May 15, 2020

CANADA CANNABIS SPOT INDEX — May 15, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published May 15, 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$6.41 per gram this week, up 0.7% from last week’s C$6.36 per gram. This week’s price equates to US$2,070 per pound at the current exchange rate.

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This week we review Canadian cannabis usage trends by province and age group. Statistics Canada conducts a survey on cannabis usage each quarter. Statistics Canada has not released any 2020 data yet, but the complete 2019 data shows a trend of growing cannabis use amongst Canadians. The data is drawn from a self-reported survey with no consideration of whether the cannabis consumed originated from the legal or the illicit market.

While overall Canadian cannabis use is trending upward, consumption did not expand at a uniform rate during the survey period, but has varied from quarter-to-quarter, as the chart below illustrates. The growth can be attributed to increased accessibility and the growing normalization of cannabis as a recreational drug. Based on the current survey, Statistics Canada estimates 5.12 million, or 17.1%, of citizens over the age of 15 use cannabis. The survey shows that 490,000 more people reported using cannabis in Q4 2019 than in Q4 2018, when legal recreational cannabis sales commenced.  

 

Although the survey does not capture the source from which cannabis is purchased or the frequency of usage, it still provides important information about trends in consumption. On average the consumer base grew by 3% per quarter. This is expected to increase in 2020 with the release of cannabis 2.0 products, as well as new users resulting from the lockdown spurred by COVID-19. Consequently, our projections show growth occurring at a faster pace this year, ultimately bringing the total cannabis user base to 6 million. This number should continue to rise with Ontario’s planned expansion of retail stores.

 

Source: Health Canada, Cannabis Benchmarks

The data also shows growth in almost every age bracket, with drops only in the youngest age group and in the 55 to 64 age group. The growth in all other age groups is further confirmation that the industry’s consumer base should expand substantially in 2020.

Source: Health Canada, Cannabis Benchmarks

For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

15 May 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

May 8, 2020

U.S. Cannabis Spot Index — May 8, 2020

U.S. Cannabis Spot Index — Published May 8, 2020

U.S. Cannabis Spot Index up 0.6% to $1,342 per pound.

 

The simple average (non-volume weighted) price increased $21 to $1,568 per pound, with 68% of transactions (one standard deviation) in the $815 to $2,320 per pound range. The average reported deal size increased to 2.4 pounds. In grams, the Spot price was $2.96 and the simple average price was $3.46.

 

The relative frequency of trades for indoor flower increased by 2% this week. The relative frequencies of deals for greenhouse and outdoor product decreased by 1% each.

 

Warehouse flower’s share of the total reported weight moved expanded by 3% this week. The relative volume of greenhouse product contracted by the same proportion, while that for outdoor flower was unchanged.

In this week’s report, we discuss the first official sales figures for April issued by any state with a legal adult-use cannabis market, which come from Illinois. Both adult-use and medical cannabis sales in the Land of Lincoln increased in April, despite the state being subject to a stay-at-home order for the entirety of the month. 

 

The increase in medical cannabis sales in Illinois in April is particularly notable, as it followed a very large spike in sales in March. Typically, medical cannabis markets see sales fall off in the month following one in which a significant jump takes place. The rate of month-over-month growth in Illinois’ adult-use market was comparable to that documented for March, but average daily sales figures increased for the first time since the recreational sector opened in January.

 

Sales data out of Illinois indicates that restrictions put in place by state and local officials in response to COVID-19 may not dampen cannabis business revenue significantly, or at all, especially if retailers are designated as essential businesses and allowed to remain open, as they are in Illinois. The data also shows that adult-use consumers and patients are both purchasing larger quantities at once, on average, likely due to people trying to limit the number of trips out of their residences in light of the coronavirus. In Illinois, adult-use consumers and patients are still permitted to enter retailers, but ordering online for curbside pickup is also an option. Ultimately, even with limited hours and not being able to allow customers and patients to freely enter stores due to social distancing protocols, Illinois cannabis sellers still saw sales growth from March to April. 

 

Similar sales guidelines exist in Colorado and the West Coast states, while Nevada retailers were until May 1 limited to delivery only. (Nevada cannabis customers can now pick up orders curbside; in-store sales will also begin to be allowed on Saturday, May 9, once retailers obtain approval from state regulators.) Whether such similarities will lead to increased sales in those markets, which are all more mature than Illinois’ to varying degrees, remains to be seen. 

 

Also, due to the youth of Illinois’ adult-use market, monthly sales trends cannot be compared to those of prior years, obscuring potential COVID-related impacts. For example, a state such as Colorado may also see month-over-month sales growth in April, but whether the rate of growth will surpass or fall short of those observed in recent months before the pandemic can be used to gauge how much the virus and accompanying restrictions are affecting demand. Official April sales data out of Colorado will not be available until June.

June Forward unchanged at $1,425 per pound.

 

The average reported forward deal size was 36 pounds. The proportion of forward deals for outdoor, greenhouse, and indoor-grown flower was 47%, 37%, and 16% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 42 pounds, 29 pounds, and 36 pounds, respectively.

 

At $1,425 per pound, the June Forward represents a premium of 6.2% relative to the current U.S. Spot Price of $1,342 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:

California

Proposed Rules for Comparable-to-Organic Certification Program for Cannabis Released by State Agriculture Department

Colorado

2019 Data Shows Wholesale Prices Rose Even as Flower Production Increased and Purchasing Declined

 

Illinois

Adult-Use & Medical Sales Both Rise in April With Stay-at-Home Order in Effect    

Massachusetts

State Announces Application Window for Adult-Use Delivery Services, Microbusinesses

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

8 May 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — May 8, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published May 8, 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$6.36 per gram this week, down 0.8% from last week’s C$6.41 per gram. This week’s price equates to US$2,057 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.

This week we focus on medical cannabis sales in Canada. Health Canada has not reported new data on total dried cannabis sold for medical use in some time. The latest data shows consumption for September 2019 at 1,215 kg. In today’s report, Cannabis Benchmarks estimates medical use in Canada from October 2019 to February 2020. 

 

Sales of medical cannabis products in Canada have dropped significantly since the opening of the recreational market. Health Canada data from between October 2018 and September 2019 shows a strong negative correlation between medical and recreational cannabis sales, which indicates that existing medical patients are switching to the recreational market. The assortment of regulated, high quality products selling at a low price point in the recreational market, and without the need for a doctor’s recommendation, makes the switch appealing for patients looking to access cannabis products. 

 

The trend line in the chart below shows a logarithmic relationship, suggesting that medical consumption will find a bottom even as monthly recreational sales volumes increase. We have highlighted the most recent data point published by Health Canada.

 

Source: Health Canada, Cannabis Benchmarks

Cannabis Benchmarks has modeled consumption for medical use between October 2019 and February 2020, with an average of 1,232 kg per month. Currently, Ontario makes up 47% of total medical market consumption. With the opening of more retail locations for recreational cannabis in the province, we expect medical usage to decline in Ontario, leading to an overall drop in the medical use category, as shown below.

Source: Health Canada, Cannabis Benchmarks

For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

08 May 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

May 1, 2020

U.S. Cannabis Spot Index — May 1, 2020

U.S. Cannabis Spot Index — Published May 1, 2020

U.S. Cannabis Spot Index down 2.5% to $1,334 per pound.

 

The simple average (non-volume weighted) price decreased $41 to $1,547 per pound, with 68% of transactions (one standard deviation) in the $821 to $2,272 per pound range. The average reported deal size was nominally unchanged at 2.3 pounds. In grams, the Spot price was $2.94 and the simple average price was $3.41.

 

The relative frequency of trades for outdoor flower increased by 2% this week. The relative frequency of deals for greenhouse product decreased by the same proportion, while that for indoor flower was unchanged. 

 

 

Outdoor flower’s share of the total reported weight moved expanded by 2% this week. The relative volumes of warehouse and greenhouse product each contracted by 1%.

This week, Colorado became the first state with a major legal cannabis market to loosen its stay-at-home order, offering a glimpse of what businesses and consumers might expect in the weeks and months to come as other states and municipalities follow suit. One thing that has become clear over the past month or so that stay-at-home orders have been in place across the country is that resumptions in economic activity will be gradual processes; it will not be like flicking a switch. 

 

One significant item to consider is that major metropolitan areas, which are often home to disproportionately large amounts of cannabis commerce in states with legalization, will likely keep restrictions in place for longer than states as a whole. For example, Colorado Governor Jared Polis allowed the state’s “Stay-at-Home” order to lapse on Monday, April 27, and replaced it with a less stringent “Safer-at-Home” order. However, on Friday, April 24, Denver Mayor Michael Hancock extended the city’s stay-at-home order through May 8. Several other counties in the Denver metropolitan area also extended stay-at-home orders to May 8, as did Boulder County.

 

In anticipation of Polis letting the state’s stay-at-home order lapse, the Colorado Marijuana Enforcement Division (MED) issued a bulletin to licensees. Overall, MED instructed licensees that a previous bulletin outlining COVID-19 protocols for cannabis businesses remains in effect. MED said it will provide updates on any changes pursuant to new executive orders. However, even in local jurisdictions that are moving to the state’s “Safer-at-Home” order, the operational constraints placed on cannabis retailers by officials in response to COVID-19 did not change. Polis has also stated that he expects that some social distancing and other protocols will persist for some time, likely months, even under loosened restrictions. 

 

Still, from the perspective of this writer, Colorado’s shift from “Stay-at-Home” to “Safer-at-Home” has resulted generally in increased amounts of people in Denver leaving their homes for various reasons, which could conceivably increase traffic at licensed cannabis retailers. Additionally, beginning Monday, May 4, offices that had been compelled to shift to remote working will be permitted to bring back some staff, provided that guidelines are followed, which should result in more people out and about. While the operational constraints to which Colorado cannabis businesses have been subject will not immediately change, retailers may see additional customers who previously opted to follow the stay-at-home order. 

 

Nevada, on the other hand, offers a different scenario. We have pointed out that Nevada Governor Steve Sisolak ordered the state’s cannabis retailers to move to sales via delivery only in late March. Additionally, with hotels and casinos closed, and Las Vegas tourism essentially non-existent, sales have reportedly slowed considerably, though official data for March and April is not yet available. (Below, we discuss February sales in Nevada, which saw a pronounced and unexpected month-over-month decline.)

 

This week, Sisolak announced on Twitter that most of Nevada’s “Stay at Home” measures will be extended through mid-May. However, today, May 1, a new order will relax restrictions on some businesses, including licensed cannabis retailers. Beginning today, cannabis retailers will be able to make sales “curbside,” offering another avenue by which transactions can be carried out. Yet, Nevada’s consumer base remains limited to in-state residents. A report on the changes from the Nevada Appeal notes, “[Sisolak] said the opening of Las Vegas casinos likely won’t happen until the third or fourth phase of his gradual reopening plan, but he has not released any more details or timeline.”   

 

A return to normalcy in the Nevada cannabis industry is contingent on a full reopening of Las Vegas and its various tourist attractions and amenities. Similar sentiments can be applied to markets such as Denver, which typically sees sales rise through the summer to peak in August or September, with help from purchases made by tourists to Colorado. However, as we ruminate on below, in the Forward Curve commentary, gradual easing of restrictions, along with the possibility of a second wave of infections, could make for unexpected shifts in demand that vary state-to-state.

November Forward initially assessed at $1,375 per pound.

 

The average reported forward deal size was nearly 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 36 pounds, respectively.

 

At $1,425 per pound, the June Forward represents a premium of 6.8% relative to the current U.S. Spot Price of $1,334 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:

California

New Research Examines Cost of Product Testing in Legal Market

Colorado

Governor Loosens Stay-at-Home Order, but Operational Restrictions on Cannabis Businesses Remain in Place

 

Nevada

  • February Sales Dive by Over 20% MoM, Even Before COVID-Motivated Shift to Only Delivery Sales in Late March
  • Retailers Now Permitted to Offer “Curbside” Sales in Addition to Delivery

       

Massachusetts

State Data Shows Production by Adult-Use Cultivators Continuing Steadily Since Retailers Forced to Close; Recreational Sales Remain Suspended Until at Least May 18

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

1 May 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — May 1, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published May 1, 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$6.41 per gram this week, up 3.8% from last week’s C$6.18 per gram. This week’s price equates to US$2,076 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.

This week we focus on the growth in legal cannabis purchasing. Statistics Canada does a very detailed job of estimating total expenditures each quarter. The break-out into various categories is informative, as they map out where spending occurs each month. We zoomed into this dataset this week to see how much Canadians spent on non-medical cannabis in 2019 in both the legal and the illegal markets. 

 

To our surprise, overall cannabis sales stayed relatively flat throughout 2019. Canadians consistently spent roughly C$1.3 billion each quarter on non-medical cannabis, with no increase since late 2018, despite legal sales commencing in October of that year. We do believe more volume was purchased, but at a lower price point, making the sales flat in revenue terms.

 

The data illustrates how spending for non-medical cannabis is moving from the illicit market into the legal market. In Q4 2018, 87% of cannabis sales were made through illegal channels. That has been shifting over time; in Q4 2019, 65% of cannabis sales were attributed to illicit sources.

 

Source: Statistics Canada, Cannabis Benchmarks

The shift has not occurred as fast as the industry would have liked. Legal cannabis producers pay excise tax, just like alcohol and tobacco manufacturers, and in most provinces consumers pay sales tax on legal cannabis. These taxes push the price of legal products higher than analogous items from illicit sources. Adding to the pain of higher prices is the lack of widespread, convenient retail access. The combination of higher prices and poor accessibility makes it very difficult for the legal market to compete with the illegal market. Cannabis Benchmarks estimates 80% of cannabis was bought from illicit markets in 2019, which is higher than that suggested by the StatsCan data above. 

 

The data above indicates that the real opportunity for this new industry is not generating a new customer base, but capturing the one already buying from illegal producers and sellers. We believe the previous trend of growing legal cannabis purchasing will change drastically in 2020, to the benefit of the licensed market. 

 

We are modelling a structural shift due to COVID-19 and its impacts on the Canadian economy, which will alter purchasing habits across the board. For example, it has been shown that when the economy tumbles, alcohol sales traditionally spike as consumption increases. On the other hand, with items such as toilet paper, panic-buying might empty shelves, but people do not use more of it; they just buy less later. 

 

We believe cannabis usage and purchasing habits will track more closely with alcohol, with the crisis resulting in increased consumption generally. We also expect online access to legal cannabis will encourage consumers to favor legal channels, rather than having to go out and meet up with illegal dealers. In our April 17 CCSI report, we detailed our projections for legal cannabis sales in March, which included an increasing share of online sales for the first time in over six months.    

 

Below is our projection of the total volume of cannabis sold to non-medical consumers in the legal market. Our latest estimate for April is 15,267 kg of dry cannabis sold. A late-March spike in sales ahead of stay-at-home orders going into effect saw users stockpile personal supplies, leading to a dampening of April sales. Similar scenarios have been observed in state markets in the U.S.; sales revenue and volume typically slumps after events or holidays, such as 4/20, that spur a momentary, outsized increase in purchasing.

Source: Cannabis Benchmarks

Getting cannabis users to the store or ordering online is one of the biggest hurdles that the industry has been facing. Allowing legal cannabis businesses to continue operating amid the COVID-19 shutdown has created a unique opportunity for this industry. With Canadians under lock down, we have altered the way we live, including how we communicate with friends and buy groceries. Cannabis purchasing is no exception. We believe cannabis consumers will now have an opportunity to experience the variety, packaging, and reliability of legal cannabis, and will respond favorably overall. We expect the altered habits to be long-lasting and lead to increased legal sales even after the pandemic subsides and daily life returns to normal.

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

01 May 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.