CANADA CANNABIS SPOT INDEX — November 8, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 8, 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$6.76 per gram this week, up 0.4% from last week’s C$6.74 per gram. This week’s price equates to US$2,329 per pound at the current exchange rate.

 

This week we review Canadian cannabis usage trends by province and age group. Statistics Canada conducts a survey on cannabis usage each quarter. The latest data provides details on Q3 2019 usage, which adds to the same data they have been tracking since Q1 2018. The exercise is a self-reported survey with no consideration of whether the cannabis consumed originated from the legal or the illicit market.

The current report shows that, overall, cannabis use continues to grow amongst Canadians. However, as the chart on the following page illustrates, consumption has not expanded at a uniform rate during the survey period, but has varied from quarter-to-quarter. The growth can be attributed to increased accessibility and the growing normalization of cannabis as a recreational drug. Based on the current survey, Statistics Canada estimates 5.2 million, or 17.1%, of citizens over the age of 15 use cannabis. The survey shows that 650,000 more people reported using cannabis in Q3 2019 than in Q3 2018, before recreational cannabis was legalized.  

 

Although the survey does not capture the source from which cannabis is purchased or the frequency of usage, it still provides important information about trends in consumption. The data shows that cannabis usage is lowest in Quebec, with only 11.5% of the province’s population partaking. Meanwhile, 26% of the population in the maritime provinces acknowledged using cannabis. 

 

Source: Cannabis Benchmarks, Statistics Canada

 

During the period from April 1 to September 30, approximately 580,000 people reported being first time cannabis consumers. The data also showed that senior citizens made up a disproportionately large segment of first-time cannabis users. 27% of new consumers identified by the survey in Q2 and Q3 are 65 years of age or older, while individuals aged 25 to 44 made up only 10% of new consumers during this period. Senior citizens are more likely to obtain cannabis from legal sources, adding to demand in the licensed system. However, most brands have to this point hesitated to market to this age group even as Canada’s recreational market grows. This is due to evidence that seniors consume less cannabis than other age groups and generally appear to be using products for therapeutic benefits, rather than recreation.

Source: Cannabis Benchmarks, Health Canada

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8 November 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — November 1, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published November 1, 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$6.74 per gram this week, down 3% from last week’s C$6.94 per gram. This week’s price equates to US$2,331 per pound at the current exchange rate.

 

This week we review Cannabis Benchmarks® estimate of monthly cannabis supply coming to market with the release of Health Canada’s August demand and stored inventory data. Our estimates of supply show that cannabis market volumes peaked in June with 62,671 kg generated by licensed producers (LPs) across Canada. Since then the quantity of cannabis has declined by 15.6% to 52,913 kg in August. 

 

Our expectation is that Canadian cannabis supply will rise above the June peak in November with outdoor product being harvested in September and early October at higher latitudes. Finished product can take six weeks to reach the marketplace after harvests are cut down, as the product is trimmed, dried, tested, and packaged.

Source: Cannabis Benchmarks, Health Canada

We have routinely reported that current supply levels have been outpacing legal market consumption. The build out of production capacity by LPs has caused a severe oversupply, with roughly 80% of cannabis users still turning to the illicit market due to lower prices, higher quality product, and more convenient access. For the month of August, we analyzed the disposition of the 52,913 kg of supply generated by LPs. Only 3% was consumed by medical patients, while 24% was consumed by recreational consumers. The remaining roughly 73%, or 38,626 kg, went into inventory as either finished or unfinished goods across the country.  

Source: Cannabis Benchmarks, Health Canada

This has been a persistent issue in the Canadian cannabis markets, especially as growth in supply has been outpacing demand since March. Since that time, nearly four-fifths of monthly available product has been going to federal and provincial storage facilities, resulting in a dramatic expansion of unsold inventory. As of the end of August, the current finished inventory levels sit at approximately five times the demand reported for August, while unfinished inventory amounts to 23 times the volume of product purchased in August.

Source: Cannabis Benchmarks, Health Canada

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1 November 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — October 25, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published October 25, 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$6.94 per gram this week, up 1.6% from last week’s C$6.83 per gram. This week’s price equates to US$2,406 per pound at the current exchange rate.

 

This week we review new provincial sales data released by the Canadian government and estimate the sales impact of the class of cannabis products that will hit store shelves by the end of the year. 


To start, we acknowledge August retail cannabis sales, which jumped significantly and corresponded with the forecast we formulated in our report for October 4. We projected C$127M in sales in August, with the actual total coming in at C$126M. In that report, we estimated that sales for October would increase to C$144M.

Nationwide sales rose by C$23M from July to August, with British Columbia (BC) seeing the most growth of any province. Even with sales in BC rising by 216% month-on-month to C$11.9M in August, the overall level of sales has been disappointing for a province known for its “BC Bud.” Two main factors continue to plague this market: the robust, entrenched illicit market and the lack of legal retail store fronts. We estimate the total number of brick and mortar stores open currently in BC at 95.

With sales significantly lower than most expected for the first full year of cannabis legalization, the question many are asking is how sales will look next year with the introduction of new types of cannabis products. Provincial sales levels to this point have been highly correlated with the total number of stores opened, but going forward we expect there to be a large uptick in total monthly sales per store as vapes, edibles, topical creams, and beverages become fully available.  

 

After surveying market participants and deliberating internally, Cannabis Benchmarks® has developed a summary of the factors that will structurally influence sales after cannabis 2.0 products become available:

 

  1. Consumer spending will shift from dry flower to more premium priced alternative products, resulting in higher sales.

  2. The cannabis consumer base will expand. New products with the capability to more accurately control dosage will attract potential consumers opposed or unable to smoke as an ingestion method. 

  3. A wider variety of products and their attendant consumption methods has the potential to attract casual novelty buyers on top of regular consumers, further expanding the country’s cannabis consumer base.

  4. Consumers that to this point have persisted in purchasing from the illicit market could be drawn into licensed retailers by the prospect of new products unavailable from illegal sellers. Such migration could also result in those consumers buying flower from licensed sources, as they will already be at the (legal) point of purchase. 

 

In sum, we expect the consumer base will expand and the average purchase will increase, resulting in increased retail sales per store.  

 

The introduction of these new products will surely be a positive for the industry. Our current estimates show average daily sales per store to be around C$25,000. With the addition of new product types, we expect that to increase by an average of 30% throughout 2020 to approximately C$32,000 in daily sales per store. Sales projections would have been even higher, but we anticipate a drop in dry flower prices as licensed producers such as HEXO lower their rates to compete with the illegal market.  

 

As mentioned above, our current retail sales forecast for the 561 stores in Canada is C$144M for October, which is C$1.72B annualized. With the addition of these new products, the same 561 stores at 30% more sales should generate C$187M monthly, or C$2.25B annualized. We expect the number of sales to substantially increase throughout 2020 in provinces such as Ontario, Quebec, and British Columbia, and with that we anticipate overall Canadian retail sales to follow.

 

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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..

Are you a licensed market participant in the U.S. or Canada? 

Do you support wholesale market transparency?

Become a member of our Price Contributor Network and receive discounted pricing and exclusive analysis!

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

25 October 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved