Quebec's Cannabis Monopoly: A $2 Billion Black Market Thrives While Government Declares Victory

How the SQDC repeats Uruguay's mistakes and why government monopolies fail at market displacement

Quebec's Société québécoise du cannabis (SQDC) wants you to believe they're winning the war on illegal cannabis. Their latest annual report celebrates 21.8% sales growth and $118 million in dividends remitted to the provincial treasury. Politicians toast success. Press releases proclaim victory. The Crown corporation expands to 104 stores.

There's just one problem: the math doesn't work.

When you apply proper total addressable market (TAM) calculation methodology—the same framework we developed to identify phantom demand in government cannabis estimates—Quebec's claimed success collapses. The real story? SQDC captures roughly 22-32% of actual demand while a $2+ billion illegal market thrives in plain sight.

Sound familiar? It should. This is Uruguay 2.0—the same playbook, the same structural failures, the same 76% black market persistence we documented in the world's first national legalization experiment.

The Government's Numbers Look Good... Until You Do The Math

Let's start with what SQDC reports for fiscal year 2024-2025:

"The SQDC recorded a sales volume of 149,223 kg of cannabis, an increase of 21.8% compared with the previous fiscal year (122,478 kg in 2023–2024). The company's sales increased by 12.0% compared with the 2023–2024 fiscal year and generated a total of $741.5 million."

Breaking this down:

• Total sales: 149,223 kg (149.2 million grams)
• Revenue: $741.5 million CAD
• Average price: $5.71 CAD/gram ($4.20 USD)
• Retail locations: 104 stores across Quebec
• Dividend to government: $118 million

On the surface, impressive. Sales are up. Stores are expanding. The government is making money. Mission accomplished, right?

Not so fast.

Reconstructing True Market Size

Quebec's 2024 Cannabis Survey reports 18% of residents aged 15+ consumed cannabis in the previous 12 months. With approximately 7 million adults aged 21+, that's 1.26 million active users.

The survey also claims "69% of users obtain at least some product from SQDC." Government officials cite this as evidence of successful market capture.

Here's where everything falls apart.

Using the TAM calculation framework we developed in our cannabis consumption analysis, the average cannabis consumer uses approximately 1 gram per day. This figure accounts for the full spectrum—from daily heavy users (1.5-2g+) to occasional weekend consumers (0.2-0.4g).

Let's do the math:

Quebec's implied scenario:

1.26M users × 365 days × 1.0g/day = ~460,000 kg total annual demand
SQDC sales: 149,223 kg
Actual market share: 32.4%

That's a 68% illegal market—nearly triple what government surveys suggest.

But it gets worse. That 18% participation rate is almost certainly understated. Statistics Canada reports 23% past-year cannabis use nationally. Self-reporting surveys consistently undercount illegal activity by 15-25%. If Quebec's true participation rate is closer to 22-23% (the national average), the picture darkens further:

More realistic scenario:

1.54M users × 365 days × 1.0g/day = ~562,000 kg total annual demand
SQDC sales: 149,223 kg
Actual market share: 26.5%

That's a $2.1 billion illegal market operating openly while the government celebrates "success."

The "69% Sourcing" Deception

Let's examine that survey claim more carefully: "69% of users obtain at least some product from SQDC."

Notice the wording: "at least some."

This doesn't mean 69% of purchases happen at SQDC. It means 69% of users made at least one legal purchase during the year. You could buy a single pre-roll at SQDC in January, then source 99% of your cannabis from mail-order markets (MOMs) for the remaining 11 months—and still answer "yes" to this survey question.

This is classic government spin: conflating any legal market contact with market dominance.

Compare this to how legitimate market research operates. Florida's medical cannabis program reports user and weight consumption.

Quebec deliberately uses the weakest possible standard. Why? Because asking "Where do you buy MOST of your cannabis?" would reveal the ugly truth: legal market capture is catastrophically low.

The Uruguay Parallel: History Repeating

As we documented in our Uruguay analysis, government monopolies follow a predictable playbook:

Uruguay's Failure (11 years post-legalization):

• Government monopoly on production
• Pharmacy distribution model
• Registration requirement
• Result: <10% legal market capture, 76%+ black market

Quebec's Failure (6 years post-legalization):

• Government monopoly on retail
• Crown corporation model
• No registration, but limited product diversity
• Result: 22-32% legal market capture, 68-78% black market

The patterns are identical:

Both governments optimize for political success metrics (profitability, no scandals) rather than the stated policy goal: illegal market displacement.

The Quality Problem: Why Price Isn't Enough

At $4.20 USD per gram, SQDC has achieved pricing competitive with mature US markets like Colorado ($3.18/gram). So why does the illegal market still dominate?

Because quality matters more than marginal price differences.

Customer reviews tell the story government reports won't:

"Buds are awful, really dried out so it's like powdered weed and difficult to smoke with paper's. Never trust SQDC they'll sell shake of who knows what strain for 50$. I actually weighted a supposed to be one eighth 3.5gr was so dried dark full of stems just empty the package and weighted barely 2.3g."
— Leafly review, SQDC Montreal

"The idea, workers and space are all fine - but the product is terrible! No choice for the customer (everything is pre-packaged) so if you find a strain you like but they only have 3.5, you'll have to buy 8 plastic containers of the stuff! and get ready to pay pay pay because the cheapest ounce to be found is 150 (not even good stuff, nothing has flavour)."
— Leafly review, SQDC Montreal

These aren't isolated complaints. They represent a systematic quality failure inherent to monopoly structures.

Why Monopolies Fail: The Structural Problem

In competitive markets, quality problems trigger immediate consequences:

Poor quality → Customer defection → Revenue loss → Quality improvement or bankruptcy

The feedback loop forces adaptation. Producers who can't satisfy customers disappear. Those who deliver quality thrive.

In monopoly markets, the feedback loop breaks:

Poor quality → Customer exits to black market → Monopoly reports "we serve X% of market" → No adaptation needed

Without competition, there's no pressure to improve. The monopoly captures the least-demanding segment (convenience-seekers, risk-averse consumers) and declares victory—while quality-conscious consumers remain in the illegal market.

Evidence:

• Colorado (competitive): Continuous quality improvement, 1000+ products, complete legal market capture
• Quebec (monopoly): Same quality complaints for 6 years, limited selection, 22-32% legal market share
• Uruguay (monopoly): Same 2 strains for 11 years, pharmacy complaints, <10% legal market share

Academic Confirmation: Designed to Fail

A 2025 peer-reviewed policy implementation study analyzing Quebec's cannabis framework exposes the fatal flaw: governments prioritize avoiding political blame over achieving stated objectives.

Researchers Maude Benoit and Gabriel Lévesque at UQÀM document how Quebec uses what they term "defensively disproportionate regulation"—extreme restrictions that create the appearance of control while systematically undermining black market displacement. Their research, published in the International Review of Public Policy, identifies the mechanism behind monopoly failure: blame avoidance strategies.

The study includes damning testimony from policy stakeholders. A cannabis industry participant explained:

"Quebec regulations prohibit anything that is easily sold and that is in demand by removing anything that is gummies, chocolate, etc. All people who want to consume, ingest, or drink fashionable products must necessarily fall back on the black market."

Health authorities confirmed the Catch-22: product diversity is needed to compete with illegal suppliers, but Quebec restricts products to avoid appearing to promote cannabis—deliberately leaving illegal suppliers to capture entire market segments.

Quebec's vaping ban provides catastrophic evidence. Despite prohibiting cannabis vaping products to "protect youth," adolescent cannabis vaping exploded from 20% (2019) to 66% (2023) among 12-17 year olds—all from unregulated black market sources with higher THC concentrations and toxicity risks. A 2023 conference by Quebec's National Institute of Public Health confirmed that illegal vaping devices often exceed safe temperature limits, increasing health dangers.

The home cultivation ban doubles down on failure. While federal law permits Canadians to grow 4 plants at home, Quebec prohibits it entirely—the only province besides Manitoba to do so. This ban eliminates the cheapest legal cannabis option while forcing home growers to remain in the black market for seeds, clones, and cultivation supplies. Public health officials interviewed for the study acknowledged the contradiction: "With a public health objective, if you want to remove cannabis from a lucrative and commercial logic, it is wise to allow consumers who want to have four plants at home." Instead, Quebec fought this restriction all the way to the Supreme Court—using judicialization as another blame avoidance mechanism rather than admit their restrictions undermine displacement objectives.

The researchers' conclusion is devastating:

"Authorities performatively enact restrictive components of legislation... On the other hand, they invest little in administrative capacities to ensure legalization unfolds according to stated objectives or to adapt to emerging challenges."

In other words: Quebec's restrictions aren't designed to work. They're designed to look like they're working while government avoids blame for "promoting cannabis." The illegal market thriving in the resulting vacuum? That's not a bug—it's a feature of blame-avoidant policy design.

Source: Benoit, M., & Lévesque, G.V. (2025). Blame avoidance and the implementation of ambiguity in Canadian cannabis legalization. International Review of Public Policy, 7(1), 54-74.

The Alberta Comparison: Competitive Markets vs. Monopolies

Academic analysis exposes the structural flaws of monopoly cannabis markets. But we don't need theory when we have hard empirical data from next door.

Alberta's fully privatized cannabis market operated under nearly identical federal regulations as Quebec for fiscal year 2024-25. Same country, same Health Canada oversight, same packaging rules. The only major difference: Alberta allowed private retail competition while Quebec enforced a government monopoly.

The results are devastating for Quebec's model.

Alberta Cannabis Market FY 2024-25:

• Total sales: $693.0 million CAD
• Total volume: 182,442 kg
• Licensed stores: 752 (fully private)
• Adult population (18+): ~3.9 million

Quebec Cannabis Market FY 2024-25:

• Total sales: $741.5 million CAD
• Total volume: 149,223 kg
• Licensed stores: 104 (government monopoly)
• Adult population (21+): ~7.0 million

Per capita legal sales:

• Alberta: 46.8 kg per 1,000 adults (182,442 kg ÷ 3.9M)
• Quebec: 21.3 kg per 1,000 adults (149,223 kg ÷ 7.0M)

Alberta's competitive market serves 2.2 times more cannabis per capita than Quebec's monopoly.

Quebecers Don't Consume Half as Much Cannabis

Let's be clear about what this comparison does NOT mean: Quebecers do not consume fundamentally less cannabis than Albertans.

Both provinces share:

• Similar GDP per capita (~$60-65k CAD)
• Comparable urbanization rates (80-85%)
• Similar age demographics
• Same federal cannabis laws
• Same national cannabis culture (Statistics Canada reports 23% national participation)

Yes, Quebec is French-speaking and has distinct cultural identity. But there is zero evidence that linguistic or cultural differences produce 2x cannabis consumption gaps. If anything, Quebec's historical tolerance for cannabis and progressive social attitudes suggest consumption rates should be comparable or higher than conservative Alberta.

The only explanation for the 2.2x per-capita gap is market structure failure.

Alberta's 752 private stores compete on quality, price, and service—capturing demand that would otherwise flow to black markets. Quebec's 104 government stores optimize for fiscal returns and blame avoidance—leaving 73-75% of demand to illegal suppliers.

Even Conservative Estimates Prove the Point

Some might argue Alberta has lower baseline consumption due to its "Montana/North Dakota" cultural mentality—perhaps 15% participation vs. Quebec's claimed 18%. Let's test that:

Alberta at 15% participation:

• 3.9M adults × 15% = 585,000 users
• 182,442 kg ÷ 585,000 = 312g/year per user
• 312g ÷ 365 = 0.85g/day per user

Quebec at 18% participation:

• 7.0M adults × 18% = 1,260,000 users
• 149,223 kg ÷ 1,260,000 = 118g/year per user
• 118g ÷ 365 = 0.32g/day per user

Even if Alberta has lower overall participation than Quebec, Alberta's legal market captures 2.7x more per-user than Quebec's monopoly (0.85g vs. 0.32g daily).

Translation: Alberta users source ~70-75% of their cannabis legally. Quebec users source ~30-33% legally. The remaining demand flows to black markets—not because Quebecers prefer illegal sources, but because the monopoly cannot compete on quality, diversity, or accessibility.

Source: Alberta Gaming, Liquor and Cannabis (AGLC) Annual Report 2024-2025. Government of Alberta.

The Product Restriction Trap

Quebec's regulatory restrictions create entire black market niches:

Edibles: Capped at 10mg per package (vs. 100mg in most US states), with bizarre product restrictions—no gummies or chocolates, only "dried cauliflower, beets, figs and blackcurrant bites." Seriously.

Result: The edibles market—typically 15% of total cannabis demand in legal states—remains almost entirely illegal. SQDC's 2025 annual report shows concentrates growing but edibles barely registering.

High-potency products: Effectively unavailable due to conservative product selection.

Result: Connoisseurs and experienced users forced to mail-order markets.

Each restriction cedes market share to illegal operators while the government celebrates serving "69% of users" with limited, lower-quality products.

The Real Numbers

Let me show you what Quebec's government doesn't want you to see:

Government's story:

• Survey: 18% participation = 1.26M users
• Claimed: 69% "obtain some" from SQDC
• Implied: ~50-57% market capture
• Message: "We're winning"

Reality:

• True participation: 22-23% (1.54-1.61M users)
• Consumption: 1.0g/day average
• Total market: 562-588k kg annually
• SQDC sales: 149k kg
• Actual market share: 25-27%
• Illegal market: 73-75% ($2.0-2.2 billion annually)

The illegal market is four times larger than SQDC revenues—and operating openly through mail-order websites that Google will find in 30 seconds.

What This Means For Policy

Quebec and Uruguay demonstrate that legalization without competition is prohibition with paperwork.

Government monopolies face a structural conflict:

Political success = Fiscal returns + No scandals
≠
Market displacement = Capturing 60-70%+ demand + Eliminating black market

They optimize for the first objective and externalize the second.

Meanwhile, competitive markets in Colorado and Oregon achieve 85%+ legal market share through:

• Quality competition driving continuous improvement
• Product diversity through multiple operators
• Innovation in formats and delivery methods
• Transparent multi-source data
• Regulatory evolution based on outcomes

The Bottom Line

After six years and 104 stores, Quebec's cannabis monopoly captures roughly one-quarter of actual demand. Three-quarters of Quebec's cannabis market—worth over $2 billion annually—remains in the hands of illegal operators.

The government response? Celebrate revenue growth, open more stores, and claim 69% of users "obtain some" product legally.

This isn't success. It's a masterclass in manipulating metrics to hide policy failure.

SQDC President's own words reveal the priority:

"The SQDC is a unique model created in Québec, and we should all be proud of it... We have hosted several European and American delegations."

They're proud of the model, not the outcomes. They're exporting the structure, not learning from competitive markets that actually work.

Uruguay tried this experiment first. After 11 years: 76% black market, pharmacies dropping out, mission failure.

Quebec is now six years in. After 18 years combined between these two monopoly experiments, the lesson is clear:

When governments compete against themselves, black markets win. When licensed operators compete against each other, consumers migrate to legal channels.

The evidence couldn't be clearer. The question is whether policymakers will look at the data—or keep believing the government's creative accounting.

Quebecers — does this match your experience on the ground?

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