January 25, 2019

CANADA CANNABIS SPOT INDEX — January 25, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 25, 2019

 

The CCSI dropped 4.5% this week to C$6.35 per gram, from C$6.64 per gram last week. The index has been particularly stable over the past five weeks, with prices bouncing within a tight C$0.29 range. C$6.35 per gram equates to US$2,164 per pound at current exchange rates.

On January 23rd, Statistics Canada issued more detailed market data – the monthly retail sales by province and territory. This published dataset gives us a full glimpse into a complete month of post-legalization sales from the provincial online stores and brick & mortar stores. Initial revenue figures are relatively low. November sales across Canada totalled C$54M.

With recreational cannabis being legalized on October 17th, Cannabis Benchmarks made adjustments to the reported October sales numbers to normalize for a full month of sales. This takes the total sales for October from C$43M to C$89M. With that adjustment, we observe November sales dropping by 39%. As we outlined last week, there are many potential reasons for this massive sales decline, with possibilities including October numbers being inflated by initial excitement about legalization. Alternatively, lack of product availability and high prices may have pushed customers back to the black market. The two aforementioned possibilities may also have been occurring simultaneously.

Drilling deeper into the provincial data exposes even more critical information. British Columbia’s total adjusted October sales dropped by 79% to C$1M, while Ontario total adjusted October sales dropped by 58% to C$10M. Alberta was one of the few provinces that did not see massive month-on-month declines, with only a 19% drop when compared to the total adjusted October sales.

 

Taking the analysis one step further, we broke down these figures into a monthly sales per person.

These simple calculations give an even more brutal look at the start of legalization. In this analysis we assume that every Canadian citizen is of legal age and would be willing to consume cannabis. On average during November, each Canadian citizen spent only C$1.55 to purchase cannabis from a legal outlet, less than many individuals spend on a coffee. British Columbia saw the lowest spend per person at only C$0.22. Low per-person spending figures indicate that the black market still likely looms large over the legal one in the early days of legalization in Canada.

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

25 January 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

January 18, 2019

CANADA CANNABIS SPOT INDEX — January 18, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 18, 2019

 

The CCSI jumped 3.9% this week to C$6.64 per gram, from C$6.38 per gram last week. The index has been stable over the past 4 weeks. C$6.64 per gram equates to US$2,271 per pound at current exchange rates.

 

On January 15th, Health Canada released preliminary data on sales, finished inventory and unfinished inventory for October and November, 2018. The Canadian government has instituted the Cannabis Tracking System to ensure illegal supply does not cross into legalized markets. This data snapshot gives the industry a fundamental view of the first complete month of non-medical cannabis sales in Canada with lots of interesting nuggets to consider.

With recreational cannabis being legalized on October 17th, Cannabis Benchmarks made adjustments to the reported October non-medical sales quantity to normalize for a full month of sales. This takes the reported non-medical sales quantity for October from 4,511 kg to 9,323 kg. Surprisingly, November non-medical sales dropped by 45% to 5,146 kg. There are many potential reasons for this massive sales decline but possibilities include:

 

1. Initial sales rush upon legalization leading to a higher October sales volume;

2. The lack of product availability at online and retail locations impacted November sales; and

3. High prices pushed customers back to the black market.

We’ll get a better perspective on the primary drivers for demand as we get more monthly data from Health Canada.


The reported amount of finished dried cannabis inventory, or product that is ready of sale, as of the end of November is also interesting. The combined inventory of Federal licence holders (inventory held by cultivators and processing facilities) and Provincial distributors/sellers (inventory held by government and privately run online and brick-and-mortar stores) was 25,607 kg., or 2.9x the total dried cannabis actually sold in November to medical and non-medical customers. Is there really a supply shortage?

The last piece of information provided is the end of month unfinished dried cannabis inventory, or product that has been cultivated but not packaged or labelled. According to monthly reported data, there was 93,254 kg of dried cannabis or 10.5x November consumption sitting at either cultivation or processing operations. Can the current reported supply shortage be resolved quickly?

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

18 January 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

January 11, 2019

CANADA CANNABIS SPOT INDEX — January 11, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 11, 2019

 

The CCSI declined another 3.4% this week to C$6.38 per gram, from C$6.60 per gram last week. The index has been steadily dropping over the past 5 weeks. C$6.38 per gram equates to US$2,178 per pound at current exchange rates.

StatsCan analysis found that recreational dried cannabis sold from a licensed supplier sold for C$9.70 per gram on average since legalization. This is drastically higher than the calculated C$6.51 per gram paid by consumers in the still thriving illicit markets. The entire industry is closely watching these prices as legalization was expected to set back the illegal supply while also controlling quality and bringing in tax revenue. Cannabis Benchmarks expects the price of cannabis to continue to drop as the current licensed producers increase business operation efficiencies and add capacity over the next 18 months. This follows a similar trend to that observed in the early years of most recreational U.S. markets.

One of the major Canadian licensed producer, Aurora Cannabis, gave industry watchers some additional insight into how the legalization process has been going so far. On January 8th, Aurora announced guidance for its Q2 2019 results, or quarter ending December 31. These early estimates show revenue of C$50 to C$55 million, net of the excise tax. The guidance indicates C$17 million in recreational sales from the start of legalization (C$20.6 million extrapolated back to the beginning of the quarter), which is lower than analyst estimates. Aurora earnings are scheduled to be released on February 11, 2019.

 

Lastly, up to 8,000 entrants are expected to enter a lottery today for licenses for the first 25 cannabis stores to open in Ontario starting April 1. The licences are being divided regionally, with five going to the east of the province, seven in the west, two in the north, six in the Greater Toronto Area and five in Toronto itself. Recreational cannabis can only be bought through the Ontario government-run website at the moment.

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11 January 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

January 4, 2019

CANADA CANNABIS SPOT INDEX — January 4, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 4, 2019

 

The CCSI declined 0.5% this week to C$6.60 per gram, from C$6.63 per gram last week. The index has dropped 18% over the past four weeks. C$6.60 per gram equates to US$2,204 per pound at current exchange rates.

 

The stability in prices adds some reassurance to the developing industry. Supply shortages are not expected to be resolved quickly, but the Alberta Gaming, Liquor and Cannabis Commission (AGLC) reported that the situation is slowly improving. Even though some producers had stockpiled product ahead of legalization, issues with packaging and logistics prevented product from hitting the marketplace in a timely manner.

 

The halt of new Alberta retail licenses remains in place to ensure current licensees can keep their shelves adequately stocked. Ontario announced it will be accepting entries next week from those looking to enter a lottery to apply for the first 25 retail cannabis licenses in the province. There is a C$75 fee and those selected will have five business days to submit their application, a C$6,000 non-refundable fee and a C$50,000 letter of credit. The short time frame for submittal of applications is to ensure that these operations can be up and running by April 1. The retail licenses will be distributed throughout the province – five to the eastern side of the province, seven to the western side, two in the north, six in the Greater Toronto Area and five in Toronto itself.

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

4 January 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

December 28, 2018

CANADA CANNABIS SPOT INDEX — December 28, 2018

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 28, 2018

 

The CCSI declined 6% this week to C$6.63 per gram, from C$7.08 per gram last week, and is down 15% over the past two weeks. C$6.63 per gram equates to US$2,212 per pound, which places the CCSI at 188% of the U.S. Cannabis Spot Index, currently at US$1,175 per pound.

Wholesale prices in Canada headed lower with supply shortages; howevever, not as extreme as reported in November when AGLC had only 20% of their product delivered and Quebec closed retail locations due to insufficient supply. 

 

Supply shortages still exist, yet inventory on provincial online sites is not as limited as it was in November. AGLC showing nearly 80% of dried flower products available on the online site. Experienced consumers, frustrated with limited quantity, could be turning back to the black market while supply shortages get resolved. One of the contributing factors to the initial supply shortage was incorrect packaging and labeling. Reports from the field indicate that some LPs have been able to resolve these issues. 

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

21 December Copyright © 2018 New Leaf Data Services, LLC.  All rights reserved