May 29, 2020

CANADA CANNABIS SPOT INDEX — May 29, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published May 29, 2020
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$6.41 per gram this week, down 1.0% from last week’s C$6.48 per gram. This week’s price equates to US$2,096 per pound at the current exchange rate.

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Last week, Statistics Canada released retail sales data for March 2020. Sales have been steadily growing across Canada, and the impacts of COVID-19 led to sales skyrocketing as cannabis users stockpiled cannabis along with toilet paper. In the back half of March, as work-from-home and social distancing became a reality, provincial online sales and retail sales grew rapidly across the country.

 

March sales settled at C$181M over the month, which was C$29M higher than February’s revenues, as well as up C$120M year-on-year.

 

Source: Health Canada, Cannabis Benchmarks

We have heard that online sales picked up, but the vast majority of sales still occur at physical retail locations. In past reports, we discussed the proportion of online sales to total recreational sales. The last data point on this topic released by Statistics Canada is for September 2019, which shows online sales dropped to 5.9% of total sales at that point. In our April 17 report, we modelled online sales continuing to drop to 5% over the next few months, until March 2020 when COVID-19 lockdowns were initiated. We estimate online sales in March rose to account for 6.5% of total sales.

 

With that estimate, we can better understand the average daily sales per store at the provincial level. We first stripped out the online sales to get to sales at physical retail stores. Next, we divided those figures by our monthly store count, then divided by the number of days in each month, to get the average daily sales per retail store.

Source: Cannabis Benchmarks

The two most populous provinces, Ontario and Quebec, have a relatively low number of stores per capita. Therefore, the licensed retailers in those provinces each serve a disproportionately large number of cannabis users and benefit by seeing voluminous amounts of daily transactions. However, average daily sales per individual retail shop in Quebec have been dropping since mid-2019, as sales have not grown at the same rate as new stores. Ontario looks to be experiencing a similar decline in recent months as new stores have been opening quickly.

 

Alberta and British Columbia have sales levels that are well below the average. While this could potentially point to an oversaturation of physical outlets relative to each province’s consumer base, the average is also skewed upward by the data out of Ontario and Quebec, where retail storefronts have been slower to proliferate.

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

29 May 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

May 22, 2020

CANADA CANNABIS SPOT INDEX — May 22, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published May 22, 2020
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$6.48 per gram this week, up 1.1% from last week’s C$6.41 per gram. This week’s price equates to US$2,101 per pound at the current exchange rate.

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This week, we provide an update on the proliferation of licensed retail storefronts in Canada. As of May, we count 891 retail stores across the country, an increase of 31 from the previous month.

 

Source: Health Canada, Cannabis Benchmarks

Despite COVID-related lockdowns in effect over the past two months, we are still seeing stores open in Canada’s major provinces. 122 stores have opened since the end of February, with 92% of the new shops located in Alberta, British Columbia, and Ontario. 

 

Alberta still has the highest store count at 461, or 52% of the licensed retailers in Canada. As expected, Alberta, with the largest concentration of stores, has greater sales per capita than the other large provinces. 

 

Month-on-month growth in store counts in Alberta is on a decline. However, the growth trajectory in Ontario, the country’s most populous province, is still going strong. Since the start of the year, the number of legal shops in Ontario has been expanding exponentially. This growth comes despite COVID-19 delaying the licensing process, as well as construction. Our count shows that 31 new stores have opened in Ontario since the end of February, doubling the number of stores in operation.

Source: Cannabis Benchmarks

The industry is keeping a close eye on Ontario, as it is home to an estimated two million cannabis users, or 38% of the total in Canada. The new stores provide more convenient access to those who previously purchased from the illicit market or were pushed to the provincial online stores. We have heard from many cannabis users that the online experience is convenient (especially during COVID), but they prefer walking into a store to see product variety, take in the aromas, and hear from experienced staff.

 

According to data compiled by Health Canada, Canada is home to approximately 5.1 million cannabis consumers. Alberta is specifically home to 585,000 users. Its current robust cannabis retail presence of 461 stores works out to one store per 1,269 consumers. 

 

Ontario, on the other hand, has a relatively sparse retail presence. Based on the number of cannabis consumers estimated to reside in the province, there is one legal storefront per 31,779 users in Ontario. Clearly, per capita store counts represent a significant difference between Alberta and Ontario. 

Source: Statistics Canada, Cannabis Benchmarks

How many stores will Ontario’s cannabis consumer population support? If we take the example of Alberta, there would need to be over 1,500 stores across Ontario in order to reach an equivalent per capita store count, based on the number of self-reported cannabis consumers in each province. An increase of over 1,400 retail outlets in Ontario would certainly result in a robust expansion of sales in the province. 

 

Given Ontario’s total population of over 14.5 million, 1,500 licensed cannabis retailers would result in one store per almost 9,700 total residents. Such a per capita store count could plausibly be supported based on data from some of the more mature cannabis markets in the U.S. The hypothetical per capita Ontario store count just noted is in line with that in Colorado, the most mature legal cannabis market in the U.S., where there is one licensed adult-use retailer per roughly 9,800 residents (587 legal storefronts serving a population of over 5.7 million). 

 

For additional context, Oregon, the U.S.’s most saturated legal cannabis market by store count, has one licensed retailer for about every 6,350 residents (661 legal shops serving a population of over 4.2 million). Store counts in both of those U.S. markets have largely stabilized after several years of growth – Colorado’s market opened in 2014, Oregon’s in late 2016 – but both still expanded a bit in 2019.

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

22 May 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

May 15, 2020

CANADA CANNABIS SPOT INDEX — May 15, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published May 15, 2020
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$6.41 per gram this week, up 0.7% from last week’s C$6.36 per gram. This week’s price equates to US$2,070 per pound at the current exchange rate.

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This week we review Canadian cannabis usage trends by province and age group. Statistics Canada conducts a survey on cannabis usage each quarter. Statistics Canada has not released any 2020 data yet, but the complete 2019 data shows a trend of growing cannabis use amongst Canadians. The data is drawn from a self-reported survey with no consideration of whether the cannabis consumed originated from the legal or the illicit market.

While overall Canadian cannabis use is trending upward, consumption did not expand at a uniform rate during the survey period, but has varied from quarter-to-quarter, as the chart below illustrates. The growth can be attributed to increased accessibility and the growing normalization of cannabis as a recreational drug. Based on the current survey, Statistics Canada estimates 5.12 million, or 17.1%, of citizens over the age of 15 use cannabis. The survey shows that 490,000 more people reported using cannabis in Q4 2019 than in Q4 2018, when legal recreational cannabis sales commenced.  

 

Although the survey does not capture the source from which cannabis is purchased or the frequency of usage, it still provides important information about trends in consumption. On average the consumer base grew by 3% per quarter. This is expected to increase in 2020 with the release of cannabis 2.0 products, as well as new users resulting from the lockdown spurred by COVID-19. Consequently, our projections show growth occurring at a faster pace this year, ultimately bringing the total cannabis user base to 6 million. This number should continue to rise with Ontario’s planned expansion of retail stores.

 

Source: Health Canada, Cannabis Benchmarks

The data also shows growth in almost every age bracket, with drops only in the youngest age group and in the 55 to 64 age group. The growth in all other age groups is further confirmation that the industry’s consumer base should expand substantially in 2020.

Source: Health Canada, 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

15 May 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

May 8, 2020

CANADA CANNABIS SPOT INDEX — May 8, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published May 8, 2020
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$6.36 per gram this week, down 0.8% from last week’s C$6.41 per gram. This week’s price equates to US$2,057 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 focus on medical cannabis sales in Canada. Health Canada has not reported new data on total dried cannabis sold for medical use in some time. The latest data shows consumption for September 2019 at 1,215 kg. In today’s report, Cannabis Benchmarks estimates medical use in Canada from October 2019 to February 2020. 

 

Sales of medical cannabis products in Canada have dropped significantly since the opening of the recreational market. Health Canada data from between October 2018 and September 2019 shows a strong negative correlation between medical and recreational cannabis sales, which indicates that existing medical patients are switching to the recreational market. The assortment of regulated, high quality products selling at a low price point in the recreational market, and without the need for a doctor’s recommendation, makes the switch appealing for patients looking to access cannabis products. 

 

The trend line in the chart below shows a logarithmic relationship, suggesting that medical consumption will find a bottom even as monthly recreational sales volumes increase. We have highlighted the most recent data point published by Health Canada.

 

Source: Health Canada, Cannabis Benchmarks

Cannabis Benchmarks has modeled consumption for medical use between October 2019 and February 2020, with an average of 1,232 kg per month. Currently, Ontario makes up 47% of total medical market consumption. With the opening of more retail locations for recreational cannabis in the province, we expect medical usage to decline in Ontario, leading to an overall drop in the medical use category, as shown below.

Source: Health Canada, 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

08 May 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

May 1, 2020

CANADA CANNABIS SPOT INDEX — May 1, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published May 1, 2020
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$6.41 per gram this week, up 3.8% from last week’s C$6.18 per gram. This week’s price equates to US$2,076 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 focus on the growth in legal cannabis purchasing. Statistics Canada does a very detailed job of estimating total expenditures each quarter. The break-out into various categories is informative, as they map out where spending occurs each month. We zoomed into this dataset this week to see how much Canadians spent on non-medical cannabis in 2019 in both the legal and the illegal markets. 

 

To our surprise, overall cannabis sales stayed relatively flat throughout 2019. Canadians consistently spent roughly C$1.3 billion each quarter on non-medical cannabis, with no increase since late 2018, despite legal sales commencing in October of that year. We do believe more volume was purchased, but at a lower price point, making the sales flat in revenue terms.

 

The data illustrates how spending for non-medical cannabis is moving from the illicit market into the legal market. In Q4 2018, 87% of cannabis sales were made through illegal channels. That has been shifting over time; in Q4 2019, 65% of cannabis sales were attributed to illicit sources.

 

Source: Statistics Canada, Cannabis Benchmarks

The shift has not occurred as fast as the industry would have liked. Legal cannabis producers pay excise tax, just like alcohol and tobacco manufacturers, and in most provinces consumers pay sales tax on legal cannabis. These taxes push the price of legal products higher than analogous items from illicit sources. Adding to the pain of higher prices is the lack of widespread, convenient retail access. The combination of higher prices and poor accessibility makes it very difficult for the legal market to compete with the illegal market. Cannabis Benchmarks estimates 80% of cannabis was bought from illicit markets in 2019, which is higher than that suggested by the StatsCan data above. 

 

The data above indicates that the real opportunity for this new industry is not generating a new customer base, but capturing the one already buying from illegal producers and sellers. We believe the previous trend of growing legal cannabis purchasing will change drastically in 2020, to the benefit of the licensed market. 

 

We are modelling a structural shift due to COVID-19 and its impacts on the Canadian economy, which will alter purchasing habits across the board. For example, it has been shown that when the economy tumbles, alcohol sales traditionally spike as consumption increases. On the other hand, with items such as toilet paper, panic-buying might empty shelves, but people do not use more of it; they just buy less later. 

 

We believe cannabis usage and purchasing habits will track more closely with alcohol, with the crisis resulting in increased consumption generally. We also expect online access to legal cannabis will encourage consumers to favor legal channels, rather than having to go out and meet up with illegal dealers. In our April 17 CCSI report, we detailed our projections for legal cannabis sales in March, which included an increasing share of online sales for the first time in over six months.    

 

Below is our projection of the total volume of cannabis sold to non-medical consumers in the legal market. Our latest estimate for April is 15,267 kg of dry cannabis sold. A late-March spike in sales ahead of stay-at-home orders going into effect saw users stockpile personal supplies, leading to a dampening of April sales. Similar scenarios have been observed in state markets in the U.S.; sales revenue and volume typically slumps after events or holidays, such as 4/20, that spur a momentary, outsized increase in purchasing.

Source: Cannabis Benchmarks

Getting cannabis users to the store or ordering online is one of the biggest hurdles that the industry has been facing. Allowing legal cannabis businesses to continue operating amid the COVID-19 shutdown has created a unique opportunity for this industry. With Canadians under lock down, we have altered the way we live, including how we communicate with friends and buy groceries. Cannabis purchasing is no exception. We believe cannabis consumers will now have an opportunity to experience the variety, packaging, and reliability of legal cannabis, and will respond favorably overall. We expect the altered habits to be long-lasting and lead to increased legal sales even after the pandemic subsides and daily life returns to normal.

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

01 May 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

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