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 CCSI has been quite volatile over the past nine weeks since legalization. Cannabis Benchmarks has recorded wholesale prices averaging C$7.50/gram or US$2,576/pound* over this time frame. The price range was C$6.66/gram to C$8.23/gram.
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.
●In Quebec, New Brunswick, Nova Scotia and Prince Edward Island, cannabis is sold through government owned retail stores and online sites with both wholesale and retail prices set by the provinces.
In Ontario, cannabis is currently available only through the Ontario Cannabis Store, a government controlled online store, with privately owned retail stores opening in April, 2019; however, the Ontario Cannabis Store will still be the exclusive wholesaler to these retail stores.
In Alberta, although cannabis is distributed through privately owned retail stores that can set their own prices, the wholesale price is established by the Alberta Gaming and Liquor Commission through supply agreements with the LPs.
British Columbia has a hybrid system with both government owned and privately owned retail stores, supplied by the British Columbia Liquor Distribution Branch.
Manitoba, Newfoundland and Labrador, and Saskatchewan allow privately owned retail stores, regulated by the provincial liquor control commission and supplied through supply agreements with the LPs.
With the exception of Manitoba, all the provinces also run government owned online websites. Although the provinces have a large role in establishing both wholesale and retail pricing, there is still a wide range of prices across the country.
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