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Since its legalization in 2018, Canada’s cannabis industry has undergone significant evolution—marked by rapid expansion, early missteps, and more recently, cautious stabilization. While economic turbulence, regulatory hurdles, and lingering stigma previously hindered profitability, the industry is showing signs of renewed opportunity in 2025. Today, government policy adjustments, market consolidation, and a maturing consumer base suggests reasons for some optimism for the years ahead.
Industry Consolidation: Survival of the Savviest
Between 2019 and 2023, Canada’s cannabis sector experienced a wave of corporate retrenchment. Over-licensing, inflated valuations, and unmet retail expectations resulted in widespread downsizing and insolvencies. Health Canada reported that the number of active federal cultivation, processing, and sales licences decreased by 10.8% from December 2022 to December 2023, indicating industry contraction and consolidation¹.
However, this downsizing may not spell doom. Rather, it reflects a maturing market—where overextended producers are giving way to leaner, more compliant, and innovation-focused firms. A 2024 update from Innovation, Science and Economic Development Canada (ISED) confirms that merger and acquisition (M&A) activity has become more strategic, with vertically integrated firms now dominating the landscape².
Expect continued consolidation, particularly among companies focused on product diversification, export readiness, and environmental sustainability—areas now emphasized in federal cannabis licensing and compliance reviews³.
Regulatory Recalibration and Federal Reviews
Health Canada’s legislative review of the Cannabis Act, initiated in 2022, reached its final phase in 2024. Alongside the expert panel’s final report³, Health Canada also launched formal consultations to modernize the Cannabis Regulations—seeking stakeholder input on THC limits, labeling requirements, and product classifications⁴. Key policy shifts under consideration include:
- Reducing the excise duty burden on small producers, a common complaint that limits profitability⁵.
- Revising THC potency caps and packaging rules to improve transparency and reduce misuse⁴.
- Expanding access to medical cannabis and reviewing administrative barriers within the ACMPR framework⁶.
Meanwhile, Statistics Canada reports that household spending on legal cannabis rose by 10.6% in 2024, while the illicit market share dropped to a record low of 27%, reinforcing public trust in the regulated industry⁷.
International Trade and Economic Diversification
In 2025, Canada’s cannabis sector is increasingly outward-looking. While domestic overproduction still presents a challenge, medical cannabis exports have gained traction. As of February 2025, Health Canada had issued 82 export permits to destinations including Australia, Germany, and Israel⁸.
Global Affairs Canada and the Trade Commissioner Service are also actively promoting cannabis-related life sciences, biotechnology, and Agri-tech products as high-potential export categories⁹. This global outlook allows Canadian firms to diversify their revenue streams and leverage the country’s world-leading quality control standards.
Green Shoots for a Green Sector
Canada’s cannabis industry is no longer in its infancy—and that may be its greatest strength in 2025. As federal reviews address early regulatory missteps and businesses align with evolving consumer demands, the outlook has become more pragmatic and sustainable. Today’s producers, policymakers, and investors are equipped with better data, clearer rules, and more mature strategies to drive long-term growth grounded in compliance and innovation.
Ready to grow in Canada’s evolving cannabis market?
Zeifmans knows and understands the business side of the cannabis sector. We can help you navigate shifting regulations, optimize your tax strategy, and position your business for sustainable growth—domestically and internationally. Connect with our audit, tax and advisory teams today to learn how we can support your next move.
Footnotes
- Health Canada. (2024). Commercial Cannabis Licence Holders – Summary Table. Retrieved from: https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/research-data/commercial-applications-licences.html
- Innovation, Science and Economic Development Canada. (2024, February 9). Government of Canada Creates Forum to Discuss Challenges in the Canadian Legal Cannabis Industry. Retrieved from: https://www.canada.ca/en/innovation-science-economic-development/news/2024/02/government-of-canada-creates-a-forum-to-discuss-challenges-in-the-canadian-legal-cannabis-industry.html
- Health Canada. (2024). Legislative Review of the Cannabis Act: Final Report of the Expert Panel. Retrieved from: https://www.canada.ca/en/health-canada/services/publications/drugs-medication/legislative-review-cannabis-act-final-report-expert-panel.html
- Health Canada. (2023). Consultation: Potential Amendments to the Cannabis Regulations. Retrieved from: https://www.canada.ca/en/health-canada/programs/consultation-cannabis-regulations.html
- Canada Revenue Agency. (2025). Operating a Cannabis Business – Excise Duties. Retrieved from: https://www.canada.ca/en/revenue-agency/campaigns/cannabis-taxation.html
- Health Canada. (2025). Medical Cannabis – Research and Usage Data. Retrieved from: https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/research-data/medical-purpose.html
- Statistics Canada. (2024, March 18). National Cannabis Survey, Q4 2023. Retrieved from: https://www150.statcan.gc.ca/n1/daily-quotidien/240318/dq240318e-eng.htm
- Health Canada. (2025). Medical Cannabis Export Permits – 2025 Data Summary. Retrieved from: https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/research-data/medical-purpose.html
- Global Affairs Canada. (2024). Trade Commissioner Service – Life Sciences Sector. Retrieved from: https://www.tradecommissioner.gc.ca/sectors-secteurs/life-sciences-sciences-de-la-vie.aspx?lang=eng
