October 9, 2020

CANADA CANNABIS SPOT INDEX — October 16, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 16, 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$6.04 per gram this week, up 1.3% from last week’s C$5.96 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 continue to delve into data from the Ontario Cannabis Store’s (OCS) Q1 Cannabis Insights reportThe report contains a wide variety of useful data to show how Ontario’s market is developing. In today’s report, we will focus on expanding cannabis product variety and sales breakdowns by product type.

 

With the introduction of cannabis 2.0 products, consumers seeking more variety presumably have greater reason to purchase products from legal channels. While illegal mail-order-marijuana websites do sell the types of products included in the legal market’s cannabis 2.0 phase, traditional dealers usually only carry a small variety of dried flower. 

 

The latest data from the OCS shows cannabis 2.0 products are already accounting for a significant portion of legal sales just a few months after their launch. For the three-month period starting April 30, cannabis 1.0 products (dried flower and pre-rolls) accounted for 70% of total sales in legal cannabis channels, while cannabis 2.0 products grew to 30% of the total. 

 

As part of the reported data, the OCS broke out sales revenue by product category. Additionally, the OCS calculated a dry cannabis equivalency (DFE) for cannabis 2.0 products, providing an estimate of the number of grams of dried flower represented by the sales of each respective product type. The DFE breakdown shows that while cannabis 2.0 products made up about 30% of all sales revenue for the period, they only accounted for 23.5% of all grams sold. This means that, overall, cannabis 2.0 products commanded a greater per-gram premium relative to dried flower. 

Source: Cannabis Benchmarks, AGCO

However, the overall premium commanded by cannabis 2.0 products is not distributed equally across the various product types. Taking the total sales with the DFE for each product category gives us a rough idea of which cannabis 2.0 products achieved a premium compared to the same gram of cannabis sold as dried flower. In other words, how much did a gram of cannabis sell for as dried flower versus being converted to a cannabis 2.0 product? Keep in mind we did not assess the cost to produce each product, which varies across – and within – product categories.

 

As the chart below shows, topicals, vapes, and capsules received the greatest premiums. On the other side of the spectrum, edibles, concentrates, and beverages commanded the lowest price for a gram of cannabis, based on the OCS’s DFE. It should also be noted that lower-grade cannabis plant material is typically used in the manufacture of cannabis 2.0 products, enhancing the premiums commanded by some of the products.

Source: Cannabis Benchmarks, AGCO

Lastly, we look at where these products were sold – through the provincial online store or at brick-and-mortar retailers. This dynamic has likely already shifted with 78 more stores opening between the end of June and the end of September, but this data gives us a good snapshot in time. 

 

As can be seen in the charts below, almost every product had a greater proportion of sales through retail stores. However, oils saw online sales make up a greater percent of the total, while the proportions of capsules, concentrates, and beverages sold online versus in-store were roughly or nearly equal. All of the products that saw a greater or almost equal proportions of online sales are highly finished and standardized. Consumers may feel more confident selecting such products online, compared to dried flower or even an edible product, which buyers might prefer to inspect in person before purchasing. It should be noted that availability issues at some store locations may have skewed sales somewhat, as cannabis 2.0 products were still being rolled out during the period under discussion.

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

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

CANADA CANNABIS SPOT INDEX — October 9, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 9, 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, down 0.4% from last week’s C$5.99 per gram. This week’s price equates to US$2,042 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, with an emphasis on the development of Ontario’s legal market. Overall, the Canadian cannabis industry has increased the pace at which it is opening new retail outlets across the country. At the end of July, we crossed the milestone of 1,000 stores and expansion has not slowed since then. As of September, we counted 1,159 licensed retailers, with an average monthly growth rate of 6.3% in 2020. This solid growth rate comes despite many store applications and openings being delayed due to COVID-19 shutdowns.

Source: Cannabis Benchmarks

The 75-store increase in September was dominated by Ontario. Ontario’s Alcohol and Gaming Commission (AGCO) issued a statement on September 1 regarding Cannabis Retail Store Authorizations. AGCO stated that they were going to “double the pace of store authorizations this fall.” This suggested that, on average, up to 40 new stores would be opened each month through the end of the year. 

 

With the most recent Ontario store count, we can confirm that 40 new stores were in fact opened in the province in September, bringing the total in Ontario to 178. This is still far below the 526 retailers active in Alberta, but growth there has slowed and Ontario should lead all provinces in store count by late 2021 if this pace continues. 

 

As we have reported in the past, expansion of the legal market’s physical presence in the form of licensed storefronts correlates strongly with increased sales, up to a point. However, given Ontario’s large population and still relatively low store count, saturation of retail outlets in the province is a long ways off. 

The latest sales data for June 2020 issued by Statistics Canada shows cannabis retail sales in Ontario totaling C$48.8M with 116 stores open. Our most recent forecast shows sales growing dramatically with the increase in active retailers, bringing September sales to C$63.9M and total Ontario sales for 2020 to C$655M. If the provincial store count continues to grow by 40 stores per month, our initial estimates show total Ontario sales eclipsing C$1B 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

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

October 2, 2020

CANADA CANNABIS SPOT INDEX — October 2, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 2, 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$5.99 per gram this week, down 3.2% from last week’s C$6.18 per gram. This week’s price equates to US$2,034 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 controls the province’s cannabis market, released their Q1 Cannabis Insights report. The report contains a wide variety of useful data to show how Ontario’s market is developing. In today’s report, we will focus specifically on price. 

 

The legal Canadian cannabis market has faced strong competition from illicit supply chains since legalization in October 2018. Ontario residents have specifically been challenged with both high prices and few stores, factors that have helped keep the illicit markets robust. That being said, this new report shows that the legal market is making significant progress on those fronts.

 

The report shows that from April 1 to June 30, not only did sales grow by 5.4%, but the price of dried flower on the OCS online store dropped by 16.7%, to below the price of illegal cannabis sold through mail-order marijuana (MoM) sites for the first time. The average price of legal dried flower was C$7.05/gram (including sales taxes) after dropping for four straight quarters. This was the result of discount lines of cannabis released by the big licensed producers and 552 individual product price drops over the quarter. In comparison, the average dried flower price on illegal MoM sites remained almost flat at C$7.98/gram. We should note that cannabis quality was not taken into consideration for this price comparison. Legal product has some 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 25.1% of cannabis sales are now being made through legal channels. The period covered by the report also coincided with the COVID lockdowns in Ontario. We believe that, along with lower prices, consumers prefer regulated, legal cannabis due to increased health and safety considerations taken by licensed retailers and in the OCS purchasing process, compared to buying from an illegal seller. 

 

Overall, this report shows positive trends for the regulated industry. It indicates that licensed cultivators can use their economies of scale and more efficient growing prices to cut prices and still maintain a profit margin; however, it is not clear how much room they have for further price cuts or discounting.

 

There are a number of structural reasons that legal channels have a hard time competing with the illicit markets:

  1. Excise taxes: These taxes are distributed to federal and provincial governments to administer the trade of cannabis, strictly monitor licensed producers with health inspector visits, social educational programs, and more.

  2. Federal and provincial sales taxes. 

  3. Laboratory testing: All legal cannabis requires a certificate of analysis (COA) from a federally approved laboratory. The laboratory analyzes the chemical profile of the product – including THC and CBD potencies, as well as terpene profiles – and tests for harmful substances such as pesticides, mold, and other contaminants. 

  4. Secure packaging: Regulated packaging to ensure the product stays out of the hands of underage users and also remains fresh. 

  5. Distribution and storage: A well planned and secure distribution and local storage network require armed and insured cannabis transportation and storage facilities.

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

September 25, 2020

CANADA CANNABIS SPOT INDEX — September 25, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published September 25, 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$6.18 per gram this week, up 0.8% from last week’s C$6.13 per gram. This week’s price equates to US$2,108 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 July 2020. Sales have been increasing steadily across Canada, but July’s sales growth was explosive. July sales settled at C$231M for the month, which is C$30.5M higher than June 2020 and up C$124M year-over-year. The monthly increase is the largest gain since cannabis was legalized almost two years ago. Our current 2020 legal cannabis sales forecast is C$2.45B, but July’s figures point to an annual run rate of C$2.73B. The prospect of retail sales eclipsing $3B in 2021 looks to have a high probability now.

 

We believe the high level of sales are a result of elevated demand during the summer months, growth in retail outlets in key provinces such as Ontario and British Columbia (BC), more higher value sales opportunities with cannabis 2.0 products, and traditional consumers switching to the safer and regulated legal channels. Apart from seasonal demand trends, the aforementioned developments represent goals that legal cannabis market participants and proponents have been working toward since the opening of the regulated market. 

Source: Cannabis Benchmarks, Statistics Canada

On an average daily basis, July sales were higher across every province. While average daily sales nationwide expanded by 11.5%, increases varied significantly at the provincial level. Of the major provinces, Ontario led the way with a 20% rise in average daily sales and BC saw an increase of 14%. Prince Edward Island (PEI) saw the biggest pop with the province permitting stores to return to normal hours after being shut down as part of the COVID-19 response. 

 

Below is a breakdown by province of movement in average daily sales from June to July. We expect that overall Canadian sales will continue their upward trajectory through the end of the year, although at a slightly lower month-over-month growth rate.

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

25 September 2020 Copyright © 2020 New Leaf Data Services, LLC.  All rights reserved.

September 18, 2020

CANADA CANNABIS SPOT INDEX — September 18, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published September 18, 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$6.13 per gram this week, down 3.8% from last week’s C$6.13 per gram. This week’s price equates to US$2,112 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 share our latest sales forecast for Alberta, which has one the most robust legal cannabis markets in Canada. The Alberta Gaming and Liquor Commission (AGLC) is the provincial regulatory body responsible for regulating private retail cannabis, the distribution of cannabis, and operation of online cannabis stores. They have been the most efficient of all provinces in having retail applications translate into store openings.

 

At Cannabis Benchmarks, we conduct a monthly store count across each province. We have seen a significant uptick in new stores across all major provinces. Alberta is the fourth most populous province with 10% of the country’s population, but it is home to 515 cannabis stores as of August 31, or 48% of all physical retailers nationwide. 

Source: Cannabis Benchmarks, Statistics Canada

 

The number of new stores opening in Alberta each month has slowed as major cities like Calgary and Edmonton are becoming saturated. We expect new store openings to continue to grow at a slower pace through the end of the year, resulting in a total of 600 stores by the beginning of 2021. 

Source: Cannabis Benchmarks, PotGuide.com

As we have noted in the past, there is a very strong relationship between the number of open stores and monthly retail sales in each province. Each new store provides better accessibility to the legal cannabis market and helps pull consumers away from the still robust illicit market. However, after a certain threshold new store openings begin to have a diminishing effect on sales; it appears that Alberta might be reaching that saturation point. The latest sales data issued by Statistics Canada for June 2020 shows Alberta’s retail cannabis sales totaling C$46.7M for the month. Ontario, with triple the number of people but only quarter of the number of stores, had a similar level of sales. 

 

Our latest forecast for Alberta has sales growing, but at a reduced pace due to the slowdown in new store openings and overall saturation. We project December sales to reach C$51.3M and total Alberta sales for 2020 to reach C$540M. Based on this forecast, sales in 2020 will amount to more than double those in 2019. This is a positive sign for regulators and market participants who are looking for the legal cannabis system to take a bigger chunk out of the illicit trade.

Source: Cannabis Benchmarks, PotGuide.com

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