April 16, 2021

CANADA CANNABIS SPOT INDEX — April 16, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 16, 2021
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$5.81 per gram this week, up 1.4% from last week’s C$5.73 per gram. This week’s price equates to US$2,101 per pound at the current exchange rate.

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This week we examine whether legal cannabis sales in Canada have impacted alcohol sales. With the legalization of recreational cannabis in October 2018, alcohol companies feared they would see a reduction in sales, as consumers of legal age may opt to substitute cannabis for alcohol. (In Canada, one must be 18 or older to purchase cannabis; for alcohol, the legal age varies between 18 and 19, depending on the province.) The Canadian government releases monthly retail sales data for both cannabis and alcohol (beer, wine, and liquor), which provides us with a better understanding of whether cannabis has actually had an impact on alcohol sales.


Below is monthly data from the start of 2016 through early this year showing sales of both categories. The chart illustrates that alcohol sales have been growing steadily despite the introduction of legal recreational cannabis sales in late 2018. Since January 2019, monthly alcohol sales have grown by C$219M to C$2.22B. Meanwhile, monthly legal cannabis sales have grown by almost the same amount – C$227M – to reach C$282M. 

Source: Cannabis Benchmarks

A review of Canadian census data for the 19+ demographic shows that the growth in alcohol sales is consistent with the growth in this population segment. Overall to this point, it appears that legal cannabis sales growth has not yet impacted alcohol sales negatively. Still, it should be noted that the COVID-19 pandemic – and associated lockdowns, including restrictions on and / or closures of bars and restaurants – provided anomalous conditions that almost certainly boosted alcohol sales higher than they might have been had the pandemic not occurred. This can be seen in the spike in alcohol sales that occurred in March 2020, as lockdowns were put in place across Canada. We have in previous reports detailed our reasoning regarding how the pandemic also resulted in a boost to legal cannabis sales.  

 

Going forward, we do believe that at some point cannabis sales will impact alcohol sales. Consumers have a finite amount of money to spend in this category, and increased accessibility and education around cannabis may lead to larger proportional expenditures for the newly-legal intoxicant. Indeed, this is occurring already. As shown in the chart below, cannabis sales are starting to represent a larger portion of the total dollars spent towards alcohol and cannabis. Currently, cannabis’ share stands at 11.3% of the total spend of the combined categories. 

Source: Cannabis Benchmarks

Our current forecast for cannabis sales projects monthly spending to reach C$433M by the end of 2021. If we assume an average annual alcohol sales growth of 1.5% each year, then we can expect monthly alcohol sales to reach C$2.33B by end of the year. At those levels, cannabis sales would grow to represent 16% of the total spend on the two categories.

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 April 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

April 9, 2021

U.S. Cannabis Spot Index — April 9, 2021

U.S. Cannabis Spot Index — Published April 9, 2021

U.S. Cannabis Spot Index up 0.6% to $1,522 per pound.

 

The simple average (non-volume weighted) price increased $7 to $1,768 per pound, with 68% of transactions (one standard deviation) in the $986 to $2,550 per pound range. The average reported deal size was 2.3 pounds. In grams, the Spot price was $3.35 and the simple average price was $3.90.

 

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

 

The relative volume of outdoor flower contracted by 3% this week. The relative volumes of warehouse and greenhouse product expanded by 2% and 1%, respectively.

 

Based on new sales data out of several states – both those with established and newer markets – the March sales spike that has come to be expected based on observations from prior years manifested again in 2021. Oregon, Illinois, and Massachusetts all saw new record monthly retail revenue figures established last month. 

 

Notably, adult-use sales alone out of the latter two states are now comparable to those generated by Oregon’s licensed system, which also serves registered patients. Total retail sales in Illinois were about $35 million more than those documented in Oregon in March, which marked just the fifteenth month that Illinois’ legal adult-use market has been up and running, compared to Oregon’s four-and-a-half year old licensed system. The rapid growth in sales in Illinois presages the additional demand that will be captured by legal cannabis markets in other high-population states such as New Jersey and New York when those markets open for business. 

 

 

At the moment, robust demand in state-legal cannabis markets has not resulted in rising wholesale prices. However, this follows the observed behavior of the U.S. Spot in 2020, which declined by 3% from February to March, then decreased another 1% from March to April, even while sales began to boom unexpectedly as the COVID-19 pandemic took hold of the country. This year’s decline in the monthly average national composite price from February to March was much smaller, at 0.3%. Meanwhile, March 2021’s mean U.S. Spot price of $1,508 per pound is up by 9.2% year-over-year, from $1,381 in March 2020. 

May 2021 Implied Forward unchanged at $1,550 per pound.

 

The average reported forward deal size was 47 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 54%, 34%, and 12% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 59 pounds, 35 pounds, and 25 pounds, respectively.

 

At $1,550 per pound, the May Implied Forward represents a premium of 1.9% relative to the current U.S. Spot Price of $1,522 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:

Oregon

March Sales Jump 23% to Exceed $109M, a New Record

Massachusetts

Adult-Use Sales Top $100M for the First Time Ever in March

Illinois

Combined Medical and Adult-Use Revenues Approach $145M in March, Establishing a New Record High

Maine

March Adult-Use Sales Grow by 47% MoM, But Remain Modest at $3.7M

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

9 April 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — April 9, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 9, 2021
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$5.73 per gram this week, down 0.7% from last week’s C$5.77 per gram. This week’s price equates to US$2,067 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 examine household expenditure data issued by Statistics Canada on a quarterly basis. The data show some very interesting and positive trends for the legal cannabis sector. As seen in the chart below, Q3 2020 was the first quarter in which the estimated household expenditure for legal recreational cannabis exceeded that spent in the illicit market. That trend continued into Q4 2020.

With increased access through physical retail stores – particularly in Ontario – and online channels during the pandemic, more Canadians chose to purchase cannabis from regulated, legal sources. Also fueling that trend was a drop in prices for legal product as new supply from indoor and outdoor cultivation operations became available.

In Q4 2020, recreational cannabis expenditures grew 101% to C$918M, while illicit cannabis expenditures dropped by 20% to C$714M as compared to the same time frame in 2019. We also note that expenditures for medical-use cannabis dropped 6% to C$135M. Medical cannabis now makes up only 7.6% of total cannabis spending in Canada. Total expenditures on cannabis reached C$1.77B for the quarter, or C$19.2M per day.

Source: Cannabis Benchmarks, Health Canada

Next we examine cannabis purchasing in comparison to that for alcohol and tobacco. Major alcohol and tobacco companies have made significant investments in cannabis operations over the last few years, in part as a hedge to ensure they do not lose out on the latent demand for cannabis that is being captured gradually by legal businesses. The data released by Statistics Canada to date shows that alcohol and tobacco sales remain much stronger than cannabis sales, and that increased cannabis sales have not impacted those categories negatively. As seen in the chart below, both alcohol and tobacco’s shares of sales remained consistent between Q4 2019 and Q4 2020, at 51% and 37-38% respectively.

Source: Cannabis Benchmarks, Health Canada

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

09 April 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

April 2, 2021

U.S. Cannabis Spot Index — April 2, 2021

U.S. Cannabis Spot Index — Published April 2, 2021

U.S. Cannabis Spot Index down 1.0% to $1,513 per pound.

 

The simple average (non-volume weighted) price decreased $20 to $1,761 per pound, with 68% of transactions (one standard deviation) in the $976 to $2,546 per pound range. The average reported deal size increased to 2.4 pounds. In grams, the Spot price was $3.33 and the simple average price was $3.88.

 

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

  

 

The relative volume of warehouse flower contracted by 2% this week. The relative volumes of greenhouse and outdoor product expanded by 1% each. 

The U.S. Spot Index averaged $1,508 in March, down 0.3% from February’s mean national composite price of $1,513 per pound. While we have pointed out that sales typically jump in March relative to February, the U.S. Spot also dropped from February to March 2020, by 3%, from $1,424 to $1,381 per pound. 

 

Looking back to last year at this time, our transaction data shows that the relative volumes of outdoor flower being traded in the West Coast states are smaller this year compared to the final week of March 2020. In addition to smaller proportions of lower-priced outdoor flower helping to lift wholesale prices, rates for all grow types are up compared to a year ago. This is particularly true for indoor-grown product. This week’s price of $1,990 per pound for warehouse flower is up by 14.2% from the rate of $1,742 per pound, documented in the week ending March 27, 2020. 

 

 

High prices in the younger adult-use markets of Michigan, Illinois, and Massachusetts have helped to lift rates for indoor flower from those recorded last year. However, data out of Michigan this week suggests that the notable upward price pressure from newer markets evident over the course of the past year may wane going forward. While sales growth in Michigan continued in February, expanding production is helping to bring down wholesale and retail prices in the state.

October 2021 Implied Forward initially assessed at $1,640 per pound.

 

The average reported forward deal size was 46.7 pounds. The proportions of forward deals for outdoor, greenhouse, and indoor-grown flower were 54%, 34%, and 12% of forward arrangements, respectively. The average forward deal sizes for monthly delivery for outdoor, greenhouse, and indoor-grown flower were 59 pounds, 34 pounds, and 25 pounds, respectively.

 

At $1,550 per pound, the May Implied Forward represents a premium of 2.5% relative to the current U.S. Spot Price of $1,513 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

Comment Period on Cannabis Appellations Program Extended Until April 12

Nevada

Total Adult-Use and Medical Cannabis Sales Exceed $83M in January, a New Record for the State

New Mexico

Bill to Legalize Cannabis for Adult-Use and Create Regulated Market Approved by State Legislature; Governor Expected to Sign

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 April 2021.  Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — April 2, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 2, 2021
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$5.77 per gram this week, down 0.8% from last week’s C$5.82 per gram. This week’s price equates to US$2,079 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 once again turn our attention to supply and demand dynamics for cannabis 2.0 products in Canada’s legal cannabis market. The three main product categories that fall under the cannabis 2.0 umbrella are edibles, extracts, and topicals. The official Health Canada definitions of each are as follows:

 

Edibles: Products that are solid or liquid at a temperature of 22 ± 2°C and that are intended to be eaten or drunk the same way as foods such as chocolate, cookies, sodas, teas.

 

Extracts: Products made using extraction processing methods or by synthesizing phytocannabinoids and intended for inhalation or ingestion, including by absorption in the mouth or other routes of administration (e.g. vape pens, hash, tinctures, softgels, suppositories).

 

Topicals: Products that include cannabis as an ingredient and that are intended for use on external body surfaces such as skin, hair, or nails.

 

In today’s report, we provide an update on the supply and demand associated with edibles and extracts, which are the two larger categories. To date, Health Canada has compiled and published monthly data for production, consumption, and inventory of packaged units through November 2020.

 

Below are two groups of charts that show the monthly supply and demand for edibles and extracts from the introduction of cannabis 2.0 products in October 2019 through November 2020. 


Starting with edibles, we see the production of packaged units by licensed producers ramped up throughout 2020, with only a couple of months not showing gains. The production of packaged units increased at a greater rate than non-medical and medical sales, leading to excess production going into inventory at the federal, provincial, or retail level. Medical sales in this category are almost negligible.

 

Just as with dry flower cannabis in 2020, the mismatch between supply and demand is causing inventories to rise at massive rates. The current inventory of edible packaged units sits at 14M, which is approximately 8.7 months worth of supply at November’s consumption rate.

Source: Cannabis Benchmarks, Statistics Canada

The story for extracts is slightly different. Both production, as well as medical and non-medical sales, increased at relatively steadier rates throughout 2020. Still, production ramped up at a faster rate than domestic consumption, leading to growing inventories. The current inventory of packaged units of extracts has not grown as quickly as edibles, but still sits at 10.4M, which is approximately 7.0 months worth of supply at November’s consumption rate. The inventory of extracts grew by 2.8M packaged units or 36% in 2020, after a high build-up throughout 2019, as compared to edibles which grew 1,900% last year. 

Source: Cannabis Benchmarks, Statistics Canada

In analyzing the Health Canada data, we anticipated the monthly supply and demand figures to perfectly balance where each month:

 

Supply – Sales (consumption) = change in Federal/Provincial storage

This has not been the case. Each month we observed an excess amount, which we label as “unaccounted” inventory. In the charts above, we identify the “unaccounted” inventory bucket with a black vertical-lined pattern. In the charts below, we show the amounts of “unaccounted” inventory of extracts and edibles, both by month and cumulatively.

Source: Cannabis Benchmarks

The growing size of the “unaccounted” category is concerning, although it is not clear if these products are being consumed somewhere in the system, being destroyed, or being held in storage. If it is going to Federal or Provincial storage, there are now an additional 3.1M packaged units of edibles and 4.0M packaged units of extracts to account for, making the inventory overhang even larger.

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

02 April 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.