November 25, 2020

CANADA CANNABIS SPOT INDEX — November 27, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 27, 2020
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*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$5.94 per gram this week, up 1.3% from last week’s C$5.86 per gram. This week’s price equates to US$2,067 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 Statistics Canada released retail sales data for September 2020. Sales have been increasing steadily across Canada. September continued that trend with sales of C$256M for the month, C$11.4M higher than August 2020 and up C$133M year-over-year. The monthly increase is not as large as those observed during the summer months, but it is still very notable. September’s figures point to an annual run rate of C$3.1B, which solidifies the prospect of retail sales eclipsing C$3B in 2021.

Source: Cannabis Benchmarks, Statistics Canada

On an average daily basis, September sales were higher across every province except for Newfoundland and Labrador. While average daily sales nationwide expanded by 8.2%, increases varied significantly at the provincial level. Of the major provinces, Ontario has been consistently outperforming all other provinces in daily sales growth. Ontario led the way with a 20.3% rise in average daily sales, while other major provinces saw increases of 4.0% to 6.5%. The growth in Ontario has been higher than expected, with daily sales averaging C$2.6M per day in September. 

Source: Cannabis Benchmarks, Statistics Canada

As of September 30, we counted 178 stores across Ontario. Increased accessibility along with more sales of premium cannabis 2.0 products has kept revenue growth strong in Canada’s most populous province. With the latest data point, we have recalibrated our model and now expect Ontario sales alone to eclipse C$1.2B in 2021.

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

27 November 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

November 20, 2020

CANADA CANNABIS SPOT INDEX — November 20, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 20, 2020
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*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$5.86 per gram this week, down 1.2% from last week’s C$5.93 per gram. This week’s price equates to US$2,030 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 the number of federal licenses issued for cultivation and processing. The licenses are issued under the Cannabis Act by Health Canada, which maintains a massive list of every license that has been issued to date. We examined each record and cleaned it up to produce some interesting statistics. We share this full license database – along with other data – with our Price Contributor Network. Click here to join our Price Contributor Network for free

 

Before we jump into the data, the following are the activities permitted by the standard types of licenses under discussion.

A cultivation license is required for:

 

  • cultivating indoors or outdoors, 
  • selling to provincial authorities, 
  • reselling to another licensed authorized seller, and/or 
  • conducting later stage services such as drying, trimming, and milling. 

 

A processing license is required for: 

 

  • any extraction processes, 
  • providing lab testing services, 
  • manufacturing cannabis 2.0 products, and 
  • selling finished products to provincial authorities.

 

Since the lead up to the opening of the country’s legal medical cannabis market, Health Canada has been very busy processing applications for cannabis market participants. The charts below show cultivation and processing licenses issued from October 2013 through October 2020, encompassing Canada’s initial medical cannabis legalization, followed by its approval of adult-use cannabis in 2018. The charts illustrate the uptick in the issuance of licenses ahead of adult-use legalization. Focusing on more recent events, it is notable that there was no real slow down in application approvals during the COVID lockdowns.

 

There have been a total of 308 cultivation licenses issued to date, with some companies having multiple locations across multiple provinces. Ontario has the largest share of cultivation licenses with 119, or 39% of the total. British Columbia has the next highest number of cultivation licenses with 76, or 25% of all licenses. 

 

In 2020 so far, there have been 95 licenses issued for cultivation. On the list are many numbered companies and unfamiliar names; our thinking is the larger licensed producers (LPs) have multiple licenses under different corporate entities. The firm with the most licenses is Aurora, with nine cultivation sites across four provinces. 

Source: Cannabis Benchmarks

On the processing side, there have been a total of 277 unique licenses issued to companies across Canada. Just as with cultivation licenses, Ontario disproportionately has the highest number of processing licenses with 122, or 44% of the total. 

Source: Cannabis Benchmarks

Likely, most of these licenses are not being utilized. That is probably a good thing in light of the large overhang of finished and unfinished products currently sitting in inventory at LP sites, provincial distributors’ storage facilities, and with retailers. The latest data from Statistics Canada shows 100,240 kg of finished products and 782,698 kg of unfinished products in inventory. Based on our assessment of current demand, this constitutes 39 months’ worth of supply.

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

20 November 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

November 13, 2020

CANADA CANNABIS SPOT INDEX — November 13, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 13, 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$5.93 per gram this week, up 0.3% from last week’s C$5.91 per gram. This week’s price equates to US$2,059 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.

Earlier this year, tough financial realities forced numerous Licensed Producers (LPs) to scrap costly greenhouse expansions. Now, an increasing number of Canadian cannabis cultivators are shifting production capacity to outdoor cultivation. 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, heating, and ventilation.

 

The latest data from Statistics Canada shows outdoor cannabis cultivation capacity expanding at a rapid rate. As of August 2020, there were 544 hectares licensed to grow cannabis outdoors. This is a massive jump relative to the first data point from October 2019. Over the 11 month period, outdoor cannabis cultivation capacity grew by 312 hectares, or 134%. 

Source: Cannabis Benchmarks

The next chart takes the same data and standardizes the units to square feet. While this chart does not reflect the amount of actual cannabis production, since an indoor-grow will have multiple harvests annually, compared to one per year outdoors, it does show the dramatic shift towards outdoor production.

Source: Cannabis Benchmarks

While outdoor cultivation is ramping higher, indoor production capacity has plateaued. This makes sense when one considers that legal markets continue to compete with illicit producers for market share. Outdoor cultivation’s lower production cost makes it more competitive with illicit supply, but the resulting cannabis is usually of lower quality. As a result, significant portions of outdoor-grown product might not be as marketable for smoking in its raw form as that grown indoors. However, it is very suitable as low-cost raw material for manufacturing cannabis 2.0 products such as edibles, beverages, and vapes. 

 

Outdoor cultivation does have risks. In Canada, there is only one growing season for outdoor cannabis. Hail, wind, and early freezes can destroy an entire harvest, leaving farmers with lost revenue. On the other hand, the 544 licensed hectares could conceivably produce a tsunami of additional flower and other plant material that may overwhelm already-inflated supply levels in Canada. 

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

13 November 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

November 6, 2020

CANADA CANNABIS SPOT INDEX — November 6, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 6, 2020
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*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$5.91 per gram this week, down 0.7% from last week’s C$5.96 per gram. This week’s price equates to US$2,036 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 an update on store counts nationwide. The Canadian cannabis industry has continued to open new retail outlets across the country at a steady clip. At the end of July, we crossed the milestone of 1,000 stores and expansion has not slowed since then. As of the end of October, we counted 1,226 licensed retailers, with an average monthly growth rate of 6.3% in 2020. This growth rate has been very consistent throughout the year, which gives us confidence that the cannabis industry will continue to grow at a stable rate in 2021.

Source: Cannabis Benchmarks

The 67-store increase in October was once again dominated by Ontario. Ontario did not hit its targeted 40 new stores during the month; rather, 32 new stores were opened in the province. Ontario now has 210 stores, which is contributing to a massive uptick in total cannabis sales. 

 

August’s reported sales were C$245M at the national level, and we should note that since then 142 new stores have opened, an increase of 13%. 

Source: Cannabis Benchmarks

As can be seen in the above chart, we have two linear fits. The last two reported months (July and August) have moved a step higher in the store to sales relationship. We believe that the end of COVID lockdowns, along with the increased availability of cannabis 2.0 products, propelled sales per store to a new level. Combined with the addition of new stores, we estimate total Canadian sales increased to between C$8.2 and $8.7M per day in October, resulting in total sales of more than C$300M last month.

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

06 November 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

October 30, 2020

CANADA CANNABIS SPOT INDEX — October 30, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 30, 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$5.96 per gram this week, up 0.6% from last week’s C$5.92 per gram. This week’s price equates to US$2,041 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 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. The official Health Canada definitions of each are as follows:


Edibles: Products that are solid or liquid at a temperature of 22 ± 2°C and that are intended to be eaten or drunk the same way as foods such as chocolate, cookies, sodas, teas.


Extracts: Products made using extraction processing methods or by synthesizing phytocannabinoids and intended for inhalation or ingestion, including by absorption in the mouth or other routes of administration (e.g. vape pens, hash, tinctures, softgels, suppositories).

Topicals: Products that include cannabis as an ingredient and that are intended for use on external body surfaces such as skin, hair, or nails.

 

In today’s report, we look specifically at 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 July 2020.

 

Below are two groupings of charts that show the monthly supply and demand for edibles and extracts from the introduction of cannabis 2.0 products in October 2019 through July 2020. 

 

Starting with edibles, we see the production of packaged units by licensed producers ramped up quickly and at a consistent rate until the most recent month. With the production increase, we see medical and non-medical sales picked up as well, but not at the same rate, leading to excess production going into inventory at the federal, provincial, or retail level. 

 

Just as with dry flower cannabis in 2019, the mismatch between supply and demand is causing inventories to rise at massive rates. The current inventory of edible packaged units sits at 8.4M, which is approximately 6.3 months worth of supply at July’s consumption rate.

Source: Cannabis Benchmarks, Statistics Canada

The story for extracts is broadly similar. Production ramped up at a faster rate than domestic consumption, leading to growing inventory. The current inventory of extract packaged units sits at 9.8M, which is approximately 7.3 months worth of supply at July’s consumption rate. 

Source: Cannabis Benchmarks, Statistics Canada

Cannabis 2.0 products seem to be following a similar trajectory as cannabis flower in 2019, with excess inventory leading to declining prices and write-offs of older products. Cannabis 2.0 products, however, typically have a longer shelf life than dry flower. When we inspected edible and extract packaging, there was a clear packaging date, but no expiration date.

 

In analyzing the Health Canada data, it is clear that there is a massive gap between supply, consumption, and storage in the market. We anticipated all this monthly data to perfectly net out to zero, but that is not the case. We have backed into the gap and labeled it as “unaccounted” inventory, which is identified in the charts above with the boxed pattern. We show unaccounted inventory only in the charts below to more clearly see the size of it each month.

Source: Cannabis Benchmarks

The growing size of the “unaccounted” category is concerning, although it is not clear if these products are being consumed somewhere in the system or it is going into inventory. If it is going to inventory, there are an additional 1.45M packaged units of edibles and 1.31M packaged units of extracts to account for, making the inventory overhang even larger.

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

30 October 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

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