*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$5.53 per gram this week, down 0.4% from last week’s C$5.55 per gram. This week’s price equates to US$2,077 per pound at the current exchange rate.

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This week we examine newly released household expenditure data from Statistics Canada, issued on a quarterly basis. The data shows 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 Q1 2021.

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 products, as new supply from indoor and outdoor cultivation operations became available.

In Q1 2021, recreational cannabis expenditures grew 74% to C$935M, while illicit cannabis expenditures dropped by 11% to C$757M as compared to the same time frame in 2020. Expenditures for medical-use cannabis also dropped 11% to C$123M. Medical cannabis now makes up only 6.8% of total cannabis spending in Canada. Total expenditures on cannabis reached C$1.82B for the quarter, or C$20.2M per day.

Source: Cannabis Benchmarks, Health Canada

Next, we examine cannabis purchasing as compared to 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 to the latent demand for cannabis that is being captured gradually by legal businesses. 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 only slightly impacted those categories negatively. As seen in the chart below, both alcohol’s and tobacco’s shares of total expenditures dropped by 1% between Q1 2020 and Q1 2021, to 51% and 36% respectively.

Source: Cannabis Benchmarks, Health Canada