Canada’s recreational cannabis market grew just 4% year-over-year in the first quarter of 2025, continuing a trend of decelerating growth from previous years, according to a new industry report.

The analysis from Zuanic & Associates, which examined retail data from Hifyre, shows the market growing at a much slower pace versus the mid-teens growth seen in 2022 and 2023.

Despite ongoing industry consolidation efforts, the cannabis market appears to be becoming more fragmented. The top three companies held 27% market share in the first quarter of 2025, down from around 31% in the same quarter last year, the report found.

Several midsized producers posted strong growth despite the overall market slowdown. Companies with double-digit sales increases include:

• Auxly (+32%)
• Cannara Biotech (+37%)
• Canopy Growth (+28%)
• Weed Me (+30%)
• Rubicon Organics (+30%)

Meanwhile, larger players, including Tilray, Village Farms International and Decibel, experienced double-digit declines in their domestic market share. According to the report, that likely reflects strategic shifts rather than competitive failures.

“For at least the first two, the share loss relates to an increased focus on sustainable sales growth,” the report noted, adding that these companies are shifting “away from deep discounts and the value end of the market.”

The analysis also pointed to format shifts in Canadian consumer preferences. Flower declined from 38% of sales in the first quarter of 2024 to 36% in the first quarter of 2025, while pre-rolls grew from 30% to 32% and vapes from 17% to 18%.

“Compared with the larger U.S. market, vape and edibles are underindexed in Canada, while pre-rolls are overindexed (flower is only slightly underindexed),” Pablo Zuanic, the report’s author, wrote.

Segment leadership shows varying degrees of market concentration. In vape products, the top five companies control 57% of the market, while in flower they hold 49% and in pre-rolls just 34%.

Retail flower prices have largely stabilized, averaging C$5.09 per gram in the quarter compared to C$4.89 a year earlier. However, pricing strategies vary by company, with premium producers like Cannara (C$8.24 per gram), Rubicon (C$8.30) and Aurora (C$7.68) commanding substantially higher price points than the category average, Zuanic said.

Organigram, including its freshly-acquired Motif Labs, maintained its market leadership with 11.6% share, while Tilray dropped nearly 2 percentage points year-over-year to 9.1% and Village Farms fell 1.8 points to 6.2%.

The report suggests that export opportunities may be becoming more important for Canadian producers, noting that “the pull of the export markets is also impacting domestic market share performance and operator economics,” as exports have helped stabilize domestic pricing.

Zuanic found that despite recreational legalization being in place for over six years, Canada’s cannabis market remains underdeveloped versus many U.S. states on a per capita basis. The report estimates Canadian recreational per capita spending at approximately $100, significantly lower than states like Michigan (>$300) and Colorado (>$200).

Israel took a firm stance against Canadian cannabis imports with the announcement of steep tariffs on the products.

Israel’s minister of economy and industry plans to impose tariffs as high as 165% on Canadian cannabis imports for the next four years, according to StratCann. The decision, which still requires approval from Israel’s Knesset Finance Committee and Finance Minister, follows allegations of “product dumping” into the Israeli medical cannabis market.

“Following the economic investigation I led, which found that cannabis is being imported from Canada at dumping prices causing significant damage to the local industry, and following the recommendation of the advisory committee that approved the findings of the investigation, the Minister of Economy decided to impose an anti-dumping duty on cannabis imports from Canada,” Dany Tal, director of import administration & commissioner of anti-dumping measures at Israel’s Ministry of Economy, said in a Thursday LinkedIn post.

The Israeli tariff decision followed a lengthy investigation that began with a preliminary report in July 2024 proposing tariffs from 63% to 369%, and a final report in November 2024 arguing for rates as high as 175%. However, Israel’s Ministry of Health opposed the tariffs option, with Ran Ridnik, head of economy, regulation and innovation at the ministry, previously expressing dismay at the proposed rates and the process used to determine them.

The final tariffs vary significantly by company:

• Decibel (12%)
• Village Farms (28%)
• Organigram (53%)
• Tilray (70%)
• 165% for most other Canadian imports.

Adam Coates, chief revenue officer at Decibel Cannabis, told StratCann their lower rate resulted from cooperation with authorities: “The lower potential duty rate reflects the cooperative approach we’ve taken and the confidence in our pricing practices.”

Other Canadian producers expressed frustration with the decision.

“We remain of the firm belief that the investigation’s methodology and interpretations were seriously flawed and that there is no credible basis for the tariffs placed on our company,” said Mark McKay, director of communications at Organigram. “The appropriate tariff amount for Organigram is zero.”

Mike Gorenstein, CEO of Cronos, which does extensive business in Israel, including local production, was more blunt.

“Inventing arbitrary formulas to make tariffs is bad for consumers and worse for patients,” he said. “I would have thought we just learned that in the last week.”

Israel has been one of a handful of significant export markets for Canadian cannabis companies, along with Australia, Germany, and to a lesser degree, the U.K.

The International Journal of Drug Policy released a research report titled, “Association of recreational cannabis legalization with changes in medical, illegal, and total cannabis expenditures in Canada,” which found that adult use legalization appeared to be displacing the illegal cannabis market.

The report said its data showed that when recreational cannabis laws (RCL) were passed, medical cannabis represented 11.8 % of the market and illegal cannabis 88.2 %. The research determined that at five years post-RCL implementation, medical cannabis decreased to 3.7 %, illegal cannabis decreased to 24.3 %, and licensed cannabis took over 72.0 % of the market.

The report stated,

The overall cannabis market increased in size by 75 % over these 5 years. Illegal cannabis expenditures increased between RCL passage and implementation but decreased immediately post-implementation and had a significant decreasing trend.

The authors did caution that the data could potentially be uncertain when it came to spending for illegal cannabis.

Research method

The researchers said they examined publicly available Canadian national estimates of quarterly household expenditures on medical cannabis, illegal cannabis, and all cannabis product types combined. For the illegal data, cannabis spending was estimated based on several metrics, including the prevalence of use, the frequency of use, and the average amount used per use day. According to the report, the prevalence and frequency of use were estimated based on population-based national surveys. The authors said that the overall size of the cannabis market was first estimated and then illegal expenditures were derived by subtracting medical and licensed sales from the overall estimate.

The study stated that Illegal cannabis prices were gathered from self-reported survey data and crowdsourced data on flower products, while medical and licensed cannabis prices were determined directly from medical producers and retailers for flower and later oil product.s

Conclusion

The report concluded that legalization in Canada appears to be achieving one of its primary goals by displacing the illegal cannabis market. However, the authors also noted that the medical cannabis market has also been affected, meaning less clinical oversight.

“Moreover, the overall cannabis market in Canada has grown substantially in the first five years of legalization, suggesting consumption has increased at the population level,” the report stated. The researchers warned that public health could be impacted by such a big increase in the consumption of legal adult-use cannabis.