July 8, 2021

CANADA CANNABIS SPOT INDEX — July 9, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending July 9, 2021
CCSI image 1 2021-07-09

*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$5.52 per gram this week, up 1.0% from last week’s C$5.47 per gram. This week’s price equates to US$2,014 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.

Last week the Ontario Cannabis Store (OCS), the organization that regulates the province’s cannabis market, released their annual Cannabis Insights report for the period from January through March 2021. The report contains a wide variety of useful data, detailing how Ontario’s market has developed.

 

In the first few years of cannabis deregulation, the legal Canadian cannabis market has faced strong competition from illicit supply chains, due in part to high product prices and few stores. That story has changed dramatically, however, especially in Ontario, Canada’s largest province by population.

 

The most recent report shows that not only did Ontario’s brick-and-mortar retail footprint grow substantially, but also that the price of dried flower as listed at the OCS online store dropped even further below the price of cannabis sold through illegal mail-order marijuana sites.

 

 

In today’s report, we focus specifically on the market share of the legal markets. The latest report shows the legal cannabis market in Ontario makes up 44% of total cannabis sales. Meanwhile the average price of legal dried flower, including sales taxes, dropped by 3% from the previous quarter to C$6.17 per gram. 

Source: OCS

While the legal market has continued to build market share over the past two years, growth slowed significantly during the past quarter. Even though the legal cannabis industry appears to be moving in the right direction, by lowering cannabis prices and providing better access with more retail stores, illicit cannabis channels have maintained a strong presence. Up until this last OCS report, the growth of the legal cannabis sector has had a very strong correlation to the number of storefronts open for business. The chart below, which combines the average number of stores in each province in the past nine quarters as tracked by Cannabis Benchmarks, versus the share of the legal cannabis market, shows the legal cannabis market share seems to have plateaued despite an increase in store counts. 

Source: OCS, Cannabis Benchmarks

The slowdown in market penetration is a cause for concern for the legal cannabis sector. For the government, this change could undermine its goal of legalizing cannabis to stamp out the illicit market altogether and to generate taxable legal sales. For the Canadian LPs and other market participants, the slowdown will impact projected revenues from domestic sales, as the export market is also facing growing competition from producers in Europe, Africa, and Colombia.
For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

9 July 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

July 2, 2021

CANADA CANNABIS SPOT INDEX — July 2, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending July 2, 2021
CCSI image 1 2021-07-02

*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$5.47 per gram this week, down 1.5% from last week’s C$5.55 per gram. This week’s price equates to US$2,008 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 wholesales prices, Licensed Producers (LPs) continue to shut down already-built indoor growing facilities and scrap future development plans. As part of the move away from indoor capacity, many Canadian cannabis cultivators are shifting to outdoor operations. Outdoor cultivation has significantly lower operating costs relative to growing indoors or in a greenhouse, including lower infrastructure and labor costs, and no energy costs for lighting or HVAC needs. 


The latest data from Statistics Canada shows outdoor cannabis cultivation capacity expanding at a consistent rate, while indoor space has been on a decline since early last year. As of March 2021, there were 772 hectares licensed to grow cannabis outdoors. This is a massive jump relative to the same period last year.  Over the past 12 months, outdoor cannabis cultivation capacity grew by 495 hectares or 179% while indoor cannabis cultivation space has dropped by 10%.

Source: Cannabis Benchmarks

As we have outlined in the past, outdoor cultivation’s lower production costs make it more competitive with illicit supply, but the resulting 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, particularly for manufacturing cannabis 2.0 products such as edibles, beverages, and vapes. Such products are also typically less readily available from illicit sources, and could bring existing consumers seeking more novel products and experiences into the legal market. 

With more farmland dedicated to cannabis, we can expect a larger jump in unpackaged supply come the autumn harvest. In the past few years, we have seen a 66% month-over-month jump in nationwide production due to the outdoor harvest from September to October. This year, with 772 hectares dedicated to outdoor cannabis growing, we can expect even more production that will put pressure on prices.

Source: Cannabis Benchmarks

For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

2 July 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

June 25, 2021

CANADA CANNABIS SPOT INDEX — June 25, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending June 25, 2021
1

*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$5.55 per gram this week, up 0.4% from last week’s C$5.53 per gram. This week’s price equates to US$2,055 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 once again turn our attention to supply and demand dynamics for cannabis 2.0 products in Canada’s legal cannabis market. The three main product categories that fall under the cannabis 2.0 umbrella are edibles, extracts, and topicals. See the definitions of each category in our past report covering this topic. 

 

In today’s report, we provide an update on the supply and demand associated with edibles and extracts, which are the two larger categories. To date, Health Canada has compiled and published monthly data for production, consumption, and inventory of packaged units through March 2021.

 

Below are two charts showing the monthly supply and demand for edibles and extracts from the introduction of cannabis 2.0 products in October 2019 through March 2021. 


Starting with edibles, we see the production of packaged units by licensed producers ramping up through the end of Q3 2020, and then declining slightly since. The production of packaged units increased at a greater rate than non-medical and medical sales, leading to excess production going into inventory at the federal, provincial, or retail level. The current inventory of edible packaged units sits at 16M, which is approximately 7.1 months’ worth of supply at March’s consumption rate.

Source: Cannabis Benchmarks, Statistics Canada

The story for extracts is somewhat similar. Both production, as well as medical and non-medical sales, increased at relatively steady rates throughout 2020, but eased in Q1 2021. Still, production outpaced domestic consumption, leading to growing inventories. The current inventory of packaged units of extracts has not grown as quickly as edibles, but still sits at 12.6M, which is approximately 6.6 months’ worth of supply at March’s consumption rate.

Source: Cannabis Benchmarks, Statistics Canada

Typically, inventory level is a barometer for the health of a commodity. Inventories are closely tracked for major agricultural commodities, metals, and energy. A growing level of inventory signals a continuous mismatch between supply and demand, and ultimately leads to lower wholesale prices. The lower wholesale price diminishes the economics to produce at the same strong rate, and also increases demand for the commodity by providing consumers an incentive to purchase more. Ultimately the change in price helps bring the market back into equilibrium. 

Source: Cannabis Benchmarks

The yellow lines in the charts above denote the typical timing of the autumn harvest of outdoor-grown cannabis, which provides a good deal of feedstock from which extracts and edibles are manufactured. Increased supply of raw materials for these products from expanding outdoor cultivation is likely helping to push down prices. Since 2020’s fall harvest, the total packaged inventory of edibles and extracts looks to be on a corrective path, as increased inventory and lower prices signal to producers of these derivative products to pull back on manufacturing.

For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

25 June 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

June 11, 2021

CANADA CANNABIS SPOT INDEX — June 18, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending June 18, 2021
61821

*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 0.8% from last week’s C$5.57 per gram. This week’s price equates to US$2,073 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 dive further into household expenditure data from Statistics Canada, issued quarterly. The data shows some very interesting and positive trends for the legal cannabis sector. As we have noted in the past, major alcohol and tobacco companies have made significant investments in cannabis operations over the last few years. They have made these investments as a hedge, to ensure their current business operations do not lose market share to the growing cannabis usage that is being captured gradually by legal businesses. 

 

Some of the notable cannabis partnerships include: 

 

·       Constellation Brands + Canopy

·       Molson/Coors + Hexo

·       Anheuser-Busch InBev + Tilray

·       Altria + Cronos

·       Imperial Brands + Auxly

Soda, energy drinks, and sports drink markets are also studying the growth of this emerging industry. Several mainstream consumer packaged goods (CPG) heavyweights, including Coca-Cola and PepsiCo, are reportedly considering the launch of THC and / or CBD infused products, but nothing has materialized yet from major CPG firms. 


So, should traditional players be threatened by the cannabis movement? 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, the overall category of spending related to tobacco, alcohol, and cannabis has grown over the past three years by 15% to C$13.4B. Over 25% of that growth comes from cannabis. 

Source: Cannabis Benchmarks, Health Canada

In the chart above, we also show the percentage of spending devoted to cannabis. Although cannabis’ share is not significant yet at only 12.6% of total spending, it is an emerging category that continues to expand with new product offerings and a growing consumer base. We estimate cannabis will grow to 14-15% of total spending by the end of 2021, with accelerated adoption amongst the younger generation and growing accessibility in major provinces such as Ontario.

For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

18 June 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

CANADA CANNABIS SPOT INDEX — June 11, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending June 11, 2021
61121

*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$5.57 per gram this week, up 0.8% from last week’s C$5.53 per gram. This week’s price equates to US$2,090 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. The number of stores continues to climb steadily across the country, making the legal cannabis system more accessible to consumers. Our latest count shows the number of stores open for business reached 2,046 as of the end of May. This is up by 1,143 stores, or 126%, compared to May 2020. As can be seen in the chart below, we expect the trend to continue throughout this year.

Source: Cannabis Benchmarks

With each province having different licensing processes, we see different growth rates.

Source: Cannabis Benchmarks

Of the top four provinces, Alberta’s store count seems to be plateauing, at least for the moment. We do not expect much additional new store growth and also anticipate  some stores to close, due to strong competition with stores being located close to each other in major cities. British Columbia (BC) increased its store count at a steady pace in 2020, but we expect that growth rate to slow in 2021. At the moment, the BC government only reports 22 stores in the queue that are licensed and ready to open. We anticipate approximately 10 stores to open in BC each month through 2021. 

 

In Quebec and most of the Maritime provinces, provincial governments control the retail environment, with each province owning both the distribution and retail parts of the supply chain. With the province in control, the rollout has been quite slow. Quebec currently has 68 cannabis retail locations and we anticipate that will grow at a pace of only three new stores per month this year. 

 

Ontario continues to be the biggest driving force for new cannabis retail stores. Ontario had the slowest initial rollout of licensed stores among all provinces, but that has drastically changed since Q2 2020. The speed at which new stores are opening for business is helping to drive strong sales growth in the province, a trend that looks as if it will persist for the foreseeable future. Based only on current applications in the pipeline, it appears that Ontario’s retail rollout will continue at a strong pace in 2021. The Ontario government has announced a target of 1,000 total stores by September 2021, and it appears the provincial government will meet that goal.

 

Overall,we see substantial, strong growth of the country’s legal market continuing, providing an example for the increasing number of U.S. states contemplating legalization, as well as America’s federal government.

For more data and analytics like this, subscribe to the Cannabis Market Insights report developed in collaboration Nasdaq. This in-depth monthly report provides exclusive data and analysis on the legal cannabis industry, focusing largely on the Canadian cannabis market, as well as the cannabis equities market in the U.S.

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

11 June 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.