April 2, 2021

CANADA CANNABIS SPOT INDEX — April 2, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending April 2, 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$5.77 per gram this week, down 0.8% from last week’s C$5.82 per gram. This week’s price equates to US$2,079 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. 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 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 November 2020.

 

Below are two groups 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 November 2020. 


Starting with edibles, we see the production of packaged units by licensed producers ramped up throughout 2020, with only a couple of months not showing gains. 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. Medical sales in this category are almost negligible.

 

Just as with dry flower cannabis in 2020, the mismatch between supply and demand is causing inventories to rise at massive rates. The current inventory of edible packaged units sits at 14M, which is approximately 8.7 months worth of supply at November’s consumption rate.

Source: Cannabis Benchmarks, Statistics Canada

The story for extracts is slightly different. Both production, as well as medical and non-medical sales, increased at relatively steadier rates throughout 2020. Still, production ramped up at a faster rate than 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 10.4M, which is approximately 7.0 months worth of supply at November’s consumption rate. The inventory of extracts grew by 2.8M packaged units or 36% in 2020, after a high build-up throughout 2019, as compared to edibles which grew 1,900% last year. 

Source: Cannabis Benchmarks, Statistics Canada

In analyzing the Health Canada data, we anticipated the monthly supply and demand figures to perfectly balance where each month:

 

Supply – Sales (consumption) = change in Federal/Provincial storage

This has not been the case. Each month we observed an excess amount, which we label as “unaccounted” inventory. In the charts above, we identify the “unaccounted” inventory bucket with a black vertical-lined pattern. In the charts below, we show the amounts of “unaccounted” inventory of extracts and edibles, both by month and cumulatively.

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, being destroyed, or being held in storage. If it is going to Federal or Provincial storage, there are now an additional 3.1M packaged units of edibles and 4.0M 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

02 April 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

March 26, 2021

CANADA CANNABIS SPOT INDEX — March 26, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending March 26, 2021
1 12.07.49 PM

*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$5.82 per gram this week, down 0.8% from last week’s C$5.86 per gram. This week’s price equates to US$2,101 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, Statistics Canada released retail sales data for January 2021. While December 2020 sales were adjusted higher by C$1.3M to C$299.7M, January sales came in lower at C$282.8M. 

Throughout 2020, total average daily sales increased every month except for November 2020; hence the drop in sales in January is a bit unexpected, especially with the continued expansion in stores. 

 

The chart below shows average daily sales per month, with a drop of C$0.54M per day from December 2020 to January 2021. 

Source: Cannabis Benchmarks

We do not see January’s sales decline as the start of a sustained slowdown in cannabis usage, but rather a decrease in spending after the holiday season. A 2018 survey related to alcohol use from Morning Recovery reported, “The average American sees a 100% increase in their alcoholic drinking habits between Thanksgiving and New Year’s.” With cannabis now legal and accessible, we believe that consumer behavior in regard to alcohol was mimicked in the cannabis realm in December. Additionally, sales trends in state-legal cannabis markets in the U.S. have shown that a month-over-month decrease in purchasing in January of any given year has become almost a customary phenomenon.  

 

 

Looking at the month-on-month change in each province, we see that a drop in cannabis sales occurred nationwide without exception. The largest proportional declines were seen in Alberta and the Maritime provinces. 

Source: Cannabis Benchmarks

In Ontario, we did not see as much of a decrease as there was a massive expansion in store counts in the month of December, with the Ontario Government making the licensing process more simplified and streamlined. As we have consistently noted, there is a strong correlation between store counts and sales with better accessibility leading to increased sales.

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

26 March 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

March 19, 2021

CANADA CANNABIS SPOT INDEX — March 19, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending March 19, 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$5.86 per gram this week, up 0.3% from last week’s C$5.84 per gram. This week’s price equates to US$2,132 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 the still-growing gap between supply and demand in Canada’s legal cannabis market. By combining our estimate on monthly demand with Statistics Canada’s production estimates, we can get a clearer understanding of the dynamics of the country’s regulated cannabis system.

Cannabis Benchmarks estimates that the total implied demand for legal cannabis in December 2020 was 30,318 kg, a 212% increase over the same month in 2019, as shown in the following table.

Source: Cannabis Benchmarks, Statistics Canada

Even though demand has grown at a rapid rate, December’s demand is still less than 18% of the 165,189 kg of unpackaged production reported by Statistics Canada for the month of November. The mismatch is creating a huge oversupply of both packaged (finished) and unpackaged (unfinished) products across the country. Statistics Canada’s most recent data for November 2020 shows unpackaged and packaged inventory ballooning to 1,165,725 kg. This represents 38 months worth of supply at current demand levels, and inventory is continuing to increase. The intent is that this inventory will ultimately be sold either as dried flower, converted into a cannabis derivative product, or exported, but there is a chance that the quality of the product degrades to a point where it is not sellable. 

Source: Cannabis Benchmarks, Statistics Canada

The issue of high production and growing inventory has been amplified by the seasonal supply increase coming to market from the outdoor harvest. The typical outdoor harvest for annual cash crops is in October and November, with cannabis following the same grow cycle. The Statistics Canada data confirms the noticeable influx of unpackaged cannabis during those months in 2019. The supply surge from sun-grown product was especially visible in 2020 as outdoor production capacity expanded last year. We anticipate a trend of expanding Q4 inventory increases going forward as more cultivators turn to outdoor cultivation.

Source: Cannabis Benchmarks, Statistics 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

19 March 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

March 12, 2021

CANADA CANNABIS SPOT INDEX — March 12, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending March 12, 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$5.84 per gram this week, down 1.4% from last week’s C$5.93 per gram. This week’s price equates to US$2,102 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, the Ontario Cannabis Store (OCS), the body that regulates the province’s cannabis market, released their Q3 Cannabis Insights report, covering the period from October through December 2020. The report contains a wide variety of useful data to show how Ontario’s market is developing. In today’s CCSI report, we focus specifically on price. 

 

The legal Canadian cannabis market has faced strong competition from illicit supply chains, due to high product prices and relatively few stores. The OCS’s latest report shows that those market dynamics are changing.

 

The report shows that not only did the brick and mortar retail footprint grow to 324 stores (an increase of 298 year-on-year), but the price of dried flower on the OCS online store continued to decline, falling further below the price of cannabis sold through illegal mail-order marijuana (MoM) sites after doing so in Q1 2020 for the first time. The average price of legal dried flower on the OCS online store, including sales taxes, was C$6.24/gram. The reduction was largely a result of discount lines of cannabis released by the big Licensed Producers. In comparison, the average dried flower price on illegal MoM sites dropped to C$7.76/gram. While the quality of the dried flower was not taken into consideration for this price comparison, legal product has some overall advantages in this regard due to required quality assurance and safety testing, prohibitions on pesticide use, and standards for accuracy in labeling, among other regulations.

Source: OCS

Clearly, lower prices have helped legal sellers build market share. The report indicates 40.3% of cannabis sales are now being made through legal channels. We believe that, along with lower prices, COVID lockdowns helped transition more consumers to regulated sales channels and legal products. 

 

Overall, this report once again emphasizes that positive trends for the legal cannabis industry are emerging and being cemented as the regulated market develops.

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

12 March 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.

March 5, 2021

CANADA CANNABIS SPOT INDEX — March 5, 2021

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending March 5, 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$5.93 per gram this week, up 1.2% from last week’s C$5.86 per gram. This week’s price equates to US$2,126 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 open stores reached 1,484 as of the end of February. This is up by 742 stores, or 96%, compared to February 2020. As can be seen in the chart below, we expect the trend to continue this year.

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

Source: Cannabis Benchmarks

Of the top four provinces, Alberta seems to have reached its limit, at least momentarily. We do not expect much more growth there and, in fact, expect some stores to close due to strong competition. British Columbia (BC) increased its store count at a steady pace in 2020, but we expect the growth rate to slow in 2021. At the moment, the BC government only reports 25 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, along with most of the Maritime provinces, the provincial government controls the retail environment, with the 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 62 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 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. We anticipate an average of 65 stores opening per month in the province throughout this year.

 

Overall, the current year looks bright for the Canadian cannabis industry. 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

05 March 2021 Copyright © 2021 New Leaf Data Services, LLC.  All rights reserved.