October 9, 2020

CANADA CANNABIS SPOT INDEX — October 16, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 16, 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$6.04 per gram this week, up 1.3% from last week’s C$5.96 per gram. This week’s price equates to US$2,073 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 continue to delve into data from the Ontario Cannabis Store’s (OCS) Q1 Cannabis Insights reportThe report contains a wide variety of useful data to show how Ontario’s market is developing. In today’s report, we will focus on expanding cannabis product variety and sales breakdowns by product type.

 

With the introduction of cannabis 2.0 products, consumers seeking more variety presumably have greater reason to purchase products from legal channels. While illegal mail-order-marijuana websites do sell the types of products included in the legal market’s cannabis 2.0 phase, traditional dealers usually only carry a small variety of dried flower. 

 

The latest data from the OCS shows cannabis 2.0 products are already accounting for a significant portion of legal sales just a few months after their launch. For the three-month period starting April 30, cannabis 1.0 products (dried flower and pre-rolls) accounted for 70% of total sales in legal cannabis channels, while cannabis 2.0 products grew to 30% of the total. 

 

As part of the reported data, the OCS broke out sales revenue by product category. Additionally, the OCS calculated a dry cannabis equivalency (DFE) for cannabis 2.0 products, providing an estimate of the number of grams of dried flower represented by the sales of each respective product type. The DFE breakdown shows that while cannabis 2.0 products made up about 30% of all sales revenue for the period, they only accounted for 23.5% of all grams sold. This means that, overall, cannabis 2.0 products commanded a greater per-gram premium relative to dried flower. 

Source: Cannabis Benchmarks, AGCO

However, the overall premium commanded by cannabis 2.0 products is not distributed equally across the various product types. Taking the total sales with the DFE for each product category gives us a rough idea of which cannabis 2.0 products achieved a premium compared to the same gram of cannabis sold as dried flower. In other words, how much did a gram of cannabis sell for as dried flower versus being converted to a cannabis 2.0 product? Keep in mind we did not assess the cost to produce each product, which varies across – and within – product categories.

 

As the chart below shows, topicals, vapes, and capsules received the greatest premiums. On the other side of the spectrum, edibles, concentrates, and beverages commanded the lowest price for a gram of cannabis, based on the OCS’s DFE. It should also be noted that lower-grade cannabis plant material is typically used in the manufacture of cannabis 2.0 products, enhancing the premiums commanded by some of the products.

Source: Cannabis Benchmarks, AGCO

Lastly, we look at where these products were sold – through the provincial online store or at brick-and-mortar retailers. This dynamic has likely already shifted with 78 more stores opening between the end of June and the end of September, but this data gives us a good snapshot in time. 

 

As can be seen in the charts below, almost every product had a greater proportion of sales through retail stores. However, oils saw online sales make up a greater percent of the total, while the proportions of capsules, concentrates, and beverages sold online versus in-store were roughly or nearly equal. All of the products that saw a greater or almost equal proportions of online sales are highly finished and standardized. Consumers may feel more confident selecting such products online, compared to dried flower or even an edible product, which buyers might prefer to inspect in person before purchasing. It should be noted that availability issues at some store locations may have skewed sales somewhat, as cannabis 2.0 products were still being rolled out during the period under discussion.

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

16 October 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

U.S. Cannabis Spot Index — October 9, 2020

U.S. Cannabis Spot Index — Published October 9, 2020

U.S. Cannabis Spot Index down 0.7% to $1,623 per pound.

 

The simple average (non-volume weighted) price increased $31 to $1,800 per pound, with 68% of transactions (one standard deviation) in the $1,045 to $2,556 per pound range. The average reported deal size was nominally unchanged at 2.0 pounds. In grams, the Spot price was $3.58 and the simple average price was $3.97.

 

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

 

The relative volume of warehouse product contracted by 1%. The relative volume of outdoor flower expanded by the same proportion, while that for greenhouse product was unchanged.

September sales data released this week continues to show demand elevated well above pre-COVID levels. However, similar to August, there are also some signs that it may have reached, or at least be near, a current peak. Sales volume to patients in Arizona’s medical cannabis system declined for the second straight month in September. Adult-use sales in Illinois continued to climb, but growth has slowed in recent months after a big jump in July, although that may be due in part to still-developing production capacity and tight supply. 

 

As record sales have strained supplies even in mature and previously well-supplied markets, new regulatory developments could add more costs for businesses, potentially applying further upward pressure on wholesale prices. Proposed rules in Oregon and Washington would enact new regulations around additives in vape products in the former state and implement required pesticide and heavy metals tests for products in the latter. Mandatory quality assurance and safety screenings of products will begin in Arizona’s market in November for the first time in the history of the state’s medical cannabis program.

 

With rules tightening in some states with more mature markets, the establishment and expansion of younger ones will capture demand that was likely supplied previously by illicit sellers. The sizable markets of Los Angeles and Michigan both announced new opportunities to apply for cannabis business licenses this week. Meanwhile, adult-use sales began today in Maine and a new law set the stage for a regulated commercial cannabis market in Vermont in the future.

November Forward up $30 to $1,545 per pound.

 

The average reported forward deal size was nominally unchanged at 22 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 35%, 39%, and 26% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 24 pounds, 17 pounds, and 25 pounds, respectively.

 

At $1,545 per pound, the November Forward represents a discount of 4.8% relative to the current U.S. Spot Price of $1,623 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

Los Angeles to Accept License Applications for Several Business Types Later this Month

Arizona

Sales Volume Declines for Second Straight Month in September, but Remains Elevated from Pre-COVID Levels

Illinois

September Adult-Use Sales Approach $68 Million

Maine

Adult-Use Market Opens, but Only a Few Businesses Licensed to Make Sales Businesses

 

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

9 October 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — October 9, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 9, 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$5.96 per gram this week, down 0.4% from last week’s C$5.99 per gram. This week’s price equates to US$2,042 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 provide an update on store counts nationwide, with an emphasis on the development of Ontario’s legal market. Overall, the Canadian cannabis industry has increased the pace at which it is opening new retail outlets across the country. At the end of July, we crossed the milestone of 1,000 stores and expansion has not slowed since then. As of September, we counted 1,159 licensed retailers, with an average monthly growth rate of 6.3% in 2020. This solid growth rate comes despite many store applications and openings being delayed due to COVID-19 shutdowns.

Source: Cannabis Benchmarks

The 75-store increase in September was dominated by Ontario. Ontario’s Alcohol and Gaming Commission (AGCO) issued a statement on September 1 regarding Cannabis Retail Store Authorizations. AGCO stated that they were going to “double the pace of store authorizations this fall.” This suggested that, on average, up to 40 new stores would be opened each month through the end of the year. 

 

With the most recent Ontario store count, we can confirm that 40 new stores were in fact opened in the province in September, bringing the total in Ontario to 178. This is still far below the 526 retailers active in Alberta, but growth there has slowed and Ontario should lead all provinces in store count by late 2021 if this pace continues. 

 

As we have reported in the past, expansion of the legal market’s physical presence in the form of licensed storefronts correlates strongly with increased sales, up to a point. However, given Ontario’s large population and still relatively low store count, saturation of retail outlets in the province is a long ways off. 

The latest sales data for June 2020 issued by Statistics Canada shows cannabis retail sales in Ontario totaling C$48.8M with 116 stores open. Our most recent forecast shows sales growing dramatically with the increase in active retailers, bringing September sales to C$63.9M and total Ontario sales for 2020 to C$655M. If the provincial store count continues to grow by 40 stores per month, our initial estimates show total Ontario sales eclipsing C$1B in 2021.

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

9 October 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

October 2, 2020

CANADA CANNABIS SPOT INDEX — October 2, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 2, 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$5.99 per gram this week, down 3.2% from last week’s C$6.18 per gram. This week’s price equates to US$2,034 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 the Ontario Cannabis Store (OCS), the body that controls the province’s cannabis market, released their Q1 Cannabis Insights report. The report contains a wide variety of useful data to show how Ontario’s market is developing. In today’s report, we will focus specifically on price. 

 

The legal Canadian cannabis market has faced strong competition from illicit supply chains since legalization in October 2018. Ontario residents have specifically been challenged with both high prices and few stores, factors that have helped keep the illicit markets robust. That being said, this new report shows that the legal market is making significant progress on those fronts.

 

The report shows that from April 1 to June 30, not only did sales grow by 5.4%, but the price of dried flower on the OCS online store dropped by 16.7%, to below the price of illegal cannabis sold through mail-order marijuana (MoM) sites for the first time. The average price of legal dried flower was C$7.05/gram (including sales taxes) after dropping for four straight quarters. This was the result of discount lines of cannabis released by the big licensed producers and 552 individual product price drops over the quarter. In comparison, the average dried flower price on illegal MoM sites remained almost flat at C$7.98/gram. We should note that cannabis quality was not taken into consideration for this price comparison. Legal product has some advantages in this regard due to required quality assurance and safety testing, prohibitions on pesticide use, and standards for accuracy in labeling, among other regulations.

Source: OCS

Clearly, lower prices have helped legal sellers build market share. The report indicates 25.1% of cannabis sales are now being made through legal channels. The period covered by the report also coincided with the COVID lockdowns in Ontario. We believe that, along with lower prices, consumers prefer regulated, legal cannabis due to increased health and safety considerations taken by licensed retailers and in the OCS purchasing process, compared to buying from an illegal seller. 

 

Overall, this report shows positive trends for the regulated industry. It indicates that licensed cultivators can use their economies of scale and more efficient growing prices to cut prices and still maintain a profit margin; however, it is not clear how much room they have for further price cuts or discounting.

 

There are a number of structural reasons that legal channels have a hard time competing with the illicit markets:

  1. Excise taxes: These taxes are distributed to federal and provincial governments to administer the trade of cannabis, strictly monitor licensed producers with health inspector visits, social educational programs, and more.

  2. Federal and provincial sales taxes. 

  3. Laboratory testing: All legal cannabis requires a certificate of analysis (COA) from a federally approved laboratory. The laboratory analyzes the chemical profile of the product – including THC and CBD potencies, as well as terpene profiles – and tests for harmful substances such as pesticides, mold, and other contaminants. 

  4. Secure packaging: Regulated packaging to ensure the product stays out of the hands of underage users and also remains fresh. 

  5. Distribution and storage: A well planned and secure distribution and local storage network require armed and insured cannabis transportation and storage facilities.

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

2 October 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

U.S. Cannabis Spot Index — October 2, 2020

U.S. Cannabis Spot Index — Published October 2, 2020

U.S. Cannabis Spot Index up 2.5% to $1,634 per pound.

 

The simple average (non-volume weighted) price increased $2 to $1,770 per pound, with 68% of transactions (one standard deviation) in the $1,013 to $2,526 per pound range. The average reported deal size decreased to 2.1 pounds. In grams, the Spot price was $3.60 and the simple average price was $3.90.

 

The relative frequency of trades for greenhouse flower increased by 1% this week. The relative frequency of transactions for indoor product decreased by the same proportion, while that for deals involving outdoor flower was unchanged.  

 

The relative volumes of each individual grow type were essentially stable this week, with shifts of less than 1% observed.

The U.S. Spot Index averaged $1,564 per pound for September, up 2.4% from August. September is the fourth straight month to see an increase in the monthly mean U.S. composite price. After it trended downward from late March through late May, in the early days of the COVID-19 pandemic, the U.S. Spot has since climbed almost ceaselessly. 

 

Some market participants expect such behavior to continue. Forward prices submitted by members of our Price Contributor Network in California last week show that agreed-upon wholesale prices for deals to be executed this month were 4.6% higher than the state’s average Spot price for September. The Forward deals show an expectation that rates will dip somewhat in November and December, but remain higher than current levels, before increasing even more dramatically in the coming year. 

 

However, the combination of uncertainty regarding the fall outdoor crop – due to wildfires on the West Coast and the early snow that hit Colorado a few weeks ago – and unprecedented demand could very well push wholesale rates up through the end of the year. In 2019, when sales growth was occurring at a significantly slower pace than this year, the U.S. Spot Index continued to rise into November. Additionally, wholesale rates in states such as Michigan, Illinois, and Massachusetts are very high due to expanding adult-use markets. At this time last year, recreational sales had not yet begun in Michigan and Illinois, and demand was much lower in Massachusetts.

April 2021 Forward initially assessed at $1,465 per pound.

 

The average reported forward deal size was 22 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 35%, 39%, and 26% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 24 pounds, 17 pounds, and 26 pounds, respectively.

 

At $1,515 per pound, the November Forward represents a discount of 7.3% relative to the current U.S. Spot Price of $1,634 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

Legislation Introduced to Make State-Licensed Cannabis Businesses Eligible for Federal Disaster Relief

California

Fresno to Begin Process of Licensing Cannabis Businesses

Oregon

State Economists Expect Some COVID-Related Sales Gains Could be Permanent

Michigan

Caregiver Product No Longer Allowed to be Sold Into Licensed Medical Market

Massachusetts

Rules Proposed for Two Types of Adult-Use Delivery Businesses

 

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

2 October 2020.  Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved