April 10, 2020

CANADA CANNABIS SPOT INDEX — April 10, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published April 10, 2020
1

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

The CCSI was assessed at C$6.46 per gram this week, down 0.9% from last week’s C$6.52 per gram. This week’s price equates to US$2,085 per pound at the current exchange rate.

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Recreational Cannabis Growth

This week we review currently available and projected sales volume data for non-medical cannabis. Health Canada has been providing very good data on cannabis supply and demand since the legalization of non-medical cannabis. Originally, data was only collected for dried cannabis and cannabis oils, but official reporting has now been extended to cover edibles, extracts, and topicals. 

 

One of the datasets that we have reviewed routinely is the monthly sales volumes for medical and non-medical cannabis. This data generally lagged the market by a number of months, but provided a great deal of insight into how much cannabis was being sold through legal channels. Unfortunately, Health Canada has changed the way they report this data. Instead of reporting monthly sales in kilograms, sales are now reported as packaged units. 

 

Although the data is informative, it is not sufficient to understand fully the true supply, demand, inventory, and overall balance of this emerging market. For example, packaged units of dry cannabis flower come in varying volumes (1 gram, 3.5 grams, 7 grams, etc), as well as pre-rolls of varying sizes. Similarly, packaged units of cannabis extracts can include oil bottles, capsule packages, vape kits, vape cartridges, and more. 

 

In today’s report, we have modelled monthly sales volumes to give a better assessment of trends in the marketplace. We have taken the Health Canada data that is currently reported up until September 2019, and extended it to January 2020. We used the reported Health Canada Retail Trades Sales data for cannabis to formulate our estimates. Sales have been growing in Canada as new retail stores open, retail prices drop, and the population becomes increasingly accustomed to accessing legal cannabis channels. 

In January 2020, we calculate that total sales across Canada reached C$154 million, which is C$99.4 million, or 281%, more than January 2019. Since September 2019, our model shows sales have been growing by an average of 5.9% each month.

Source: Cannabis Benchmarks

The sales volumes we have modelled show similar growth. We show the sales volume of dried cannabis in January 2020 at 14,157 kg. This is 8,623 kg, or 255%, more than January 2019. This growth in consumption is what the market needs to balance out the growing production capacity.

Source: Cannabis Benchmarks

The data modelled at the provincial level is very interesting as well. In January of this year, Ontario accounted for 24% of total consumption, Quebec accounted for 20.7% of total consumption, Alberta accounted for 21.6% of total consumption, and BC accounted for 12.8% of total consumption.

Source: Cannabis Benchmarks

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Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

10 April 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

April 3, 2020

U.S. Cannabis Spot Index — April 3, 2020

U.S. Cannabis Spot Index — Published April 3, 2020

U.S. Cannabis Spot Index up 2.3% to $1,388 per pound.

 

The simple average (non-volume weighted) price increased $23 to $1,588 per pound, with 68% of transactions (one standard deviation) in the $815 to $2,361 per pound range. The average reported deal size was nominally unchanged at 2.2 pounds. In grams, the Spot price was $3.06 and the simple average price was $3.50.

 

The relative frequency of trades for outdoor flower decreased by 5% this week. The relative frequencies of deals for indoor and greenhouse product increased by 2% and 3%, respectively. 

 

Outdoor flower’s share of the total reported weight moved contracted by almost 5% this week. The relative volumes of warehouse and greenhouse product expanded by about 2% and 3%, respectively. 

Accounts from several states across the country indicate that cannabis sales are down after experiencing a surge ahead of shelter-in-place and stay-at-home orders issued by numerous states and localities in response to the COVID-19 pandemic. This development is not particularly surprising; during the sales surge, reports frequently told of customers purchasing outsized amounts of product, resulting in ample personal supplies and no need to make further purchases for a longer-than-usual period. Similar situations have been observed in prior years, particularly after 4/20 and other traditional holidays when cannabis retailers run sales and promotions; consumers take advantage of lower prices to purchase larger volumes, which leads to lower sales in subsequent weeks.

 

Speaking of 4/20, it appears that the industry holiday will not provide its customary sales spike this year, as physical distancing recommendations and stay-at-home orders have in many cases been extended through the end of April. The free 4/20 concert held annually in Denver has already been canceled, while Nevada Governor Steve Sisolak announced this week that casinos and hotels in the state would remain closed through the end of this month. The New Mexico Cannabis Chamber of Commerce is urging patients and businesses to forego, or at least delay, 4/20 sales and celebrations this year until the pandemic subsides, according to New Mexico Political Report.  

 

While most developments are pointing to a period of suppressed demand as consumers are largely complying with stay-at-home orders in many parts of the country, at least one positive sign for cannabis sales was reported this week. According to Bloomberg, recent survey data indicates that demand for cannabis “appears to be just as inelastic as demand for alcohol,” even in a period of economic downturn. However, this is the first time that the legal cannabis industry has experienced a recession, and the first time that virtually all consumers have endured a pandemic of this nature generally, so it is possible that the findings of the survey could be altered as the situation persists.

October Forward initially assessed at $1,400 per pound.

 

The average reported forward deal size was 37 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 46%, 37%, and 17% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 43 pounds, 29 pounds, and 37 pounds, respectively.

 

At $1,400 per pound, the May Forward represents a premium of 0.9% relative to the current U.S. Spot Price of $1,388 per pound. The premium or discount for each Forward price, relative to the U.S. Spot Index, is illustrated in the table below.

Headlines From This Week’s Premium Report:

National

COVID-19 Pandemic and Resulting Stay-At-Home Orders Likely to Dampen or Eliminate 4/20 Sales Spike this Year

Colorado

Officials Allow Adult-Use Retailers to Serve Customers in Stores, After Limiting Them to “Curbside” Pickup Last Week

 

Oregon

February Sales Increase Slightly From Prior Month, Up 30% YoY

       

Nevada

Total January Retail Revenue Reaches New Record at over $64 Million

 

Massachusetts

Adult-Use Sales Swelled to New Peak in February, Topping $55 Million

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Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

3 April 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — April 3, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published April 3, 2020
1

*The provincial excise taxes vary. Cannabis Benchmarks estimates the population weighted average excise tax for Canada.

**CCSI is inclusive of the estimated Federal & Provincial cannabis excise taxes..

The CCSI was assessed at C$6.52 per gram this week, up 2.9% from last week’s C$6.33 per gram. This week’s price equates to US$2,096 per pound at the current exchange rate.

Include your weekly wholesale transactions in our price assessment by joining our Price Contributor Network If you have not already done so, we invite you to join our Price Contributor Network, where market participants anonymously submit wholesale transactions to be included in our weekly price assessments. It takes two minutes to join and two minutes to submit each week, and comes with loads of extra data and market intelligence.

Time to Shine


Most, if not all, licensed cannabis producers have not seen the level of sales they had expected since the recreational market opened in October 2018. The higher prices and lack of accessibility to legal sources of product have led to weaker-than-projected demand for licensed producers. As we have reported in the past, we believe roughly 80% of cannabis consumed in Canada still comes from the illicit market, but that might be changing quickly.

 

Since the COVID-19 pandemic reached Canada, universities and colleges have closed, businesses have instituted work-from-home programs, and unemployment has skyrocketed. At the same time, the sale of cannabis in legal channels has spiked across the country. In most provinces, cannabis is now considered an essential business, meaning cannabis retailers will remain open as most other businesses close their doors. Additionally, the Government of Canada has listed cannabis for medical use an essential service at the federal level. We believe that the unprecedented restrictions that have been put in place to contain the coronavirus present a unique set of circumstances that will benefit legal cannabis producers, at least in the short term. 

 

Social or physical distancing is likely to modify purchasing habits. Experienced cannabis users who have continued to buy products from their local illicit dealer may now prefer to purchase cannabis through legal channels – either online or at a physical retail location – rather than risk paying cash for untested product from unknown sources, delivered by someone who is essentially a travelling salesman. Simply getting these consumers in the door of a legal store or ordering through a legal website could be the game-changer that the industry needs. Consumers may now be more attracted to legal channels with a wider variety of tested, traceable products and the ability to pay electronically. Online sales should be particularly strong as consumers stay home and purchase goods remotely for delivery. This could create a structural shift to the legal markets, possibly resulting in increased sales for licensed producers that continue after the virus abates.

   

 

We have updated our sales forecast from our pre-COVID-19 base case. We believe the cannabis industry will see a spike in sales in March, which will help cushion the drop in sales expected in April and May. Our base case assumes that life returns to normal in June, with many of the stores that were expected to open in April and May pushed back to the summer, and a new consumer base formed at the expense of the illicit cannabis market.

 

Source: Cannabis Benchmarks

Our pre-COVID-19 base case showed total recreational Canadian cannabis sales reaching C$2.4B in 2020. Despite a dip in sales in April through June, we believe the cannabis industry will generate higher revenues this year. Our post-COVID-19 base case shows total recreational cannabis sales climbing to C$2.5B this year, which is more than double the C$1.2B in sales recorded in 2019.

Source: Cannabis Benchmarks

Our downside case, which assumes the economy does not recover quickly, shows sales coming in at C$120M, or 5% below the pre-COVID-19 base case. Our upside case, where the economy bounces back and customers switch to the legal markets, shows sales approximately 11.5%, or C$280M, higher than the pre-COVID-19 base case.

For more data and analytics like this, please sign up to become a BETA client of our market fundamentals dashboard. Please click the link below to register and we will email you directly as our platform becomes available.

Are you a licensed market participant in the U.S. or Canada? 

Do you support wholesale market transparency?

Become a member of our Price Contributor Network and receive discounted pricing and exclusive analysis!

Cannabis Benchmarks®, a division of New Leaf Data Services, LLC

03 April 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.