves as a great resource for those looking to start a cannabis business in Canada. It highlights important things you need to know about the Cannabis industry in the country and gives you a basic idea of how profitable your business can be, whether online or domestic.

Canada’s Push for the Legalization of Cannabis 

Cannabis was previously legal in Canada, but only for medical purposes. However, under the guise of this justification, marijuana was being sold to the public indiscriminately. 

This haphazard drug distribution posed a social as well as a health risk. Therefore, to regulate the illegal retail of the drug and gain control of the cannabis industry, The Cannabis Actwas passed by the Canadian government. 

The bill that was passed almost 4 years ago made Canada only the second country to sanction the use of pot.

Ever since its legalization, the cannabis industry has generated a lot of tax revenue for the government. But the million-dollar question remains: what has it done for the cannabis growers? 

Are Cannabis Growers Profiteering? 

Although the domestic sellers seem to be struggling a bit with generating decent profits, the exporters are thriving. 

Canada is the world’s largest exporter of cannabis flowers and oil. Cannabis shipments are increasing and don’t appear to be slowing down. 

There are many reasons for the global domination of Canada in сannabis export. Some of those reasons are explored below. 

Why Is International Trade Booming? 

The laws surrounding marijuana legalization are a major factor in the proliferation of the cannabis industry in Canada and its success internationally. 

Newly licensed growers can import start-up materials like seeds and plants from abroad so they can cultivate high-quality marijuana that is at par with international standards. Several policies such as this have made it possible for growers to compete in the global market and maximize their profits. 

Also, licensed producers (LPs) who can cultivate for the export market are actually only found in Canada, with one grower in the Netherlands being the exception. 

The companies involved in cultivating cannabis are generating enormous profits from its export since there are no rivals in the international market. However, things are different in the domestic market! 

Why Is Domestic Trade Struggling? 

Despite the investments in the cannabis sector by the government, the nascent industry has not been able to generate high-profit margins for the domestic sellers. 

There are multiple reasons why the industry has not been able to live up to the expectations of people involved in the distribution of cannabis domestically, compared to the US where the profits are soaring for the investors. Let’s take a look at some of these reasons below.

1. High Supply, Low Demand 

Split between medicinal and recreational growers, there are 800 licensed cannabis producers in Canada. 

However, Canada is a country with a relatively small population. Analysts argue that the introduction of so many businesses contributed to marijuana’s overproduction. This resulted in millions of grams of the drug being discarded since there was insufficient consumer demand. 

Profits have been elusive for most investors, leading companies like Aurora Inc., and Tilray Inc., to do mass lay-offs and shut down operations in several places. 

In 2020, Canopy Growth Corp. ceased operations in 5 facilities across Canada, laying off 220 employees in the process. This was done to maximize profits and save the company from a loss of $150 to $200 million.

2. The Global Pandemic

The temporary lockdown due to Coronavirus saw a decrease in the profit for the growers. While the exporters were able to quickly get back up on their feet, the domestic sellers struggled a bit. 

The Covid policies issued by the federal and provincial governments required the closure of all non-essential businesses. 

Cannabis cultivation and retail were deemed essential. However, several restrictions were placed on the latter, which reduced the overall sales of the product. 

The government provided salary subsidies to the businesses that suffered losses so they could keep their employees. The pandemic did, however, result in more employment lost than gained.

3. Heavy Taxes 

Although generating tax income was not the main goal when the bill for legalization was tabled, it has unquestionably increased overall tax collection. 

The overall cost of the product rises due to taxes and overhead expenses, doubling the prices in the legal market. This compels customers to purchase from illegal sources rather than from authorized suppliers. 

Therefore, the sales drop for the licensed cannabis producers and coupled with heavy taxes levied by the government, the profits further decrease. 

Consumers have complained about the problems regarding the accessibility of legal cannabis due to high prices. This results in them sticking with their traditional dealers. 

Conclusion 

Since there is little to no competition in the international market, Canada has been able to dominate the trade of cannabis oil and flower for several years in a row. However, things are different within the country as there is a lot of competition. 

Having said that, it is not an unsolvable issue and with correct business strategies and government support, domestic sellers will be able to generate better profits. 

Also, it cannot be discounted that this is a nascent industry with only four years of experience and still has managed to show upward growth in these years. 

Even if the profits might not have been as expected, the domestic trade still has a lot of promise for the investors and is expanding at a slow but steady pace.