April 24, 2020

CANADA CANNABIS SPOT INDEX — April 24, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published April 24, 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, down 3.1% from last week’s C$6.38 per gram. This week’s price equates to US$1,987 per pound at the current exchange rate.

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This week we review new data from Statistics Canada on retail sales. The latest data for February shows sales sliding to C$150M. With two fewer days than January, however, this lower overall number still represents growth. Average daily sales show an increase of 4% in February versus the previous month, to C$5.2M/day.

Source: Cannabis Benchmarks

All of the large Canadian provinces saw substantial daily sales gains except for Quebec. Ontario’s daily sales grew by 10%, to C$1.3M/day. This increase in sales comes with only five new stores opening in Ontario in February. March sales are expected to rise by an even larger magnitude, with seven additional stores opening, as well as a sales spike associated with the COVID-19 pandemic. Quebec had four more retail stores open in February, yet total daily sales decreased by 3% to just over C$1M/day.

 

In terms of volume, Cannabis Benchmarks estimates a total of 14,792 kg of recreational cannabis flower was purchased across Canada in February. Ontario, with 39% of the Canadian population, leads in sales, but only makes up 25% of the total volume sold. This implies that there should be significant sales growth in the province in coming months, as Ontario makes legal cannabis more accessible with a larger retail store footprint. 

 

Alberta, on the other hand, generated 22% of total sales despite only 12% of the country’s population living in the province. As we have discussed previously, this is due largely to the fact that Alberta is home to a disproportionately large proportion of the licensed retailers in Canada, making the legal market more convenient and accessible to consumers in the province.

Source: Cannabis Benchmarks

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

April 17, 2020

CANADA CANNABIS SPOT INDEX — April 17, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published April 17, 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$6.38 per gram this week, down 1.3% from last week’s C$6.46 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.

Online Sales on a New Course

 

With the enactment of the Cannabis Act, provinces and territories were given the responsibility for determining how recreational cannabis would be distributed and sold in their jurisdictions. Each instituted a variety of regulatory frameworks, resulting in an industry structure composed of public, private, and hybrid systems for brick-and-mortar and online stores.

 

 

Below is a summary of the structure set out in each province.

 

Source: Cannabis Benchmarks

All provinces, other than Manitoba and Saskatchewan, have some government intervention in the sales of cannabis products. In most cases, the provincial government controls the online sales channel of cannabis. Surprisingly, Canadian cannabis consumers have preferred purchasing their cannabis in stores rather than online from the comfort of their home. This has been evident in the correlation between the rapid increase in monthly sales and the establishment of new stores. 

 

Cannabis Benchmark estimates the total number of cannabis retail stores in Canada at 806 as of March 2020, an increase of 615 from the previous year. Alberta has held the top spot in terms of the number of cannabis stores, as well as the lowest average distance between consumers and the nearest cannabis store. The Alberta regulatory framework for issuing new retail licenses is the quickest and most relaxed, unlike Ontario, which was slow to issue licenses. 

 

As more physical retail locations get built out, the average distance between Canadians and the nearest licensed cannabis store is decreasing. This is leading to higher monthly sales in the legal market and, presumably, lower sales through illegal channels. Additionally, as more consumers head to brick and mortar stores, online stores sales have been falling dramatically – until the COVID-19 pandemic and the accompanying mitigation measures taken by the federal and provincial governments. 

 

As reported in a BloombergBNN article, the Ontario Cannabis Store reported an explosion in online sales as consumers stuck at home stocked up on cannabis. In the second half of March, daily online orders nearly tripled to 5,000 orders; April sales are even higher at 9,000 orders per day month-to-date. Of all the orders, more than 33% are being placed by customers new to the OCS, indicating that the illicit market is losing market share during this crisis.
In past reports, we estimated total March retail cannabis sales across Canada spiked to C$216M. This is a massive jump from C$154M reported for January 2020 by Health Canada, and more than three-and-a-half times greater than March 2019’s sales of C$59M. 

 

Today we add to that analysis by breaking out the portion of sales we expect to come from online sales. While online sales had been on a decline, the global COVID-19 pandemic seems to be setting them on a different course. Our estimates show Canadian online sales reaching a total of C$14M throughout March, or C$450k daily. In April, the trend will continue higher as more consumers rely on home delivery of cannabis.

Source: Cannabis Benchmarks

This prompts the debate of whether cannabis producers should be able to bypass the provincial governments and retail networks to sell directly to consumers. This would allow licensed producers to better compete against their number one competitor – the illicit market. By selling direct to consumers, LPs could keep prices lower by cutting out unnecessary transport to provincial facilities, storage at public distribution points, and provincial sales margins. After all, LPs already sell medical cannabis directly to patients. Email us with your thoughts at [email protected].

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

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

April 10, 2020

CANADA CANNABIS SPOT INDEX — April 10, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published April 10, 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$6.46 per gram this week, down 0.9% from last week’s C$6.52 per gram. This week’s price equates to US$2,085 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.

Recreational Cannabis Growth

This week we review currently available and projected sales volume data for non-medical cannabis. Health Canada has been providing very good data on cannabis supply and demand since the legalization of non-medical cannabis. Originally, data was only collected for dried cannabis and cannabis oils, but official reporting has now been extended to cover edibles, extracts, and topicals. 

 

One of the datasets that we have reviewed routinely is the monthly sales volumes for medical and non-medical cannabis. This data generally lagged the market by a number of months, but provided a great deal of insight into how much cannabis was being sold through legal channels. Unfortunately, Health Canada has changed the way they report this data. Instead of reporting monthly sales in kilograms, sales are now reported as packaged units. 

 

Although the data is informative, it is not sufficient to understand fully the true supply, demand, inventory, and overall balance of this emerging market. For example, packaged units of dry cannabis flower come in varying volumes (1 gram, 3.5 grams, 7 grams, etc), as well as pre-rolls of varying sizes. Similarly, packaged units of cannabis extracts can include oil bottles, capsule packages, vape kits, vape cartridges, and more. 

 

In today’s report, we have modelled monthly sales volumes to give a better assessment of trends in the marketplace. We have taken the Health Canada data that is currently reported up until September 2019, and extended it to January 2020. We used the reported Health Canada Retail Trades Sales data for cannabis to formulate our estimates. Sales have been growing in Canada as new retail stores open, retail prices drop, and the population becomes increasingly accustomed to accessing legal cannabis channels. 

In January 2020, we calculate that total sales across Canada reached C$154 million, which is C$99.4 million, or 281%, more than January 2019. Since September 2019, our model shows sales have been growing by an average of 5.9% each month.

Source: Cannabis Benchmarks

The sales volumes we have modelled show similar growth. We show the sales volume of dried cannabis in January 2020 at 14,157 kg. This is 8,623 kg, or 255%, more than January 2019. This growth in consumption is what the market needs to balance out the growing production capacity.

Source: Cannabis Benchmarks

The data modelled at the provincial level is very interesting as well. In January of this year, Ontario accounted for 24% of total consumption, Quebec accounted for 20.7% of total consumption, Alberta accounted for 21.6% of total consumption, and BC accounted for 12.8% of total consumption.

Source: Cannabis Benchmarks

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

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

April 3, 2020

CANADA CANNABIS SPOT INDEX — April 3, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published April 3, 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$6.52 per gram this week, up 2.9% from last week’s C$6.33 per gram. This week’s price equates to US$2,096 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.

Time to Shine


Most, if not all, licensed cannabis producers have not seen the level of sales they had expected since the recreational market opened in October 2018. The higher prices and lack of accessibility to legal sources of product have led to weaker-than-projected demand for licensed producers. As we have reported in the past, we believe roughly 80% of cannabis consumed in Canada still comes from the illicit market, but that might be changing quickly.

 

Since the COVID-19 pandemic reached Canada, universities and colleges have closed, businesses have instituted work-from-home programs, and unemployment has skyrocketed. At the same time, the sale of cannabis in legal channels has spiked across the country. In most provinces, cannabis is now considered an essential business, meaning cannabis retailers will remain open as most other businesses close their doors. Additionally, the Government of Canada has listed cannabis for medical use an essential service at the federal level. We believe that the unprecedented restrictions that have been put in place to contain the coronavirus present a unique set of circumstances that will benefit legal cannabis producers, at least in the short term. 

 

Social or physical distancing is likely to modify purchasing habits. Experienced cannabis users who have continued to buy products from their local illicit dealer may now prefer to purchase cannabis through legal channels – either online or at a physical retail location – rather than risk paying cash for untested product from unknown sources, delivered by someone who is essentially a travelling salesman. Simply getting these consumers in the door of a legal store or ordering through a legal website could be the game-changer that the industry needs. Consumers may now be more attracted to legal channels with a wider variety of tested, traceable products and the ability to pay electronically. Online sales should be particularly strong as consumers stay home and purchase goods remotely for delivery. This could create a structural shift to the legal markets, possibly resulting in increased sales for licensed producers that continue after the virus abates.

   

 

We have updated our sales forecast from our pre-COVID-19 base case. We believe the cannabis industry will see a spike in sales in March, which will help cushion the drop in sales expected in April and May. Our base case assumes that life returns to normal in June, with many of the stores that were expected to open in April and May pushed back to the summer, and a new consumer base formed at the expense of the illicit cannabis market.

 

Source: Cannabis Benchmarks

Our pre-COVID-19 base case showed total recreational Canadian cannabis sales reaching C$2.4B in 2020. Despite a dip in sales in April through June, we believe the cannabis industry will generate higher revenues this year. Our post-COVID-19 base case shows total recreational cannabis sales climbing to C$2.5B this year, which is more than double the C$1.2B in sales recorded in 2019.

Source: Cannabis Benchmarks

Our downside case, which assumes the economy does not recover quickly, shows sales coming in at C$120M, or 5% below the pre-COVID-19 base case. Our upside case, where the economy bounces back and customers switch to the legal markets, shows sales approximately 11.5%, or C$280M, higher than the pre-COVID-19 base case.

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

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

March 27, 2020

CANADA CANNABIS SPOT INDEX — March 27, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published March 27, 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$6.33 per gram this week, down 0.6% from last week’s C$6.37 per gram. This week’s price equates to US$2,010 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.

Illegal to Essential

 

As the coronavirus crisis deepens in Canada, the regulatory and business landscape continues to change rapidly. Each province has made countless moves to contain COVID-19. At this point, most provinces have declared a “state of emergency” or a “public health emergency.” This led to a massive spike in medical and recreational cannabis sales over the past week as consumers stocked up on products ahead of any potential availability issues or retail store closures. 

 

The cannabis industry has already faced many challenges this year and closures to any part of the supply and distribution chain would be difficult to overcome. Canadian cultivators and retailers have already been struggling ahead of the pandemic, as they compete directly with lower priced and more accessible illicit markets. The same goes for ancillary businesses – including processing, packaging, distribution, delivery, and maintenance – that rely on continuous business operation to keep afloat.

 

In today’s report, we look at how each province is dealing with cannabis businesses and whether the provinces have qualified cannabis operations as essential services that will be allowed to operate as the country begins to mandate business closures, lay-offs, mandatory quarantine, and work from home programs. 

 

Alberta
The Alberta Government has declared a public health emergency but has not recommended that any business or workplace close. At this point the Alberta Gaming, Liquor and Cannabis Commission (AGLC) is allowing liquor and cannabis retail stores to remain open, but the province is presently reviewing potential additional measures, including further restrictions on businesses. As of now, Alberta has not produced a list of essential businesses.

 

British Columbia (BC)

BC has ordered a mandatory closure of all non-essential businesses, such as dine-in restaurants and personal services. The Public Safety Minister encouraged businesses that are listed as essential to follow the advice of the provincial health officer. Cannabis retailers and producers have been deemed essential under the food and agriculture service providers listing.

Ontario

The Ontario Government ordered the mandatory closure of all non-essential workplaces, effective March 25. This closure will be in effect for 14 days and may be extended. Cannabis retailers and producers will remain open, as they are listed as essential under the retail and wholesaling category.

Quebec
The Quebec Government has announced the closure of all non-essential businesses until April 13. This measure went into effect as of March 25. Quebec has listed cannabis retailers as an essential business. The provincial-run SQDC outlets will remain open, but will limit the number of customers permitted at any given time and will only process non-cash payments.

 

Saskatchewan

The Saskatchewan Government released a comprehensive list of critical public services and business services that will be allowed to continue operations on March 26. Cannabis retailers are amongst the critical businesses allowed to remain open.

 

Manitoba

The Manitoba Government is developing a list of essential businesses. At the moment, cannabis stores remain open, but it is still uncertain if they will be deemed an essential service.

Nova Scotia

The Nova Scotia Government declared a state of emergency on March 19, ordering any non-essential services to close. The provincial-run Nova Scotia Liquor Corporation has been allowed to remain open.

New Brunswick
The New Brunswick Government declared a state of emergency on March 19, ordering any non-essential services to close. Cannabis retailers are recognized as essential businesses and will remain open. 

 

Prince Edward Island (PEI)
The PEI government has taken the strongest actions of all provinces by closing all provincial-owned liquor and cannabis stores.

 

Newfoundland and Labrador
The Newfoundland and Labrador Government has declared a public health emergency. Cannabis retailers were not recognized as an essential service. All stores were closed on March 26.

 

Online sales from the provincial-run stores will still be allowed. The only change will be that Canada Post will discontinue home delivery as it will not be accepting signatures at one’s door, but customers may pick up their packages from a local post office.

 

 

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

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