March 4, 2022

CANADA CANNABIS SPOT INDEX — March 4, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending March 4, 2022
CCSI image 1 2022-03-04

*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$5.13 per gram this week, down 1.3% from last week’s C$5.20 per gram. This week’s price equates to US$1,833 per pound at the current exchange rate.

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This week we examine updated household expenditure data issued quarterly by Statistics Canada. The data shows some very interesting and positive trends for the legal cannabis sector. To start, we look at the rise of the legal recreational cannabis market across Canada. As seen in the chart below, in Q4 2021 the estimated household expenditure for legal recreational cannabis continued to grow, while estimated expenditures in the illicit market continued to contract. More Canadians are choosing to purchase cannabis through regulated legal channels, as awareness and accessibility continue to evolve. Also fueling that trend is the drop in prices, as new supplies from legal indoor and outdoor cultivation operations became available, making products from licensed businesses more price-competitive with those of illegal sellers.

 

In Q4 2021, recreational cannabis expenditures grew 33% to C$1,224M and illicit cannabis expenditures dropped by 13% to C$660M compared to the same time frame in 2020. We also note that expenditures for medical-use cannabis dropped 13% to C$108M. Medical cannabis now makes up only 5.4% of the total Canadian cannabis market. Total expenditures on cannabis were C$1.993B for the quarter, or C$21.7M per day.

SOURE: Cannabis Benchmarks, Health Canada

Next we look at cannabis purchasing in comparison to that for alcohol and tobacco. As we have noted in the past, major alcohol and tobacco companies have made significant investments in large cannabis operations over the last few years, in part as a hedge to ensure they do not lose out on the latent demand for cannabis that is being captured gradually by legal businesses. The data released by Statistics Canada for Q4 2021 shows that alcohol and tobacco sales are starting to  lose ground to growing cannabis sales. Even though total spending on alcohol, tobacco, and cannabis continues to rise, the portion spent on cannabis now makes up 14.3% of the total.

SOURCE: Cannabis Benchmarks, Health Canada

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

4 March 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

February 25, 2022

CANADA CANNABIS SPOT INDEX — February 25, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending February 25, 2022
CCSI image 1 2022-02-25

*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$5.20 per gram this week, up 0.6% from last week’s C$5.17 per gram. This week’s price equates to US$1,848 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.

Statistics Canada recently released retail sales data for December 2021, showing nationwide legal cannabis sales once again grew during the holiday month. Sales in December grew to C$382.4M. The month-on-month increase of C$31M or 8.5% led to the highest monthly sales since legalization.

In 2021, we saw a monthly increase in sales almost every month, as cannabis products became more accessible and acceptable, as well as more inexpensive. Specifically looking at December, we typically see a big boost in sales during this holiday month. In December 2020, we observed sales jump by C$38M from the previous month, which is comparable to this past December.

This latest report also gives us a complete view of 2021 sales, which totaled C$3.92B. This was a C$1.3B or 50% increase year-on-year. We expect 2022 will exceed last year’s sales as more stores are rolled out across key provinces, and lower price points and product variety continue to attract illicit market consumers to the legal markets. Based on the latest report, the annual sales run rate for 2022 is expected to hit at least C$4.5B.

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

25 February 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

February 18, 2022

CANADA CANNABIS SPOT INDEX — February 18, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending February 18, 2022
CCSI image 1 2022-02-18

*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$5.17 per gram this week, up 0.7% from last week’s C$5.13 per gram. This week’s price equates to US$1,844 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 analyze data collected by Health Canada regarding trends in cannabis usage in the country. The agency conducts an annual Canadian Cannabis Survey to obtain “detailed information about the habits of people who use cannabis and behaviors relative to cannabis use.” The 2021 survey had over 10,000 responses split almost evenly between males and females from various provinces. The data is all reported at the national level, despite the agency having specific provincial data. While there is a plethora of data collected, in this week’s report we focus on a few high-level trends in cannabis usage and sources of cannabis. We begin by looking at the trends in Canada’s cannabis usage rate since 2018. In all categories, cannabis usage rose from 2018 through 2020, with a small drop in 2021. The drop-off in usage for 2021 can likely be explained by anomalously elevated usage in 2020, when stay-at-home orders during the initial surge of the COVID pandemic were in place, resulting in more free time and disposable income for consumers. At the national level, approximately 25% of the population used cannabis in 2021, down from 27% the year prior, with provincial estimates ranging from 17% to 38%. Also apparent in the data is that the male population is more likely to use cannabis products, with 20 to 24-year-olds the age group in which cannabis usage is most prevalent. The data indicates a steep drop-off in usage rates for those over 25.

SOURCE & ANALYSIS: Health Canada, Cannabis Benchmarks

The next trend we examine are the factors that influenced where consumers sourced their cannabis over the past three years. The data was complete for 2020 and 2021, but we did need to make some assumptions for the 2019 dataset, as it was not as complete. What is apparent from the data is that cannabis users are most sensitive to price and safe supply, followed by quality and convenience.

SOURCE & ANALYSIS: Health Canada, Cannabis Benchmarks

Lastly, we look at some trends in the medical cannabis market. While survey respondents could choose more than one source, the data clearly indicates that legal outlets – including licensed recreational storefronts and online options, as well as Health Canada licensed medical cannabis producers – are preferred to unlicensed sources. As seen over the past three years, there is an increasing trend to purchase cannabis from a legal, recreational source (online or storefront) and a negative trend to acquiring it from a dealer, friend, or illegal online source. 

 

Although this is good news for the legal cannabis industry as a whole, the increasing preference for legal recreational sources also came at the expense of cultivators licensed in the country’s medical cannabis program, which saw the proportion of survey respondents selecting that category as a preferred source wane from 2020 to 2021. As seen in the chart below, the last category, “Health Canada licensed producer,” the cannabis source for registered medical patients, garnered a relatively weak response. Only 21% of medical cannabis users get products directly from licensed medical providers, and it appears they increasingly prefer the convenience and product variety found in the legal recreational markets. Our modeling of demand for recreational versus medical cannabis affirms the survey findings, with total kilograms sold in the medical market consistently constituting only a small fraction of the volume sold in the recreational market.

SOURCE & ANALYSIS: Health Canada, Cannabis Benchmarks

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

18 February 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

February 11, 2022

CANADA CANNABIS SPOT INDEX — February 11, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending February 11, 2022
CCSI image 1 2022-02-11

*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$5.13 per gram this week, up 1.7% from last week’s C$5.05 per gram. This week’s price equates to US$1,834 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 explore the state of British Columbia’s (BC) cannabis market. BC has long been one of the cannabis cultivation capitals of North America. Prior to legalization, its ideal climate helped allow the province to develop a deep underground network of craft growers, which in turn supplied cannabis across the country.

 

However, the robust illicit market is now plaguing the legal industry. Cannabis retail sales in the province are not as large as one might expect due to the continued, large presence of the illegal cannabis trade. To curb supply from the illicit market, the BC government is working with many illegal cannabis growers; part of efforts to convert them to the legal sector by helping them through the official application and regulation process.

 

BC has the third-largest provincial population in Canada. The latest monthly sales data from Statistics Canada post-November has sales there at C$47.8M for the month. For a province that is known for its cannabis roots, this falls far short of expectations. Looking at the monthly sales by population size and the proportion of the population that uses cannabis, we calculated the average legal spend by cannabis users in the top four provinces. As part of that process, we take the reported monthly sales numbers from Statistics Canada, convert them to a daily figure, and then divide it by the number of estimated cannabis users in the province. 

 

 

Based on a survey done by the Canadian government, roughly 20% of the BC populace is estimated to use cannabis regularly. Based on our analysis, the average cannabis user in BC spends C$1.42/day on legal cannabis products.

SOURCE: Cannabis Benchmarks

We believe this number could be substantially higher, but the legal BC markset faces two main obstacles.The first is that many cannabis users still purchase products from the illicit sector. So, while they may identify themselves as cannabis users their purchases do not show up in official stats. The second is a low store count relative to other legalized jurisdictions with, in some cases, illegal stores still in operation. The relationship between store counts and sales is very strong, so with the slow rollout of stores we do not expect BC sales to jump substantially in 2022.

SOURCE: Cannabis Benchmarks
We estimate BC sales for 2022 to total $C654M, an increase of C$104M or 19% compared to 2021. While this is a substantial year-on-year increase, there is still significant room for sales growth in the province. There are other factors that could help grow the industry, however, including converting current users to the legal channels, the recent push by the BC government to help transform illicit operations into legal ones, the growing number of cannabis stores, and the lower legal wholesale price point.

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

11 February 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved

February 4, 2022

CANADA CANNABIS SPOT INDEX — February 4, 2022

CANADA CANNABIS SPOT INDEX (CCSI) 

Week Ending February 4, 2022
CCSI image 1 2022-02-04

*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$5.05 per gram this week, down -0.4% from last week’s C$5.07 per gram. This week’s price equates to US$1,802 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, and in some cases increasing competition among retailers in more saturated local markets. 

 

Our latest count shows the number of stores open for business reached 2,980 as of the end of January. That figure is up by 1,487 stores, or a jump of  99%, compared to January 2021. As can be seen in the chart below, we expect that trend to continue throughout this year but at a slightly slower rate. The slowdown is already apparent in the January data. During the 2021 calendar year, there were an average of 124 stores added each month, but only 86 were added in January 2021.

SOURCE: Cannabis Benchmarks

One province that sticks out is Alberta. We had been anticipating a slowdown there for some time, but Alberta’s store count continues to grow at a steady rate. The current count is 740 stores, which is 184 more than last January. We are modeling no growth for the rest of the year, with changes being made to the online sales model. Up until now, legal cannabis was available online only through an e-commerce platform run by the Alberta Gaming, Liquor, and Cannabis (AGLC) agency. The passing of Bill 80 in December will allow licensed retailers to set up their e-commerce platforms starting on March 8, 2022. This change will make the cannabis landscape even more competitive.

As we noted in a previous report, licensed private retailers will be able to keep costs significantly lower with a shift to online sales. From the established retailer’s perspective, the goal would be to move current customers to their online platform and fulfill their purchases from a centralized location. The new model will add pressure to already low sales margins. In the end, though, these changes should be a net benefit to both retailers and customers.

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

4 February 2022 Copyright © 2022 New Leaf Data Services, LLC.  All rights reserved