July 22, 2022

CANADA CANNABIS SPOT INDEX — July 22, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending July 22, 2022
CCSI image 1 2022-07-22

*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$5.29 per gram this week, down 0.7% from last week’s C$5.33 per gram. This week’s price equates to US$1,861 per pound at the current exchange rate.

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This week we review closures of growing areas by the top Canadian cannabis Licensed Producers (LPs). After the legalization of cannabis in December 2018, the Canadian LPs rushed to build out production capacity, resulting in a heavily overbuilt, oversupplied market. Since January 2020, LPs have continued to shutter indoor, greenhouse, and outdoor operations, with the associated write-offs and lay-offs, in an attempt to right-size operations and improve margins. At some point, the drop in production capacity should help relieve the vast amount of cannabis inventory – both unpackaged and packaged – sitting in warehouses across Canada.

 

The chart below only tracks the operations of the major Canadian cultivators, and in some cases the facilities include a cultivation area and processing / warehouse area.

SOURE: Cannabis Benchmarks, Health Canada

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

22 July 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

July 8, 2022

CANADA CANNABIS SPOT INDEX — July 15, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending July 15, 2022
CCSI image 1 2022-07-15

*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$5.33 per gram this week, up 0.3% from last week’s C$5.32 per gram. This week’s price equates to US$1,860 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.

The following analysis is repeated from the July 8th, 2022, report…
SOURE: Cannabis Benchmarks, Health Canada
  • Statistics Canada reports the total licensed indoor and outdoor growing area, with the latest data showing legal cultivation capacity between October 2018 and September 2021. Indoor grow facilities were ready to go for the October 2018 start to adult use legalization, with some facilities built specifically to serve the recreational sector while others converted from the medical cannabis market.
  • From the outset, the industry drastically miscalculated the volume of cannabis required to meet demand and keep the market balanced, resulting in a significant overbuilding of indoor cultivation capacity. With much of that production unsold, sitting in federal or provincial inventories, or destroyed and written off after becoming unmarketable, all the major licensed producers began to close cultivation space at indoor and greenhouse operations. Over time, we believe this will help balance supply and demand, leading to a more sustainable market.
  • One year after legalization, the first outdoor cannabis cultivation site was licensed. The advent of outdoor production coincided with the legalization of so-called “cannabis 2.0” products. Such products include edibles, vapes, and topicals that were not available during the first year of legal sales. Outdoor cannabis has a significantly lower cost of production, but is often considered to be of lower quality and can be difficult to market as smokable flower. That said, outdoor flower is often employed as the raw material for extraction, with the extracted cannabinoids further refined into inhalable products such as vapes or incorporated into manufactured products like edibles.
  • As with the rapid growth in indoor cultivation capacity during the first 18 months after the legal market opened, we see an almost identical situation developing with licensed outdoor production. Also similar to the overproduction of smokable flower by indoor growers, the production harvested from outdoor operations is likely to sit in inventory, as the market for cannabis 2.0 products has not grown as rapidly as anticipated. However, since much of the outdoor production will be processed into extracts and other more shelf-stable forms, the inventory of cannabis 2.0 products can be stored to support future sales and will not have to be written off or destroyed like the large oversupply of raw flower.
  • In most commodity markets, understanding available production capacity usually helps forecast monthly supply. That does not seem to be the case here. Based on typical yields, Cannabis Benchmarks found no reliable relationship between potential production from licensed indoor and outdoor growing areas and the actual monthly unpackaged cannabis production reported by Statistics Canada. We attribute this to cultivation sites and operators having a very wide variance in harvest yields, as well as the fact that indeterminate amounts of licensed production areas were unused at various times.

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

15 July 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — July 8, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending July 8, 2022
CCSI image 1 2022-07-08

*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$5.32 per gram this week, up 0.6% from last week’s C$5.29 per gram. This week’s price equates to US$1,859 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.

SOURE: Cannabis Benchmarks, Health Canada
  • Statistics Canada reports the total licensed indoor and outdoor growing area, with the latest data showing legal cultivation capacity between October 2018 and September 2021. Indoor grow facilities were ready to go for the October 2018 start to adult use legalization, with some facilities built specifically to serve the recreational sector while others converted from the medical cannabis market.
  • From the outset, the industry drastically miscalculated the volume of cannabis required to meet demand and keep the market balanced, resulting in a significant overbuilding of indoor cultivation capacity. With much of that production unsold, sitting in federal or provincial inventories, or destroyed and written off after becoming unmarketable, all the major licensed producers began to close cultivation space at indoor and greenhouse operations. Over time, we believe this will help balance supply and demand, leading to a more sustainable market.
  • One year after legalization, the first outdoor cannabis cultivation site was licensed. The advent of outdoor production coincided with the legalization of so-called “cannabis 2.0” products. Such products include edibles, vapes, and topicals that were not available during the first year of legal sales. Outdoor cannabis has a significantly lower cost of production, but is often considered to be of lower quality and can be difficult to market as smokable flower. That said, outdoor flower is often employed as the raw material for extraction, with the extracted cannabinoids further refined into inhalable products such as vapes or incorporated into manufactured products like edibles.
  • As with the rapid growth in indoor cultivation capacity during the first 18 months after the legal market opened, we see an almost identical situation developing with licensed outdoor production. Also similar to the overproduction of smokable flower by indoor growers, the production harvested from outdoor operations is likely to sit in inventory, as the market for cannabis 2.0 products has not grown as rapidly as anticipated. However, since much of the outdoor production will be processed into extracts and other more shelf-stable forms, the inventory of cannabis 2.0 products can be stored to support future sales and will not have to be written off or destroyed like the large oversupply of raw flower.
  • In most commodity markets, understanding available production capacity usually helps forecast monthly supply. That does not seem to be the case here. Based on typical yields, Cannabis Benchmarks found no reliable relationship between potential production from licensed indoor and outdoor growing areas and the actual monthly unpackaged cannabis production reported by Statistics Canada. We attribute this to cultivation sites and operators having a very wide variance in harvest yields, as well as the fact that indeterminate amounts of licensed production areas were unused at various times.

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

8 July 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

July 1, 2022

CANADA CANNABIS SPOT INDEX — July 1, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending July 1, 2022
CCSI image 1 2022-07-01

*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$5.29 per gram this week, up 1.3% from last week’s C$5.22 per gram. This week’s price equates to US$1,862 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.

SOURE: Cannabis Benchmarks, Health Canada
  • Cannabis Benchmarks’ total Canada-wide adult use cannabis store count reached a new high of 3,231 as of June 30. This figure represents an increase of 606 stores during the first half of this year.
  • Each province is on a different trajectory this year based on provincial rules and regulations on retail licensing:
  • Alberta’s store count looks to have reached a saturation point, having stalled at 759. The province continues to lead Canada in terms of stores per capita, but we believe the retail footprint is currently overbuilt, which will likely result in closures. Alberta also recently closed its provincial online store and gave private retail operators the ability to open their own online stores.

  • In Quebec, where all licensed retailers are owned and operated by the provincial government, growth in the retail footprint has been negligible. The lack of convenient access to the legal market is bolstering illicit operators and helping them maintain market share, despite the Quebec government’s claims of a dying illicit supply. 

  • British Columbia’s store count continues to grow at a steady rate, but is still significantly behind that of Alberta, its less populated neighbor.

  • The number of retailers in Ontario continues to grow at a strong rate, but much slower than the exceptional growth seen in 2021. The 2021 rush was initiated by a move to streamline the province’s licensing protocol, which included doing away with a very stringent lottery system.

  • At current growth rates, Cannabis Benchmarks is projecting 3,511 licensed stores open across Canada by the end of 2022. The increased store presence will heighten competition, continue to push retail prices lower, and further pressure margins. That said, lower retail prices could help the legal market continue to expand its share of total cannabis sales at the expense of illicit supply. From the store operator’s point of view, then, lower prices may be offset by increased sales volume.

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

1 July 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

June 24, 2022

CANADA CANNABIS SPOT INDEX — June 24, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending June 24, 2022
CCSI image 1 2022-06-24

*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$5.22 per gram this week, up 0.5% from last week’s C$5.19 per gram. This week’s price equates to US$1,826 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.

SOURE: Cannabis Benchmarks, Health Canada
  • Health Canada data for the number of active registered medical cannabis clients is currently available from October 2018 to September 2021, and is shown in the chart above. 

 

  • Medical cannabis patient registrations have been on a steady decline with the inception of legal recreational cannabis markets in October 2018, except for the initial months of the COVID pandemic when retail shops were closed. Based on recent data, we observe roughly 3,000 fewer active registered medical cannabis clients each month.

  • Provinces with well-developed recreational retail store footprints have seen the biggest loss in medical clients. Alberta, with the highest number of stores per capita, has seen active registrants drop by 57% since legalization. On the other hand, Quebec, with only 89 provincial-run retail cannabis stores currently, has seen patient registrations increase by 64%.

 

  • Since recreational cannabis was legalized, the total number of medical cannabis shipments has dropped by a larger magnitude than the decline in registered clients. Total monthly shipments in October 2018 were 143,752, which fell by 34% to 94,420 in September 2021.

  • Cannabis Benchmarks attributes the transfer of cannabis consumers from medicinal to the recreational path to increasing accessibility in the latter sector (both in terms of storefronts and online shopping), lower prices, larger product variety with similar potencies, and better education.

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

24 June 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved