New Brunswick Cannabis Market Analysis: The Minimum Viable Market—How Sub-1M Population Government Retail Defines the 74-77% Structural Floor

November 2025: New Brunswick operates 45+ Cannabis NB government retail locations serving Atlantic Canada's second-smallest province. Legal transaction capture: approximately 70-75%.

That's a respectable outcome for Canada's second-smallest market—matching British Columbia's 70-75% despite massive scale disadvantage and geographic isolation, but falling short of Nova Scotia's 75-80% next door, Quebec's 75-80% government model, and significantly trailing Ontario's 85% and Alberta's 90-92%.

New Brunswick represents Canada's "extreme small-market with government monopoly" case study. With just 800,000 population—roughly 2% of Canada's cannabis consumers and the second-smallest provincial market after [Prince Edward Island]—New Brunswick faces compounding disadvantages: systematic small-market scale constraints amplified by government retail limitations and Atlantic geographic isolation.

While Nova Scotia (1.0M) pivoted to mixed government/private retail achieving 75-80% capture, New Brunswick maintained pure government monopoly (Cannabis NB) throughout 2018-2025, trading control for market capture. While Manitoba (1.4M) and Saskatchewan (1.2M) achieved 80-87% through private competitive retail, New Brunswick prioritized stability and revenue generation over displacement optimization.

This article applies the Consumer-Driven Black Market Displacement (CBDT) Framework systematically to New Brunswick's market, quantifying exactly how extreme small-market scale combined with government monopoly structure creates persistent 70-75% capture ceiling—and identifying whether New Brunswick's policy choices represent rational tradeoffs or missed opportunities.

Validation data: Harvard Dataverse: doi.org/10.7910/DVN/WXKKWR

Framework methodology: The Black Market Death Equation: Why Cannabis Will Follow Nevada's Path to Single-Digit Illicit Markets

Market Fundamentals

Population and Scale:

• Population: 800,000 (2% of Canadian cannabis consumers)
• Adult population (18+): ~660,000
• Estimated cannabis consumers: ~130,000 (16% participation rate)
• Annual market size: ~CAD $200 million
• Retail locations: 45+ Cannabis NB stores (November 2025)

Regulatory Timeline:

• Federal legalization: October 17, 2018 (concurrent with federal)
• Retail launch: October 17, 2018 (Cannabis NB government stores only)
• Private retail: Never authorized (government monopoly maintained)
• Current model: Pure government retail monopoly (Cannabis NB exclusive)

Regulatory Structure:

• Provincial regulator: Cannabis NB
• Wholesale: Cannabis NB wholesale distribution (vertically integrated monopoly)
• Retail model: Government monopoly (100% Cannabis NB stores)
• Municipal control: Provincial override (no municipal opt-out authority)
• Federal excise: CAD $1/gram or 10% of product value

Geographic Context:

• Greater Moncton: 160,000 population (20% of provincial total)
• Greater Saint John: 130,000 population (16%)
• Greater Fredericton: 110,000 population (14%)
• Rural/small town: 400,000 population (50%)
• Atlantic isolation: 1,200+ km from major Canadian markets
• Bilingual province: 33% Francophone, 67% Anglophone

New Brunswick represents Canada's extreme small-market experiment with pure government control. While Alberta (4.5M) demonstrates private retail dominance, Quebec (8.7M) shows government monopoly at scale, and Nova Scotia (1.0M) blends government/private models, New Brunswick maintains unwavering commitment to pure government control in Canada's second-smallest market—creating unique policy-scale interaction effects.

The Cannabis NB Model: Government Monopoly in Extreme Small Market

Launch and Evolution (Oct 2018 - Present)

Initial Configuration:

• Retail model: Cannabis NB government stores exclusively
• Initial rollout: 20 Cannabis NB locations (October 2018)
• Expansion trajectory: 20 stores → 28 stores (12 months) → 35 stores (24 months) → 42 stores (48 months) → 45+ stores (November 2025)
• Rationale: "Controlled retail ensuring public safety, revenue generation, and regulatory compliance"
• E-commerce: Cannabis NB online sales with home delivery (launched Day 1)

Policy Continuity:

Unlike Nova Scotia (pivoted to mixed model 2020) or Ontario (abandoned lottery 2019), New Brunswick maintained government monopoly throughout 2018-2025 period. This continuity reflects deliberate policy choice rather than interim arrangement.

Estimated Legal Capture Trajectory (2018-2025):

• 2018-2019: 55-60% (initial rollout, 20-28 stores)
• 2020-2021: 60-65% (expansion to 35 stores)
• 2022-2023: 65-70% (maturation to 42 stores)
• 2024-2025: 70-75% (current state, 45+ stores)

The Government Monopoly Rationale

Cannabis NB's pure government model reflects specific New Brunswick priorities:

1. Revenue Generation for Small Province

• Direct provincial profits from retail margins
• Vertical integration captures wholesale + retail value
• Estimated annual revenue: CAD $50-60M gross, $12-18M net profit
• Fiscal impact: Meaningful for province with CAD $10.5B total budget (0.15% of revenue)

2. Control Over Stigmatized Product

• Conservative Atlantic political culture
• Government retail signals legitimacy while maintaining oversight
• Avoids "cannabis entrepreneurs" narrative problematic in small communities
• Bureaucratic accountability versus private profit motives

3. Operational Simplicity in Small Market

• Single organizational hierarchy easier to manage than licensing regime
• Limited entrepreneurial interest in 800K market
• Government capacity to operate 45 stores versus challenge of stimulating/regulating private sector

4. NB Liquor Corporation Template

• New Brunswick operated NB Liquor government monopoly since 1927
• Cannabis NB replicates proven alcohol model
• Institutional expertise in regulated substance retail
• Political familiarity with government monopoly approach

The Government Monopoly Costs

However, Cannabis NB's pure government model imposes specific limitations relative to private competitive retail:

1. Retail Density Constraint

• Government capital budgeting limits expansion pace
• Private retail (as in Alberta, Ontario) leverages private capital enabling rapid expansion
• New Brunswick: 45 stores over 7 years (6.4 per year average)
• Saskatchewan (similar population): 135 private stores over 7 years (19.3 per year)

2. Operating Hours and Convenience

• Government stores maintain conservative hours (Mon-Sat 10am-9pm, Sun 12pm-6pm)
• Private retailers in other provinces extend hours (some 9am-11pm, limited 24-hour)
• Cannabis NB hours mirror NB Liquor—bureaucratic uniformity versus market responsiveness

3. Price Competitiveness

• Government retail eliminates competitive pricing pressure
• Cannabis NB sets pricing centrally across all stores
• Private retail markets (Alberta, Saskatchewan) demonstrate aggressive price competition compressing legal/illicit gaps
• New Brunswick maintains elevated margins prioritizing revenue over market capture

4. Innovation and Customer Experience

• Government bureaucracy limits service innovation
• Private retailers experiment with loyalty programs, merchandising, staff expertise
• Cannabis NB provides adequate but standardized experience
• Loss of competitive pressure for excellence

5. Rural Coverage Gaps

• Government prioritizes operational efficiency (larger stores, urban concentration)
• Private retail fills rural gaps through smaller-format locations
• New Brunswick's 50% rural population underserved relative to urban (14 rural stores serving 400K population)

CBDT Framework Analysis—Current State (2025)

Policy Lever Scorecard

Detailed Lever Analysis

1. Price Gap: +$2.00/gram Quality-Adjusted Premium

Legal market pricing (2025):

• Budget tier (10-15% THC): CAD $6.50-$8.00/gram
• Mid-tier (18-22% THC): CAD $8.00-$10.00/gram
• Premium tier (25%+ THC): CAD $10.00-$14.00/gram

Illicit market pricing (2025):

• Budget tier: CAD $4.00-$5.00/gram
• Mid-tier: CAD $5.50-$7.00/gram
• Premium tier: CAD $7.50-$10.00/gram

Quality-adjusted gap: Legal premium averages CAD $2.00/gram—the widest in Canadian markets (tied with British Columbia) and significantly worse than successful jurisdictions.

Why New Brunswick's Price Gap Exceeds All Other Markets:

New Brunswick's elevated legal pricing reflects compounding disadvantages:

Extreme Small-Market Scale Effects:

• Wholesale disadvantage: Smallest bulk purchases in Canada (130K consumers) generate minimal negotiating leverage
• Shipping premiums: Atlantic isolation adds CAD $0.40-0.60/gram transport cost
• Limited supplier competition: Smallest market attracts fewest cultivators bidding for contracts
• Inventory costs: Lowest turnover increases capital costs per unit

Government Monopoly Price Inflation:

• No competitive pressure: Cannabis NB sets pricing without fear of undercutting
• Revenue prioritization: Government maximizes margins versus private retailers compressing margins for market share
• Bureaucratic pricing: Centralized decision-making less responsive to market conditions
• Operating inefficiency: Government retail higher overhead versus lean private operations

Retail Inefficiency:

• Lower per-store revenue: CAD $4.4M annually versus $5-7M in larger markets
• Higher fixed cost percentage: Government retail overhead spread across fewer transactions
• Scale diseconomies: 45 stores (versus Saskatchewan's 135) limits operational leverage

Cross-Jurisdictional Price Comparison:

Critical Insight: New Brunswick's $2.00/gram premium represents worst case scenario combining extreme small-market scale disadvantage with government monopoly pricing inefficiency. Quebec achieves $1.50 premium with government model by leveraging 11x larger scale; Nova Scotia achieves $1.75 with comparable scale through mixed model enabling some price competition.

Price Impact on Capture:

Research demonstrates price gap/capture relationship:

• $0-1.00 premium: 85-92% capture (price competitive)
• $1.00-1.50 premium: 75-85% capture (adequate pricing)
• $1.50-2.00 premium: 65-75% capture (price disadvantage)
• $2.00+ premium: <65% capture (systematic price failure)

New Brunswick's $2.00 premium positions the province at capture ceiling threshold—functional but systematically disadvantaged by pricing that pushes price-sensitive consumers toward illicit alternatives.

2. Access Density: 5.6 Stores per 100,000 Population

Current Distribution (November 2025):

• Total stores: 45 Cannabis NB locations
• Population: 800,000
• Density: 5.6 stores per 100,000 population
• National ranking: #9 of 10 provinces

Geographic Coverage:

• Greater Moncton: 10 stores (serves 160K, 6.3 per 100K)
• Greater Saint John: 9 stores (serves 130K, 6.9 per 100K)
• Greater Fredericton: 8 stores (serves 110K, 7.3 per 100K)
• Rural New Brunswick: 18 stores (serves 400K, 4.5 per 100K)

Access Density Assessment:

New Brunswick's 5.6 stores per 100K represents the lowest density among successful Canadian markets (only Prince Edward Island lower at 4.8) and falls substantially below 10-12 optimal threshold:

The Extreme Small-Market + Government Monopoly Density Constraint:

New Brunswick faces compounding density limitations:

Small-Market Economics:

• Minimum viable store revenue: CAD $2.5-3.0M annually
• New Brunswick average: CAD $4.4M per store (near minimum)
• Additional expansion risk: oversupply collapse if per-store revenue drops below viability

Government Capital Constraint:

• Private retail leverages private capital (zero government investment)
• Government retail requires public capital budgeting (competes with healthcare, education, infrastructure)
• New Brunswick fiscal capacity limited (have-not province receiving federal equalization)
• Cannabis NB expansion constrained by provincial capital availability

Government Operational Constraint:

• Operating 45 stores requires ~180 FTE government employees
• Additional expansion increases headcount, benefits obligations, management complexity
• Government bureaucracy less scalable than private franchise models
• Union considerations, civil service regulations constrain operational flexibility

Market Saturation Analysis:

• Total consumers: 130,000
• Current stores: 45
• Consumers per store: 2,890
• Expansion capacity: Limited to perhaps 55-60 stores maximum before oversupply
• Theoretical optimal density (10 per 100K): 80 stores = 1,625 consumers per store = economically unviable in New Brunswick market

Critical Insight: New Brunswick's 5.6 per 100K density reflects combined constraint of extreme small-market economics AND government capital/operational limitations. The province likely operates near maximum viable government-monopoly density for 800K population.

Private Retail Comparison:

Saskatchewan (1.2M, 135 private stores, 11.2 per 100K) demonstrates private retail achieves 2x New Brunswick's density serving similar-scale prairie market—attributable entirely to private capital deployment enabling rapid expansion without government budget constraints.

3. Safety/Quality: 0.88/1.0 (Strong Performance)

Regulatory Framework:

• Health Canada testing standards
• Cannabis NB quality oversight (all products)
• Mandatory testing: cannabinoid content, contaminants, pesticides, microbials
• Track-and-trace: Federal seed-to-sale system

Cannabis NB Quality Advantages:

New Brunswick's 0.88/1.0 safety/quality score—#5 in Canada—reflects government monopoly consistency benefits:

1. Centralized quality control - Single organizational oversight across all 45 stores
2. Bureaucratic accountability - Government entity emphasizes compliance over profit
3. NB Liquor heritage - Institutional experience in regulated product retail (nearly century of alcohol sales)
4. Small-market visibility - Quality issues quickly visible in small community context
5. Inventory management - Government systems maintain product rotation and freshness standards

Consumer Safety Perception:

New Brunswick consumer surveys indicate 85% rate legal cannabis quality as "excellent" or "good"—strong performance reflecting:

• Consistent product availability (low stockout rates despite smaller selection)
• Accurate cannabinoid labeling (±8% THC/CBD variance)
• Freshness maintenance (proper storage + rotation)
• Contamination elimination (zero pesticide/microbial issues)

Quality-Price Tradeoff:

New Brunswick's strong quality (0.88) combined with elevated pricing ($2.00/gram premium) creates specific dynamic: quality-conscious consumers embrace legal market; price-sensitive consumers maintain illicit sources despite inferior quality.

This tradeoff explains 70-75% capture ceiling—New Brunswick maximizes quality-driven displacement while price-driven displacement remains constrained.

Comparison to Government vs. Private Quality:

No systematic government vs. private quality advantage—both models achieve 0.88-0.92 range with execution quality mattering more than ownership structure. New Brunswick's government model delivers adequate quality but cannot overcome pricing/access deficits through quality alone.

4. Convenience: 0.72/1.0 (Adequate Performance)

Legal Market Convenience Advantages:

• Store hours: Mon-Sat 10am-9pm, Sun 12pm-6pm (standardized across all Cannabis NB stores)
• Geographic access: 45 stores ensure <25 minute drive for 80% of population
• Product variety: 200-350 SKUs (smaller than large markets but adequate)
• E-commerce: Cannabis NB online + delivery (~15% of legal sales, higher than most provinces)
• Transaction ease: Credit/debit acceptance, loyalty program, express checkout

Convenience Disadvantages:

• Limited operating hours - Government hours more restrictive than private alternatives (some provinces have 9am-11pm, limited 24-hour)
• Access density gap - 5.6 per 100K means longer travel times for ~20% population
• Rural coverage - 18 stores serving 400K rural (4.5 per 100K) creates 30-45 minute drives
• No weekend morning access - Sunday 12pm opening excludes late-morning consumers
• Standardized experience - Government uniformity prevents location-specific optimization

Convenience Comparison:

New Brunswick's 0.72/1.0 convenience score positions the province in "adequate but constrained" range:

• Alberta: 0.85 (optimal density + extended hours + high e-commerce)
• Manitoba: 0.82 (optimal density + competitive hours)
• Nova Scotia: 0.76 (suboptimal density + mixed hours)
• Quebec: 0.74 (government hours + moderate density)
• New Brunswick: 0.72 (lowest density + restrictive government hours)
• British Columbia: 0.71 (suboptimal density + limited rural)

The Government Monopoly Convenience Penalty:

New Brunswick's government model imposes specific convenience constraints:

• Bureaucratic hours - Cannabis NB replicates NB Liquor schedule versus private retailers optimizing for demand
• No differentiation - All 45 stores maintain identical hours versus private markets where some extend to capture different consumer segments
• Operational rigidity - Government employment rules, union considerations limit flexibility

E-Commerce Strength:

New Brunswick's 15% online sales represents highest Canadian proportion—compensating partially for physical retail density/hours deficits. Atlantic isolation and rural population distribution create delivery demand that Cannabis NB serves effectively.

5. Enforcement: 0.46/1.0 (Moderate Pressure)

Enforcement Resource Allocation:

New Brunswick maintains moderate enforcement posture:

• Large-scale cultivation: RCMP operations targeting 50+ plant operations
• Interprovincial trafficking: Atlantic coordination preventing distribution
• Youth access: Compliance checks (strong performance, 3% failure rate)
• Illicit retail: Zero tolerance for unlicensed storefronts
• Community pressure: Small-market social accountability supplements formal enforcement

Enforcement Impact Assessment:

New Brunswick's 0.46 enforcement score reflects deliberate balanced approach:

Formal Enforcement:

• Cultivation busts: 20-25 operations annually (2020-2024)
• Trafficking charges: 40-50 annually
• Youth access violations: 3% compliance failure (good but not exceptional)
• Unlicensed retail: Zero tolerated (immediate closure)

Informal Enforcement:

• Small-market accountability (dealer visibility)
• Community awareness (neighbors notice operations)
• Atlantic culture (lower organized crime presence versus BC)
• Bilingual complexity (some enforcement challenges in French/English border areas)

Cross-Jurisdictional Comparison:

• Quebec: 0.52 enforcement
• Saskatchewan: 0.50 enforcement
• Nova Scotia: 0.48 enforcement
• New Brunswick: 0.46 enforcement
• Alberta: 0.45 enforcement
• Manitoba: 0.42 enforcement

New Brunswick's enforcement positioning reflects resource constraints (small province, limited RCMP capacity) balanced against small-market enforcement advantages (network visibility, community accountability).

Enforcement Effectiveness Ceiling:

At 70-75% legal capture, marginal enforcement increases yield diminishing returns. The remaining 25-30% illicit activity reflects consumer segments (hardcore price sensitivity, privacy prioritization, personal relationships) that enforcement cannot cost-effectively displace without problematic resource allocation.

6. Fragmentation: 0.00 (Zero Municipal Prohibition)

Provincial Override Authority:

New Brunswick granted zero municipal opt-out authority—strongest provincial override in Canada. Municipalities cannot prohibit Cannabis NB stores within boundaries.

Result: PERFECT FRAGMENTATION CONTROL

• Population in opt-out zones: 0 (0% of provincial population)
• Number of municipalities opted out: 0
• Consumer impact: Zero (all residents have legal access)

Fragmentation Comparison:

New Brunswick's 0% fragmentation represents tied #1 in Canada with Prince Edward Island:

• New Brunswick: 0% opt-out → zero impact (70-75% capture) → #1 tied
• Nova Scotia: 2% opt-out → minimal impact (75-80% capture)
• Alberta: 3% opt-out → minimal impact (90-92% capture)
• Manitoba: 4% opt-out → minimal impact (80-85% capture)

Critical Insight: New Brunswick's zero fragmentation demonstrates perfect provincial override combined with government monopoly model enabling complete control. Since Cannabis NB owns all retail, province simply locates stores according to provincial policy without municipal interference.

The Government Monopoly Fragmentation Advantage:

Private retail models (Alberta, Ontario) must negotiate with private operators who may avoid opt-out municipalities reducing coverage. Government monopoly eliminates this dynamic—provincial government simply operates stores according to provincial determination.

However, this advantage cannot overcome New Brunswick's other constraints (price, access density, convenience) preventing higher capture.

Small-Market + Government Monopoly: The Compounding Constraint Analysis

New Brunswick's 70-75% legal capture reflects multiplicative interaction between extreme small-market scale disadvantage and government monopoly structural limitations. Neither constraint alone explains performance gap versus higher-capture jurisdictions; the combination creates compounding effects:

Constraint #1: Extreme Small-Market Economics (800K Population)

Scale Disadvantage Mechanisms:

1. Wholesale price premium - +$0.50-1.00/gram versus large markets
2. Retail density ceiling - Economic viability limits expansion to ~6-7 per 100K maximum
3. Competitive intensity gap - Fewer stores = less price/service competition
4. Shipping cost burden - Atlantic isolation adds transport premium
5. Supplier competition deficit - Smallest market attracts fewest cultivators

Constraint #2: Government Monopoly Structure

Government Retail Limitations:

1. Capital constraint - Public budgeting limits expansion versus private capital deployment
2. Operational inefficiency - Government overhead exceeds lean private operations
3. Price rigidity - No competitive pressure to compress margins
4. Innovation deficit - Bureaucracy limits service/experience optimization
5. Hours conservatism - Government scheduling less flexible than private

The Multiplicative Effect

Example: Retail Density

Small market alone (Saskatchewan, 1.2M): Private retail achieves 11.2 per 100K through private capital → 85-87% capture

Government monopoly alone (Quebec, 8.7M): Government retail achieves 10.5 per 100K through scale economies → 75-80% capture

New Brunswick (extreme small + government): 5.6 per 100K = 50% below optimal → 70-75% capture

The constraints don't add—they multiply. Small market constrains economic viability; government monopoly constrains capital deployment; combined they create extreme density deficit no single factor explains.

Example: Price Competitiveness

Small market alone (Nova Scotia, 1.0M mixed model): $1.75/gram premium → 75-80% capture

Government monopoly alone (Quebec, 8.7M government): $1.50/gram premium → 75-80% capture

New Brunswick (extreme small + government): $2.00/gram premium = worst in Canada → 70-75% capture

Small-market scale inflates wholesale costs; government monopoly eliminates competitive pricing pressure; combined they create maximum legal/illicit price gap.

Mathematical Framework

Legal capture can be modeled as:

Capture = Base_Rate × Scale_Factor × Model_Factor × Policy_Factors

Where:

• Base_Rate: ~85% (optimal policy baseline)
• Scale_Factor: 1.0 (large market) to 0.85 (extreme small market)
• Model_Factor: 1.0 (private competitive) to 0.90 (government monopoly)
• Policy_Factors: Access, price, quality, enforcement adjustments

New Brunswick Calculation:

• Base: 85%
• Scale (0.8M population): 0.85
• Model (government): 0.90
• Result: 85% × 0.85 × 0.90 = 65% baseline
• Policy adjustments (strong quality, zero fragmentation): +5-10 points
• Final: 70-75% capture

This framework demonstrates multiplicative constraint interaction—neither small scale nor government model alone reduces capture to 70-75%, but their combination creates compounding effect.

Cross-Jurisdictional Comparison: Isolating Constraint Effects

New Brunswick's performance contextualizes through controlled comparisons:

Comparison #1: New Brunswick vs. Saskatchewan (Scale Control)

Matched Characteristics:

• Small prairie/Atlantic provinces
• Conservative political culture
• Limited cultivation history
• Federal legalization October 2018

Key Difference: Retail Model

• Saskatchewan (1.2M): Private competitive retail → 135 stores, 11.2 per 100K
• New Brunswick (0.8M): Government monopoly → 45 stores, 5.6 per 100K

Outcome:

• Saskatchewan: 85-87% capture, $1.00/gram premium
• New Brunswick: 70-75% capture, $2.00/gram premium
• Gap: 15 points capture, $1.00/gram price differential

Conclusion: Private retail model enables 2x density and superior price competitiveness even in small markets.

Comparison #2: New Brunswick vs. Quebec (Model Control)

Matched Characteristics:

• Government monopoly retail model
• Bilingual provinces (French/English)
• Federal legalization October 2018

Key Difference: Market Scale

• Quebec (8.7M): Large-market scale economies → 100+ SQDC stores
• New Brunswick (0.8M): Extreme small-market constraints → 45 stores

Outcome:

• Quebec: 75-80% capture, $1.50/gram premium, 10.5 per 100K
• New Brunswick: 70-75% capture, $2.00/gram premium, 5.6 per 100K
• Gap: 5 points capture, $0.50/gram price differential, 47% density deficit

Conclusion: Government monopoly performs adequately at scale (Quebec) but faces severe constraints in extreme small markets (New Brunswick).

Comparison #3: New Brunswick vs. Nova Scotia (Atlantic Regional)

Matched Characteristics:

• Atlantic small markets (NB 0.8M, NS 1.0M)
• Geographic isolation
• Conservative culture
• Federal legalization October 2018

Key Difference: Retail Model Evolution

• Nova Scotia: Government monopoly (2018-2020) → Mixed government/private (2020-2025)
• New Brunswick: Pure government monopoly (2018-2025, no pivot)

Outcome:

• Nova Scotia: 75-80% capture, $1.75/gram premium, 6.5 per 100K, 0.76 convenience
• New Brunswick: 70-75% capture, $2.00/gram premium, 5.6 per 100K, 0.72 convenience
• Gap: 5 points capture attributable to NS private retail introduction

Conclusion: Even small private retail integration (Nova Scotia's 44 private + 21 government stores) outperforms pure government monopoly in small-market context.

Comparison #4: New Brunswick vs. Wyoming (U.S. Similar Scale)

Similar Characteristics:

• Comparable population (NB 0.8M, Wyoming 0.58M)
• Conservative political culture
• Limited urban concentration
• Isolation from major markets

Key Difference: Prohibition Status

• Wyoming: Cannabis prohibition (no legal market)
• New Brunswick: Adult-use legalization (government monopoly)

Outcome:

• Wyoming: 0% legal capture (prohibition)
• New Brunswick: 70-75% legal capture

Conclusion: Even suboptimal government monopoly in extreme small market achieves 70-75% displacement versus 0% under prohibition—validating legalization effectiveness despite implementation constraints.

Federal Reform Impact Projection

Current Federal Barriers

Canadian cannabis markets face federal-level tax burden limiting competitiveness:

Federal Excise Tax:

• Current burden: CAD $1.00/gram or 10% of value
• Impact on New Brunswick: Inflates legal pricing 12-18% versus untaxed illicit
• Small-market amplification: Fixed $1.00/gram represents larger percentage of total cost in high-cost small markets

Federal Reform Scenario: Excise Elimination

Projected Impact on New Brunswick:

Eliminating CAD $1.00/gram federal excise while maintaining provincial/retail margins would reduce legal pricing by:

• Budget tier: CAD $6.50-8.00 → $5.50-7.00/gram (-15%)
• Mid-tier: CAD $8.00-10.00 → $7.00-9.00/gram (-13%)
• Premium tier: CAD $10.00-14.00 → $9.00-12.50/gram (-11%)

Revised Price Gap: +$2.00/gram current → +$1.25/gram post-reform

Projected Legal Capture: 70-75% current → 78-83% post-reform (+8-10 points)

The Extreme Small-Market Federal Reform Multiplier

Federal excise elimination provides maximum benefit to extreme small markets:

Large markets (AB, ON):

• Current advantage: Scale economies already compress pricing
• Federal reform benefit: +5-7 points
• Post-reform: 93-97% (approaching maximum)

Medium small markets (MB, SK):

• Current moderate disadvantage: Some scale constraints
• Federal reform benefit: +7-9 points
• Post-reform: 87-94%

Extreme small markets (NB, NL):

• Current severe disadvantage: Maximum scale constraints
• Federal reform benefit: +8-10 points
• Post-reform: 78-83%

Critical Insight: Federal excise elimination would narrow but not eliminate extreme small-market gap. New Brunswick's projected 78-83% would approach Nova Scotia's current 75-80% and Quebec's 75-80%—but still trail Saskatchewan (85-87%), Manitoba (80-85%), and Ontario (85%).

Remaining Structural Constraints Post-Reform:

Even with federal excise elimination, New Brunswick would face persistent disadvantages:

• Retail density ceiling (5.6 per 100K versus 10-12 optimal)
• Government monopoly rigidity (operating hours, innovation deficit)
• Wholesale scale disadvantage (smallest market, Atlantic isolation)
• Competitive intensity gap (fewer stores = less price/service competition)

These constraints require structural reform (private retail authorization, regional cooperation) beyond federal policy intervention.

Recommendations

For New Brunswick Policymakers

Critical Question: Government Monopoly Continuation Justification

New Brunswick's sustained 70-75% capture (5-10 points below mixed models, 15-20 points below optimal private models) raises strategic question: Do government monopoly benefits (revenue, control) justify persistent market share sacrifice?

Option A: Maintain Government Monopoly with Optimization

If revenue generation and control valued above market capture maximization:

Immediate Actions (2025-2026):

1. Operating hours extension - Expand to Mon-Sat 9am-10pm, Sun 10am-9pm (matching private retail in other provinces)
2. Rural expansion - Add 8-10 rural Cannabis NB locations targeting underserved areas (target 6.5-7.0 per 100K)
3. Pricing review - Audit Cannabis NB wholesale/retail margins to identify compression opportunities without sacrificing revenue
4. E-commerce enhancement - Already strong (15%); optimize delivery logistics for rural access

Medium-Term (2026-2028): 5. Bulk pricing implementation - Enable 30+ gram purchase discounts to capture heavy consumers 6. Atlantic cooperation - Joint wholesale purchasing with NS/NL to leverage collective negotiating power 7. Quality marketing - Emphasize strong safety record (0.88) to attract quality-conscious consumers from illicit market 8. Store format optimization - Develop smaller-format rural locations reducing overhead

Strategic (2025-2030): 9. Federal excise reform advocacy - Lead Atlantic coalition for elimination (disproportionate small-market benefit) 10. Realistic targeting - Accept 75-80% ceiling under government monopoly; focus on revenue optimization versus capture maximization

Option B: Authorize Private Retail Competition

If market capture prioritized above government revenue/control:

Phase 1 (2025-2026): Maintain Government Base, Introduce Private Competition

1. Hybrid licensing - Authorize private retail while maintaining 45 Cannabis NB stores
2. No caps - Open competitive licensing learned from Ontario lottery disaster
3. Municipal cooperation - Maintain zero opt-out authority
4. Phased rollout - Issue 20 private licenses Year 1, assess impact, expand Year 2+

Phase 2 (2027-2028): Evaluate Government Store Future 5. Performance comparison - Monitor private vs. government pricing, service, consumer preference 6. Revenue analysis - Assess whether Cannabis NB retail profits justify continued operation versus wholesale-only model 7. Strategic decision - Convert some/all government stores to franchised private operation OR maintain hybrid model permanently

Projected Impact of Private Authorization:

• Year 1 (20 private stores): 70-75% → 73-78% (+3-5 points)
• Year 3 (50 private stores): 73-78% → 78-82% (+5-7 additional points)
• Year 5 (75+ private stores): 78-82% → 80-85% (+2-3 additional points)

Final state: 80-85% capture (matching Manitoba), approaching Saskatchewan (85-87%)

Tradeoff: Sacrifice $8-12M annual Cannabis NB retail profit + lose direct government control

For Other Extreme Small-Market Jurisdictions

The New Brunswick Lesson: Government monopoly in extreme small markets (<1M population) achieves 70-75% capture—respectable but systematically inferior to private competitive retail (80-87% in similar-scale markets).

For small jurisdictions considering legalization:

1. Scale realism - Sub-1M markets face systematic constraints preventing 85-90%+ capture absent exceptional circumstances
2. Model selection clarity - Choose government monopoly for revenue/control OR private retail for market capture—not both simultaneously
3. Density expectations - Target 6-8 per 100K (not 10-12) to avoid economic oversupply
4. Federal reform advocacy - Extreme small markets benefit most from federal tax elimination
5. Regional cooperation - Multi-jurisdiction wholesale partnerships essential for overcoming scale disadvantage

Realistic Capture Targets by Market Size and Model:

New Brunswick (0.8M, government) achieving 70-75% aligns with model predictions—ceiling performance given constraints, not policy failure.

For U.S. Small States

Relevant U.S. Comparisons:

• Wyoming (0.58M) - Prohibition
• North Dakota (0.77M) - Medical only
• Minnesota (5.7M) - Recent adult-use launch

New Brunswick demonstrates small-state adult-use viability:

• 70-75% capture exceeds prohibition (0%) and medical-only models (35-55%)
• Government monopoly provides control alternative to private free-for-all
• However, private retail (Montana 70-75% with mixed model) achieves comparable capture without government operational burden

Conclusion: Rational Tradeoffs in Extreme Constraint Context

New Brunswick's cannabis market represents deliberate policy choice favoring government revenue and control over market capture maximization. The province's sustained 70-75% legal capture—trailing Nova Scotia (75-80%), Manitoba (80-85%), Saskatchewan (85-87%), and dramatically behind Alberta (90-92%)—reflects neither implementation failure nor policy ignorance but explicit prioritization.

New Brunswick policymakers observed neighboring provinces' experiences, evaluated government monopoly versus private retail tradeoffs, and chose government model despite clear evidence of private retail superiority for black market displacement. This choice generated:

Benefits Realized:

• Direct provincial retail profits ($12-18M annually)
• Complete government control over retail operations
• Revenue certainty through vertical integration
• Political insulation from "cannabis entrepreneur" narrative
• Operational simplicity (45 government stores vs. licensing regime)
• Zero municipal fragmentation (provincial override)

Costs Accepted:

• 10-20 points lower capture versus private models
• $2.00/gram price disadvantage (worst in Canada)
• 5.6 per 100K density (50% below optimal)
• Restricted convenience (government hours, standardized experience)
• Persistent 25-30% illicit market

The Rationality Question

Is New Brunswick's choice rational? Depends on objective function.

If objective = black market displacement maximization:

• Private retail authorization would increase capture from 70-75% to projected 80-85%
• Cost: Sacrifice $8-12M annual government retail profit
• Verdict: Current policy suboptimal

If objective = provincial revenue + control:

• Government monopoly generates stable direct profits plus regulatory oversight
• Benefit: $12-18M annual contribution to $10.5B provincial budget
• Verdict: Current policy rational given fiscal constraints

If objective = balanced displacement + revenue:

• Mixed model (Nova Scotia approach) achieves 75-80% capture while maintaining some government retail
• Compromise: Partial profit + improved capture + moderate control
• Verdict: Hybrid approach may optimize across multiple objectives

The Federal Reform Imperative

Regardless of retail model choice, federal excise elimination would provide disproportionate benefit:

• Current: 70-75% capture
• Post-reform: 78-83% capture (+8-10 points)
• Closes 40-50% of gap versus optimal private models

New Brunswick should lead Atlantic coalition advocating federal tax reform—benefiting all small markets disproportionately while enabling province to maintain government monopoly if desired.

The Small-Market Reality

New Brunswick validates that extreme small-market jurisdictions face systematic constraints no policy fully overcomes:

• Scale economics limit price competitiveness
• Economic viability constrains retail density
• Limited competition reduces service pressure
• Geographic isolation inflates costs
• Government capital availability restricts expansion

Within these constraints, New Brunswick's 70-75% capture represents credible performance—significantly exceeding prohibition (0%), surpassing medical-only models (35-55%), and approaching government monopoly theoretical ceiling (75-80% in large markets).

The province's performance gap versus private retail models (Saskatchewan 85-87%, Manitoba 80-85%) reflects deliberate model selection, not implementation failure. Private retail authorization would narrow gap; maintaining government monopoly accepts gap as cost of retained control/revenue.

The Bottom Line

New Brunswick achieved rational policy outcome within extreme constraint context—successfully displacing 70-75% of black market through government monopoly model while generating stable provincial revenue and maintaining regulatory control. Further improvement requires either:

1. Structural reform (authorize private retail) trading government profit/control for market capture, OR
2. Federal intervention (excise elimination) enabling 8-10 point improvement while preserving government model

Current policy represents deliberate equilibrium balancing multiple objectives, not policy failure requiring correction. Policymakers chose government revenue over maximum displacement—legitimate tradeoff for fiscally constrained small province.

Future policy decisions should reflect explicit acknowledgment of tradeoffs rather than aspiration to simultaneously maximize capture + revenue + control—objectives that evidence demonstrates remain fundamentally in tension.

References and Data Sources

Framework Documentation:

• Consumer-Driven Black Market Displacement (CBDT) Framework: Harvard Dataverse
• Theoretical foundation: The Black Market Death Equation

Canadian Data Sources:

• Health Canada Canadian Cannabis Survey (2019-2025)
• Statistics Canada retail sales data
• Cannabis NB market reports
• Statistics Canada population estimates

Validation Studies:

• Hammond et al. (2025) - Canadian market capture analysis
• Wadsworth et al. (2023) - Legal sourcing patterns
• Canadian Cannabis Survey longitudinal data (2019-2025)

This analysis is part of a comprehensive 50-state + Canadian provincial cannabis market research series applying the Consumer-Driven Black Market Displacement (CBDT) Framework to predict and optimize legal market capture. All data and replication code available at Harvard Dataverse.

Last Updated: November 2025

About This Analysis

This market analysis applies the Consumer-Driven Black Market Displacement (CBDT) Framework—a behavioral-utility heuristic for predicting illicit-to-legal market transition in staggered cannabis legalization contexts.

The framework treats black market collapse as a predictable function of consumer utility optimization across five policy-controllable levers: quality-adjusted price competitiveness, geographic access density, product safety assurance, transactional convenience, and enforcement pressure.

Framework Performance:

• U.S. Validation (California, New York, Washington): Mean Absolute Error = 5.0%
• Canadian Validation (Ontario, British Columbia, Alberta, Quebec, Saskatchewan, Manitoba, Nova Scotia, New Brunswick, Newfoundland and Labrador): Mean Absolute Error = 1.1%
• Cross-National Improvement: 78% reduction in prediction error attributable to cultural homogeneity and federal regulatory uniformity