April 15, 2022

CANADA CANNABIS SPOT INDEX — April 15, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 15, 2022
CCSI image 1 2022-04-15

*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$5.07 per gram this week, down -0.5% from last week’s C$5.10 per gram. This week’s price equates to US$1,821 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.

Adding to our report from last week, Statistics Canada has also released licensed processing area data last week after almost nine months. The latest data set gives us a view of cannabis processing area through September 2021. Cannabis processing refers to processing, compounding, or conversion of marijuana into cannabinoid products, cannabinoid concentrates, or cannabinoid extracts. Processing output is typically associated with cannabis 2.0 products such as beverages, edibles, concentrates, vapes, and other novel cannabis products.

 

As seen in the chart below, total cannabis processing area has increased year-over-year as the consumption of cannabis 2.0 products has increased. The first data point reported by Statistics Canada is for October 2019, and since then processing area has grown 3.2x times from 130,269 square meters to 541,777 square meters in September 2021.

Interestingly, cannabis processing area and outdoor growing area have a strong positive correlation (0.779). This actually makes sense since outdoor cultivation generally produces large volumes of lower quality cannabis more suitable for processing into cannabis 2.0 products, while indoor-grown flower is typically directed at the premium smokable flower market. 

 

One last fact to note on processing is related to the specific license required to sell cannabis plant material. Starting this month, Health Canada will grant all standard and micro processing license holders authorization to sell dried and fresh cannabis. Prior to this change, processing facilities could cultivate cannabis and use the harvested material to feed their downstream activities only. With this change, which becomes effective on April 19, processing license holders will no longer require an amendment in order to sell fresh or dried cannabis to wholesalers.

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

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

April 8, 2022

CANADA CANNABIS SPOT INDEX — April 8, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 8, 2022
CCSI image 1 2022-04-08

*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$5.10 per gram this week, down -1.1% from last week’s C$5.15 per gram. This week’s price equates to US$1,844 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.

As competition intensifies in the cannabis cultivation sector and a supply surplus continues to depress wholesale prices, some Licensed Producers (LPs) have shut down already-built indoor growing facilities and are questioning future development plans. This is quite a change in direction from the first few years of legalization. More Canadian cannabis cultivators are shifting to outdoor operations and moving away from indoor growing. As we have noted in the past, outdoor cultivation has significantly lower operating costs relative to growing indoors or in a greenhouse, including lower infrastructure and labor costs – and, of course, outdoor grows also have no energy costs for lighting or HVAC needs. 

 

Statistics Canada released licensed cultivation growing area data this past week after almost nine months. The latest data set gives us a view of the indoor and outdoor growing area up through September 2021. Here are two seasonality charts that show the trend in indoor and outdoor growing areas across Canada.

As seen in the chart above, there was 1.73M square meters of indoor growing capacity in September 2021, which was down from 2.0M square meters a year earlier. This represents a 13.5% drop in indoor growing area.

In contrast, there is a big push towards outdoor growing. Outdoor growing area increased substantially, reaching 894 hectares in September 2021. This is a massive jump relative to the same month in the previous year.  Over the 12 month period, outdoor cannabis cultivation capacity grew by 308 hectares or 53%.

 

As we outlined last year, outdoor cultivation’s lower production costs make it more competitive with illicit supply, but the resulting legal cannabis is frequently perceived to be of lower quality. As a result, significant portions of outdoor-grown product might not be as marketable for smoking in its raw form, relative to indoor-grown flower. However, outdoor-grown cannabis is very suitable as raw material for extraction and manufacturing cannabis 2.0 products such as edibles, beverages, and vapes.

With more farmland dedicated to cannabis, we can expect a larger jump in unpackaged supply with each autumn harvest. In the 2019 and 2020 cannabis supply data, we have seen a large month-over-month jump in nationwide production due to the outdoor harvest from September to October. Last year, with 894 hectares dedicated to outdoor cannabis growing, there was likely an even higher production jump in October, which will continue to fill federal and provincial inventories and put pressure on prices.

 

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

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

April 1, 2022

CANADA CANNABIS SPOT INDEX — April 1, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 1, 2022
CCSI image 1 2022-04-01

*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$5.15 per gram this week, down -1.3% from last week’s C$5.22 per gram. This week’s price equates to US$1,870 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 review Canada’s recreational cannabis store count. We have been tracking this number very closely because there has been a very strong correlation between stores and sales. The number of stores continues to climb steadily across the country, making the legal cannabis system more accessible to consumers and, in some cases, increasing competition between retailers in more saturated local markets. 

 

Our latest count shows the number of stores open for business reached 3,138 as of the end of March. That figure is up by 1,344 stores – or a jump of 75% – compared to March 2021. As shown in the chart below, we expect that trend to continue throughout this year but at a slightly slower rate, a change that is already playing out. During Q1 2022, an average of 74 new stores opened each month, which is much lower than the 127 stores added monthly during the same quarter in 2021.

As we noted a few months back, one province that sticks out is Alberta. We have long been awaiting a slowdown in the number of stores added each month, but Alberta’s store count continues to grow at a steady rate. The current count is 757 stores, which is 155 more than last March.

The situation is already ultra-competitive amongst Alberta cannabis retailers, but it is expected to become even more so with the passing of Bill 80 in December. That measure allowed licensed retailers to set up their own e-commerce platforms starting on March 8, 2022. At the moment only the major retail chains have established an online presence, but over time almost every store should have a simple, Shopify-type site to fulfill online orders. We expect this change will lead to lower cannabis prices for customers, as the larger, more efficient retailers flex their pricing muscle. We also believe this trend will eventually lead to a flattening store count, as new store openings are offset by the closing of unprofitable ones.

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

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

March 25, 2022

CANADA CANNABIS SPOT INDEX — March 25, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending March 25, 2022
CCSI image 1 2022-03-25

*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$5.22 per gram this week, up 1.1% from last week’s C$5.17 per gram. This week’s price equates to US$1,884 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 January 2022, showing nationwide legal cannabis sales dropping from the previous month. Sales in January slid to C$347.2M. The month-on-month decrease of C$7.5M, or 2.1%, continues the trend of a flattening market, which commenced last summer. Monthly sales have averaged C$354M over the last six months for which data is available.

Also noteworthy in the latest report is the strong downward revision of the December 2021 sales figure. In last month’s retail sales report, December sales were estimated at C$382.4M. The latest release removed C$27.6M from the December sales estimate, bringing it C$354.8M. Looking at the same data on a per day basis paints a picture of softening demand in Canada’s legal cannabis industry, where sales have been sliding each month from September 2021 (C$11.8M / day) through January 2022 (C$11.2M / day). 

 

Trends in mature, state-legal U.S. cannabis markets have consistently shown that October-November and January-February are typically periods of relatively weaker sales, providing hope that Canadian legal cannabis demand could pick up again come March, when a significant month-on-month boost is frequently observed. In other words, the current Canadian sales slump may be due to a maturing market leaving behind the consistent growth of its early stages and settling into seasonal sales trends. 

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

25 March 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

March 18, 2022

CANADA CANNABIS SPOT INDEX — March 18, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending March 18, 2022
CCSI image 1 2022-03-18

*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$5.17 per gram this week, down 0.4% from last week’s C$5.19 per gram. This week’s price equates to US$1,845 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.

As we reported last week, Alberta’s cannabis industry went through a major transformation that allows licensed private retailers in the province the ability to establish online stores to sell their products direct-to-consumer. This week we focus on British Columbia (BC), where the government opened online sales back in August 2020. The one caveat: customers were required to pick up their purchases in-person. 

 


That changed on July 15 last year, when licensed cannabis retailers in BC were authorized to deliver recreational cannabis products directly to consumers. The BC government saw this as an avenue to support BC’s legal cannabis industry and continue to push out the illegal market. With this initiative and the continued growth in new retail stores, we are seeing BC’s legal cannabis sales grow. This is welcome news for the industry, since BC still has a very robust illicit market.

At the end of 2021, there were 403 cannabis retailers in BC, which was 100 more than at the end of 2020. 2021 sales topped C$551M, with consecutive monthly growth. The primary factor for the growth in sales was the increased accessibility of the legal market, with nine new stores opening per month, on average. This strong relationship between store counts and monthly legal cannabis sales can be seen clearly in the chart below.

For 2022, we expect an average of eight new stores to open each month. We expect total 2022 sales to grow by 18% or C$98M, to C$649M.

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

18 March 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved