May 20, 2022

CANADA CANNABIS SPOT INDEX — May 20, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending May 20, 2022
CCSI image 1 2022-05-20

*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$5.14 per gram this week, down 1.2% from last week’s C$5.20 per gram. This week’s price equates to US$1,812 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 month the Ontario Cannabis Store (OCS), the body that regulates the province’s cannabis market, released its quarterly Cannabis Insights report for the period from October through December 2021.

 

In this week’s report, we focus particularly on the battle between legal and illicit supply. In the first few years of cannabis legalization, the regulated Canadian market has faced strong competition from illicit supply chains, but that situation is evolving quickly. Falling retail prices, increased product variety, and better accessibility through storefronts, pick-up / delivery options, and online marketplaces are helping legal cannabis gain the upper hand in this battle. 

 

The story is particularly changing in Ontario, where the most recent report estimates the legal market made up 59% of all cannabis sales as of Q4 2021. As can be seen, the trend of legal cannabis capturing increasing proportions of the total market has been quite dramatic over the past two years, and with it we have seen monthly cannabis sales increasing rapidly. For December 2021, legal recreational cannabis sales in Ontario totaled C$127M, 37% higher than a year prior.

SOURE: OCS

The chart below shows the average number of stores in Ontario over the past twelve quarters, as tracked by Cannabis Benchmarks and the OCS, versus the share of the legal cannabis market. The growth of the legal cannabis sector had a very strong correlation to the number of storefronts open for business in 2020 and that positive relationship continued in 2021.

Source: OCS, Cannabis Benchmarks
Based on the 2021 trajectory seen above, we estimate that every additional 100 stores opened will help increase the proportion of total sales from legal channels by about 2%. The Ontario deployment of stores has slowed down in 2022, but our current Ontario store count estimate is 1,503 stores open as of the end of April. Based on that figure we estimate that legal cannabis currently makes up 62% of total Ontario cannabis sales. This is a great feat for the regulated cannabis market.

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

20 May 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

May 13, 2022

CANADA CANNABIS SPOT INDEX — May 13, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending May 13, 2022
CCSI image 1 2022-05-13

*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$5.20 per gram this week, up 0.4% from last week’s C$5.18 per gram. This week’s price equates to US$1,815 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 how legal cannabis sales in Canada have impacted alcohol sales. With the legalization of recreational cannabis in October 2018, some alcoholic beverage companies stated that they 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 recently released monthly retail sales data for both cannabis and alcohol (beer, wine, and liquor), which gives us a view of whether cannabis has impacted alcohol sales.

 

Below is monthly data from October 2018 through early this year, showing sales of both categories. The chart illustrates that alcohol and cannabis sales were both growing steadily up until 2021. (The spike in alcohol sales in March 2020 was due to bulk buying ahead of COVID-19 lockdowns.) Alcohol sales dropped in early 2021 and leveled off a few months before cannabis sales began to plateau in late summer 2021. That being said, since January 2020, monthly alcohol sales have grown by C$215M to C$2.27B, while cannabis sales grew by a little less – C$182M – to reach C$282M.

With consumers having a finite amount of money to spend in these categories, increased accessibility and education around cannabis has led to a larger proportional expenditure for the new category. As shown in the chart below, cannabis sales’ share of the total dollars spent towards alcohol and cannabis has increased steadily since legalization. Currently, cannabis’ share stands at 12.9% of the total spend of the combined categories.

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

13 May 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

May 6, 2022

CANADA CANNABIS SPOT INDEX — May 6, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending May 6, 2022
CCSI image 1 2022-05-06

*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$5.18 per gram this week, up 0.4% from last week’s C$5.16 per gram. This week’s price equates to US$1,831 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 additional analysis on the optimal number of recreational cannabis stores in Canada. The Canadian cannabis industry continues to open new retail outlets across the country at a steady pace. As of the end of April, we counted 3,162 licensed retailers. The pace of store openings has slowed considerably in 2022 so far relative to 2021. In 2021, we counted 125 new stores opened each month, on average, with 70% of new store openings occurring in Ontario. So far in 2022, new store openings have declined to an average of 62 each month.

Alberta remains an outlier, with stores continuing to open despite it having the smallest population of the four major provinces. We expect the number of stores in Alberta to decline over the next 24 months, as competition intensifies and store economics become less favorable. British Columbia’s store count, meanwhile, is growing at a steady rate, while Ontario’s exponential growth in 2021 allowed it to catch up to a more respectable level. Quebec remains the biggest laggard this year, with the slowest rollout due to the provincial government owning and operating all cannabis retail operations.

 

The table below shows the average number of people each store serves in all the major provinces. To better understand the number of stores required, we looked to Colorado and Oregon, two of the most mature legal cannabis markets in the U.S. that do not place an artificial cap on the number of stores permitted to open. In Colorado, there is one recreational retailer for about every 9,600 residents while in Oregon there is one legal store for about every 6,150 people.

Using that example, we assume one store should ideally serve around 7,500 people. Based on this analysis, Canada as a whole would require a total of 5,137 stores, or 1.6 times the current number of retailers.

In the chart below, we show how each province is performing relative to the optimal store count. Other than Alberta, every province is still behind its optimal level. That being said, we saw meaningful progress made in comparison to 2021 and continue to see this trend moving in the right direction.
Source: Cannabis Benchmarks

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

6 May 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

April 29, 2022

CANADA CANNABIS SPOT INDEX — April 29, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 29, 2022
CCSI image 1 2022-04-29

*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$5.16 per gram this week, up 0.6% from last week’s C$5.13 per gram. This week’s price equates to US$1,830 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.

Statistics Canada recently released retail sales data for February 2022, showing nationwide legal cannabis sales dropping from the previous month due to fewer total days. Sales in February slid to C$336.4M but increased on a daily basis. From January to February daily sales grew from an average of C$11.2M per day to C$12.0M per day, or a 7.5% increase. After relatively flat daily sales over the past six months, average daily sales grew to over C$12M per day for the first time.

Another interesting aspect of this month’s data was the revisions. For 2021, total sales were revised down by C$62.6M. While we are uncertain of the exact reason for the restatement, Ontario made up the majority of the revision, with annual sales revised down by 4%, or C$60.6 to C$1.38B. The table below shows the monthly sales change by province.

After the revisions, Canadian recreational cannabis sales totaled C$3.83B for 2021. In light of the restatement, stagnant sales in the back half of 2021, and lower recreational cannabis prices, we have lowered our projection of total recreational cannabis sales for 2022 to C$4.3B.

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

29 April 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

April 22, 2022

CANADA CANNABIS SPOT INDEX — April 22, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 22, 2022
CCSI image 1 2022-04-22

*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$5.12 per gram this week, up 1.1% from last week’s C$5.07 per gram. This week’s price equates to US$1,846 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.

In this week’s report we review data released by Statistics Canada, which expands our understanding of the state of cannabis market fundamentals. The data set we focus on this week shows monthly dry cannabis unit production and sales data through September 2021. We discover the dynamics are changing rapidly with this latest installment of data, which spans from April 2021 to September 2021.

The chart below shows monthly dry cannabis packaged production alongside total cannabis sales. Both monthly data sets are reported on a packaged unit basis rather than volume.

As the chart illustrates, both production and sales were increasing at a steady rate in the first few years of legalization. However, with the exception of the COVID shutdown periods during Q2 2020, production consistently outpaced sales, with the excess production each month either being destroyed or pushed into storage facilities. As with most commodity markets, a steady increase in inventory leads to weakening wholesale prices. While declining prices typically result in an increase in sales in the short term, over the longer term producers need to cut production to correct the imbalance. As of last September, the data indicates that production cuts are finally being made to move supply closer in line with demand, with a number of cultivators closing production facilities. A better supply/demand balance should be good news for the cannabis markets as a whole, and should be seen as another sign of a maturing market.

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

22 April 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved