December 13, 2019

CANADA CANNABIS SPOT INDEX — December 13, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 13, 2019

*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$6.39 per gram this week, down 1.5% from last week’s C$6.29 per gram. This week’s price equates to US$2,197 per pound at the current exchange rate.

This week, the government of Ontario announced that it would abandon the current lottery system for cannabis retail licenses and replace it with an open licensing system with no cap on the number of private cannabis stores. 

The Alcohol and Gaming Commission of Ontario (AGCO) issued a press release stating it “will begin accepting operator licence applications from prospective retailers on January 6, 2020, followed by store authorization applications on March 2, 2020. Store authorizations from this open application process are expected to be issued beginning in April, at an initial rate of approximately 20 per month.”  

Other notable facts from the announcement include:

  • Licensed producers (LPs) can apply to open a store at one of their facilities.


  • Retail operators may own a maximum of 10 cannabis stores until August 31, 2020, after which the cap will rise to 30 in September 2020 and 75 in September 2021.


  • Authorized cannabis stores can now offer click-and-collect services that allow customers to order and pay for products online for in-store pick-up.


  • The application does not require a pre-qualification step, as was the case in the lottery process. Applicants are no longer required to secure leases or provide a letter of credit for $250,000.

  

Ahead of this next round of retail stores opening, AGCO also stated that some of the 42 proposed cannabis stores granted a license in the second lottery have been authorized to open their doors this month. We expect all 42 to open ahead of the next batch of stores coming in April from the new open licensing process.

Our last Ontario sales forecast, issued in our November 22 report, did take into account the new rules discussed above, but today we make some small revisions based on the more definitive details that just recently came to light. Our current estimate reduces the number of stores opening initially to 20 per month from April through July, then increasing from August onward.

We are now forecasting retail cannabis sales in Ontario to average C$71M per month in 2020, with 310 retail locations open in December 2020, generating C$92M in sales that month. This puts total 2020 Ontario cannabis sales at C$854M.

Cannabis Benchmarks projections for retail cannabis sales in Ontario and the number of licensed storefronts projected to open each month through the end of 2020 are illustrated in the chart below, on the following page.

Source: Statistics Canada, Cannabis Benchmarks

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13 December 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved