Canada Cannabis Spot Index (CCSI)
The CCSI was launched to assess prices at the national level. Provincial indices for Ontario, Quebec, Alberta and British Columbia will be introduced in the first quarter of 2019. Cannabis Benchmarks assesses the average wholesale price that an online or retail location pays for dried cannabis flower from Licensed Producers (LPs) under supply agreements with the provinces. Cannabis Benchmarks’ methodology includes working directly with market participants from both the supply and demand sides, including analysis of public and private data, such as StatsCan and LP company filings, to assess the average wholesale price paid each week.
For the week ending December 14th, the CCSI was up 0.8% to C$7.79/gram, equating to US$2,678/pound.
The structure of the Canadian cannabis market is fundamentally different than those of state markets in the U.S. While the U.S. market is a free market with wholesale prices established between buyers and sellers, the Canadian government exerts more control over the market, with wholesale prices and distribution set in large part by the provinces. Each province has a similar structure with a provincially-appointed government agency working directly with LPs to procure the region’s supply.
Wholesale price movement should be expected when implementing such vast legislation on a nation-wide scale. The recent weekly movement in prices was predominantly driven by supply shortfalls at the outset, resulting in retailers looking for any inventory to satisfy buyers. Despite supply shortfalls, which could have been used as an opportunity to capture higher margins, our research and data indicate that short-term windfalls by retailers were not pursued. Rather, retailers seemed disposed to securing new customers and creating a positive experience in the legal markets.
*At an average exchange 1.32 Canadian dollars per U.S. dollar