December 18, 2020

CANADA CANNABIS SPOT INDEX — December 18, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 18, 2020
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*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$6.20 per gram this week, up 1.7% from last week’s C$6.09 per gram. This week’s price equates to US$2,207 per pound at the current exchange rate.

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This week we provide an update on the 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 market.

 

Cannabis Benchmarks estimates that the total implied demand for legal cannabis in August 2020 was 25,978 kg, an 81% increase over the same month in 2019, as shown in the following table. 

Source: Cannabis Benchmarks, Statistics Canada

Even though demand has continued to grow at a rapid rate, August’s demand is still less than 25% of the 112,025 kg of unpackaged production reported by Statistics Canada for the month. The mismatch is creating a huge oversupply of both packaged (finished) and unpackaged (unfinished) products across the country. Not surprisingly, Statistics Canada’s most recent data for August 2020 shows unpackaged and packaged inventory ballooning to 882,938 kg. This represents 34 months worth of supply at current demand levels, and inventory is continuing to increase. Additionally, this imbalance has persisted even after many Licensed Producers took large write-offs for excess inventory over the past year. 

Source: Cannabis Benchmarks, Statistics Canada

The hope is that this inventory will ultimately be sold either as dried flower or after being converted into a cannabis derivative product, but there is a chance that the quality of the product degrades to a point where it is not sellable. As noted above, we estimate that the August inventory level represents 34 months of demand based on the August sales volume. 

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

December 11, 2020

CANADA CANNABIS SPOT INDEX — December 11, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 11, 2020
ccsi image 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$6.09 per gram this week, up 0.9% from last week’s C$6.04 per gram. This week’s price equates to US$2,155 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 revisit our outlook for the growth of cannabis store counts and sales in Ontario. The province’s Alcohol and Gaming Commission (AGCO) issued a statement on December 8 regarding Cannabis Retail Store Authorizations, which necessitates updates to our projections. 

 

Last December, after pressure from the cannabis industry, the Ontario government altered its retail store licensing process from a lottery system to a more open format. The goal was to issue up to 20 retail store licenses each month starting in April. Then, in a statement in September, AGCO stated they would “double the pace of store authorizations this fall.” This suggested an average of 40 new stores each month through the end of the year. Despite the province missing its targeted increase in October and November, this week’s statement ups their growth estimate once again.

 

Starting this month, Ontario’s cannabis store regulator is now set to double the number of Retail Store Authorizations (RSA) it is issuing each month to 80. This is a massive increase, and a necessary shock to boost legal cannabis sales in Canada’s most populous province. 

 

 

With the new RSA target, we anticipate 80 stores to open on average each month throughout 2021. At this rate, the current 240 stores would increase to roughly 1,260 stores by the end of next year.

Source: Cannabis Benchmarks

As we stated last week, based on the current store count of 240, each store serves roughly 60,000 Ontarians. (This number is not adjusted for underage people or those that choose not to consume cannabis products.) If the forecast of 1,260 stores is achieved, there will be one retailer per 11,500 Ontario residents. This number is closer to Alberta’s per capita store count, as well as those of some mature state markets in the U.S.

 

Over the past two years, we have reported on the 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 system and helps pull consumers away from the still-robust illicit market. The latest sales data for September 2020 issued by Statistics Canada shows Ontario cannabis retail sales totaled C$77.9M that month with 178 stores open. Based on the new RSA target of 80 new stores per month, our updated forecast shows sales growing dramatically over the course of 2021. We now project Ontario’s total sales to exceed C$1.6B by the end of next year.

Source: Cannabis Benchmarks

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

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

December 4, 2020

CANADA CANNABIS SPOT INDEX — December 4, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 4, 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 1.7% from last week’s C$5.94 per gram. This week’s price equates to US$2,114 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. The Canadian cannabis industry has continued to open new retail outlets across the country at a steady pace. As of the end of November, we counted 1,276 licensed retailers, with an average monthly growth rate of 6.1% in 2020. This growth rate has been very consistent throughout the year, which gives us confidence that the cannabis industry will continue to grow at a stable rate in 2021.

Source: Cannabis Benchmarks

At the national level, the increase in store counts look to be growing linearly, but drilling down into each province shows a very different picture. 

Source: Cannabis Benchmarks

All provinces are seeing store counts grow, but at different rates. British Columbia’s store count is growing at a steady-state, while Ontario’s has been growing exponentially. Ontario, however, is playing a bit of catch up to the rest of the provinces on this front. While Ontario has not achieved its goal of opening 40 stores per month set in September, they have not far behind; since September, an average of 34 new stores per month have opened in the province.

The more interesting story is Alberta, where the number of new store openings has decreased significantly. The province appears to have reached a plateau on how many stores it needs to support its relatively small population of 4.3M people. Alberta’s current store count equates to one per 8,018 residents. 

 

For context, Alberta’s per capita store count lies between those of two of the most mature legal cannabis markets in the U.S.: Colorado and Oregon. In Colorado, there is one recreational retailer per roughly 9,600 residents. In Oregon, there is one legal store for about every 6,150 people. 

If we assume Alberta’s to be the optimal number of stores – an assumption buttressed by its position between two relatively stable, mature U.S. state markets – it provides some insight into how many retailers each province ultimately needs to open to reach the same ratio. Below is the result of this simple model: calculating the number of stores each province needs to meet the same ratio of one store per 8,018 people.

*note adjusting for the % of the population that does not use cannabis products

Based on this analysis, Canada as a whole would require a total of 4,638 stores, or 3.6 times the current number of retailers. While it is unlikely that Canada will reach that amount anytime soon, continued growth in store counts will ultimately lead to higher sales across the country. If we project using the average of 55 stores opened each month across Canada – the 2020 average so far – then we reach 4,638 stores at the end of 2023. This level of accessibility would almost certainly minimize illicit market activity and shift most of the overall cannabis sales volume to legal channels – something the regulated industry is very much looking forward to.

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

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

November 25, 2020

CANADA CANNABIS SPOT INDEX — November 27, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 27, 2020
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*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$5.94 per gram this week, up 1.3% from last week’s C$5.86 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.

This week Statistics Canada released retail sales data for September 2020. Sales have been increasing steadily across Canada. September continued that trend with sales of C$256M for the month, C$11.4M higher than August 2020 and up C$133M year-over-year. The monthly increase is not as large as those observed during the summer months, but it is still very notable. September’s figures point to an annual run rate of C$3.1B, which solidifies the prospect of retail sales eclipsing C$3B in 2021.

Source: Cannabis Benchmarks, Statistics Canada

On an average daily basis, September sales were higher across every province except for Newfoundland and Labrador. While average daily sales nationwide expanded by 8.2%, increases varied significantly at the provincial level. Of the major provinces, Ontario has been consistently outperforming all other provinces in daily sales growth. Ontario led the way with a 20.3% rise in average daily sales, while other major provinces saw increases of 4.0% to 6.5%. The growth in Ontario has been higher than expected, with daily sales averaging C$2.6M per day in September. 

Source: Cannabis Benchmarks, Statistics Canada

As of September 30, we counted 178 stores across Ontario. Increased accessibility along with more sales of premium cannabis 2.0 products has kept revenue growth strong in Canada’s most populous province. With the latest data point, we have recalibrated our model and now expect Ontario sales alone to eclipse C$1.2B 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

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

November 20, 2020

CANADA CANNABIS SPOT INDEX — November 20, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 20, 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$5.86 per gram this week, down 1.2% from last week’s C$5.93 per gram. This week’s price equates to US$2,030 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 the number of federal licenses issued for cultivation and processing. The licenses are issued under the Cannabis Act by Health Canada, which maintains a massive list of every license that has been issued to date. We examined each record and cleaned it up to produce some interesting statistics. We share this full license database – along with other data – with our Price Contributor Network. Click here to join our Price Contributor Network for free

 

Before we jump into the data, the following are the activities permitted by the standard types of licenses under discussion.

A cultivation license is required for:

 

  • cultivating indoors or outdoors, 
  • selling to provincial authorities, 
  • reselling to another licensed authorized seller, and/or 
  • conducting later stage services such as drying, trimming, and milling. 

 

A processing license is required for: 

 

  • any extraction processes, 
  • providing lab testing services, 
  • manufacturing cannabis 2.0 products, and 
  • selling finished products to provincial authorities.

 

Since the lead up to the opening of the country’s legal medical cannabis market, Health Canada has been very busy processing applications for cannabis market participants. The charts below show cultivation and processing licenses issued from October 2013 through October 2020, encompassing Canada’s initial medical cannabis legalization, followed by its approval of adult-use cannabis in 2018. The charts illustrate the uptick in the issuance of licenses ahead of adult-use legalization. Focusing on more recent events, it is notable that there was no real slow down in application approvals during the COVID lockdowns.

 

There have been a total of 308 cultivation licenses issued to date, with some companies having multiple locations across multiple provinces. Ontario has the largest share of cultivation licenses with 119, or 39% of the total. British Columbia has the next highest number of cultivation licenses with 76, or 25% of all licenses. 

 

In 2020 so far, there have been 95 licenses issued for cultivation. On the list are many numbered companies and unfamiliar names; our thinking is the larger licensed producers (LPs) have multiple licenses under different corporate entities. The firm with the most licenses is Aurora, with nine cultivation sites across four provinces. 

Source: Cannabis Benchmarks

On the processing side, there have been a total of 277 unique licenses issued to companies across Canada. Just as with cultivation licenses, Ontario disproportionately has the highest number of processing licenses with 122, or 44% of the total. 

Source: Cannabis Benchmarks

Likely, most of these licenses are not being utilized. That is probably a good thing in light of the large overhang of finished and unfinished products currently sitting in inventory at LP sites, provincial distributors’ storage facilities, and with retailers. The latest data from Statistics Canada shows 100,240 kg of finished products and 782,698 kg of unfinished products in inventory. Based on our assessment of current demand, this constitutes 39 months’ worth of supply.

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

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