Alberta pot smokers are expected to spend about $940 million on legal weed by 2024, with the province becoming Canada's second-largest market for cannabis behind Ontario, according to a new forecast.

U.S.-based research firms BDS Analytics and Arcview Market Research said in a new report Albertans spent about $216 million on medical and retail cannabis last year. They will more than quadruple that spending in the next five years, the forecast predicts.

Alberta currently has the fourth-highest population in Canada, but its spending on cannabis is expected to lead all provinces except Ontario, where retail and medical cannabis sales are expected to top $2 billion by 2024.

Albertans smoke more than national average

The report says Albertans typically smoke more cannabis than the national average, but the growth in sales will largely be driven by the province's free-market regime of private stores.

"Alberta seems to be taking a fairly liberal approach that will enhance the growth of the market, especially in comparison to the more conservative approach that bigger provinces are taking," said Tom Adams, managing director of industry intelligence at BDS Analytics.

The forecast is based on data from Health Canada and Statistics Canada, along with the research firm's own studies of the Canadian market and retail data from legalized U.S. states.

The report forecasts total retail and medical cannabis sales in Canada will soar from about $570 million last year to nearly $5.2 billion by 2024.

Canada has a real chance to pretty much eliminate [the illicit market] or at least minimize it dramatically. - Tom Adams, BDS Analytics

"Over that six years, we think [Canada] will perform as well or better than any of the U.S. markets that went adult use, despite constraints on the supply chain," Adams said.

Canadian laws allowing adults 18 or 19-year-olds to buy cannabis, depending on the province, will give those markets a large advantage over U.S. states where the legal age is 21, Adams said.

"Canada has a real chance to pretty much eliminate [the illicit market] or at least minimize it dramatically."

Still, BDS Analytics and Arcview Market Research reduced their forecast from earlier this year when they projected Canadians would spend $5.9 billion on cannabis by 2022. The researchers now don't believe spending will even get that high by 2024.

Adams said the earlier forecast was based on sales in Oregon, Colorado and Washington, where he says legislators took a more liberal approach and allowed more stores. He said Canada's "slow start" to legalization meant a downsized forecast.

"There are hundreds of stores in Colorado, Washington and Oregan, in very small states, and a handful of stores in mighty Canada," he said.

Province driving national growth

Another factor slowing the pace of growth is government control of retail sales in several parts of the country, including Quebec and the Maritime provinces.

Alberta is expected to be an important driver of national sales growth, accounting for about 16 per cent of the jump in national sales between 2018 and 2024.

Before legalization, Adams said Alberta already had a strong medical cannabis market, with 2.5 per cent of its population having prescriptions, well ahead of other provinces. He said there was a "mad embrace" of cannabis prescriptions among workers in the oilpatch who are often drug-tested and can avoid losing their jobs by having medical cards.

Alberta Gaming, Liquor and Cannabis has stopped issuing new retail licences because of cannabis shortages. (David Horemans/CBC)

Cannabis use in Alberta has also typically been above the national average, according to Statistics Canada's quarterly survey.

Quebec, by comparison, is the second-largest province but has reported the lowest levels of cannabis use in the country, according to Statistics Canada and BDS Analytics data. Its cannabis stores are run by the provincial government, which Adams said limits sales.

"There's no competition when there's government-owned stores," he said. "They're not out trying to build the business; they're treating it like a dangerous product that needs to have access limited, not something [where] private enterprise is trying to drive sales up."

Alberta is also expected to spend more on legal weed than British Columbia, which has a reputation for having a far more robust cannabis culture. The report notes B.C. continues to have strong competition from so-called grey market retailers who are not licensed to sell pot.

Retail sales in Alberta and other provinces have been hampered by a national supply shortage as cannabis producers were not prepared for an influx of new customers.

Alberta Gaming, Liquor and Cannabis has stopped issuing new retail licenses because of the shortages, and may not approve any more until May 2020. Seventy-five retailers are selling cannabis across Alberta, including 24 in Calgary.

The province's largest city is dealing with a backlog of 132 municipally approved cannabis stores that can't open until the AGLC allows for growth.

According to the report, the supply shortages were not surprising, given the shortfalls experienced in U.S. states that legalized.

Slow distribution, grey market competition

Looking ahead, the report says sales in the legal Canadian market will be held back in part by competition from grey market retailers, mostly in Ontario and B.C., and by slow distribution from online purchases. It can take as long as a week or two from order to delivery.

Still, there are more than 100 licensed producers in Canada with significant first-mover advantage to capitalize on the domestic market as well as international expansion, well ahead of U.S. competitors still dealing with federal prohibition, the report states.

Edmonton-based Aurora Cannabis, which is worth more than $12 billion on the stock market, is the second-largest pot producer in Canada based on market capitalization, trailing only Canopy Growth Corp., which is valued at $14.6 billion.