CANADA CANNABIS SPOT INDEX — March 15, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published March 15, 2019

The CCSI declined by 1.4% this week to C$7.01 per gram, from last week’s C$7.10 per gram. The average price over the past eight weeks is assessed to be C$6.60 per gram, which includes the excise duties. This week’s price of C$7.10 per gram equates to US$2,378 per pound at current exchange rates.

 

This week we provide an update on recent sales trends. On March 12th, the Government of Canada’s Cannabis Tracking System published an updated supply and demand report. The newly published data made some revisions to sales figures from Q4 2018 and added January 2019 data. Today we look specifically at recreational market sales, defined formally as “CRA-stamped cannabis products sold directly in the Canadian retail market (either online or in-person) for non-medical purposes.”

A closer look into sales from individual provinces provides more perspective on the current purchasing habits of consumers according to their jurisdiction. British Columbia’s (BC’s) December revenues were remarkably low, with total retail sales tallying only C$1.24M. This despite BC being the third largest province by population, although it is possible that it is also home to Canada’s most established illicit market.

 

Ontario’s December sales are similarly disproportionate to its population size. Ontario is home to 38% of the total Canadian population, but sales from November to December dropped by a staggering 14% to C$8.72M, 16% of the nationwide total.

 

The two noteworthy positive highlights were December sales growth in Alberta and Saskatchewan, which saw increases in retail revenues of 12% and 5%, respectively.As seen in the charts above, there was a substantial revision made to the reported sales figures for the Q4 2018 non-medical dry cannabis and oils categories (see yellow line). The Government does state that the reported data is preliminary and that “verification and validation of this data is ongoing.” A close analysis of the most current figures is especially warranted in this case as the overall changes are quite significant.

Total sales of non-medical dry cannabis in Q4 2018 were revised higher by 634 kg, or 4.2%, and total sales of non-medical cannabis oil for the same time period were revised higher by 1,128 litres, or 20.8%. Going forward we need to remember that large revisions are always on the table, especially as the Government builds error correction into their models and cannabis market participants become more accustomed to, and efficient at, reporting inventory and sales data.

 

The addition of the January data provided some further insight into sales trends. Non-medical dry cannabis sales for January dropped by 4.5% from December sales to 5,336 kg across Canada. January non-medical oil sales told another story. Total oil sales sharply increased by 10.7% to 2,873 litres. All this stated, we take this latest month of data with a grain of salt as potential revisions could be made in the future.

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

15 March 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — March 8, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published March 8, 2019

The CCSI once again moved higher this week with a 3.4% gain to C$7.10 per gram, from last week’s C$6.87 per gram. The index is steadily moving higher from a low of C$6.04 hit during the week ending February 15. This week’s price of C$7.10 per gram equates to US$2,412 per pound at current exchange rates.

This week we provide an update on the monthly retail sales by province and territory data released by Statistics Canada. This published dataset now gives us a full glimpse into a complete quarter of post-legalization sales from both the provincial online stores and brick & mortar shops. The initial revenue figures for Q4 2018 are relatively low. December sales across Canada totaled C$55.2M, up 2% over the previous month.

Source: Cannabis Benchmarks, Statistics Canada [Table  20-10-0008-01]

A closer look into sales from individual provinces provides more perspective on the current purchasing habits of consumers according to their jurisdiction. British Columbia’s (BC’s) December revenues were remarkably low, with total retail sales tallying only C$1.24M. This despite BC being the third largest province by population, although it is possible that it is also home to Canada’s most established illicit market.

 

Ontario’s December sales are similarly disproportionate to its population size. Ontario is home to 38% of the total Canadian population, but sales from November to December dropped by a staggering 14% to C$8.72M, 16% of the nationwide total.

 

The two noteworthy positive highlights were December sales growth in Alberta and Saskatchewan, which saw increases in retail revenues of 12% and 5%, respectively.

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

CANADA CANNABIS SPOT INDEX — March 1, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published March 1, 2019

The CCSI once again moved higher this week by 5.6% to C$6.87/gram. This comes after edging down to the C$6/gram mark only two weeks ago. C$6.87/gram equates to US$2,363/pound at current exchange rates.

 

This week we continue to analyze the dry cannabis sales data from Health Canada’s Cannabis Tracking System. The Q4 2018 data, displayed in the table below, shows steady sales to registered medical patients, but sales to recreational consumers quickly declined after an initial rush immediately subsequent to legalization.

Dry cannabis sales for medical use across Canada remained quite steady over Q4 with an average of 220 kg being sold each day. Recreational sales showed different behaviour. The first 15 days of legalization in October saw an average of 389 kg sold daily, which then dropped to an average of 240 kg in daily sales over the next two months.

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

CANADA CANNABIS SPOT INDEX — February 22, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published February 22, 2019

The CCSI jumped back up by 7.7% this week to C$6.51/gram, after hitting a low of C$6.04/gram last week. Last week’s price appears to be an anomaly, perhaps due to potentially lower quality and lower priced product changing hands. This week’s price mean reverted back to the 2-month moving average of C$6.45/gram. C$6.51/gram equates to US$2,232/pound at current exchange rates.


This week we dive a bit deeper in the quarterly earnings reports issued by Canopy Growth and Aurora Cannabis.

 

The Health Canada Cannabis Tracking System report gives us complete view of both medical and recreational sales in the last quarter of 2018. From the latest data issued on Jan 29th, a total of 40,753 kg equivalent was sold across Canada with an almost perfect 50/50 split between the medical and recreational markets during this time period.

 

Using this data as a reference point, we calculate the reported Canopy sales volumes of 10,102 kg equivalent for that timeframe for dried cannabis and extracts to be approximately 40% and 9% of the total Canadian recreational and medical markets, respectively. Aurora, the second-largest producer, came in with a smaller market share of 20% of recreational sales, but a substantially larger share of the medical market at 16%.

 

Both producers also gave some insight into their average net selling prices. Canopy’s average net selling price for dried cannabis in the recreational market was slightly higher than our average index price over Q4, while Aurora’s was more comparable to our price assessments. Canopy and Aurora stated their average net selling prices (net of excise duties) to be C$6.96/gram and C$6.23/gram, respectively. The CCSI averaged approximately C$6.32/gram over Q4 2018 (net of the C$1.15 provincial and federal excise duties estimated by Cannabis Benchmarks [$C7.49 less C$1.15]).   

 

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22 February 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — February 15, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published February 15, 2019

The CCSI declined 5.4% this week to C$6.04 per gram, from C$6.39 per gram. The index has moved to the lowest point since legalization. C$6.04 per gram equates to US$2,062 per pound at current exchange rates.

 

This week we saw quarterly earnings from the two largest licensed producer, Aurora Cannabis and Canopy Growth. The earning period for both companies end Dec 31st, 2018 cover the first full quarter of legalized Canadian markets. This week, we drill in to the quantity of total dry cannabis sold, and its average net selling price from the top two LPs.

 

Canopy broke out their recreation and medical sales with the addition of recreation sales this quarter. Total volumes of dry and cannabis extract sold increased to 10,102 kg from 2,330 kg reported the previous quarter.  Recreational sales made up 82% of total sales, with dry flower accounting for 62% of total sales. The average net selling prices for dry and cannabis extracts was reported at C$6.96/gram, while medical averaged C$8.49/gram.



Aurora Cannabis kept their numbers at a higher level by lumping medical and recreational sales together. Aurora Cannabis produced 7,822 kg over the quarter with 6,999 kg sold. Digging into the Management Discussion & Analysis we managed to find total recreational dry cannabis sold was 3,500 kg and total cannabis extracts was 306 kg, suggesting that 54% of their production was sold into the newly legalized market. The average net selling prices for dry and cannabis extracts for both the medical and recreational markets was reported to be C$6.23/gram.

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

15 February 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — February 8, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published February 8, 2019

The CCSI moved 2.2% lower this week to C$6.39 per gram, from C$6.53 per gram. The index looks to have found its sweet spot within a narrow C$0.28 range. C$6.39 per gram equates to US$2,196 per pound at current exchange rates.

 

This week we take a deeper look at the final price consumers are paying for dry cannabis products. Each provincial retail structure is set up slightly differently, but ultimately consumers purchase recreational cannabis in pre-rolls or canisters. Unlike products sold in the U.S., Canadian cannabis packaging enforces strict volume and labelling guidelines. The canisters are mainly sold in one gram, 3.5 gram, and 7 gram increments with a strict labelling protocol that includes the producer’s brand, strain information and Health Canada warning labels. Many of the recent supply issues have been attributed to faulty packaging.

For this week’s analysis, we specifically focussed in on the retail price of 14 out of the 80 listed dry cannabis products on the Ontario Cannabis Store (https://ocs.ca/). We chose a variety of products from different licensed producers (LP), varying THC and CBD levels, and assorted flower types (Sativa, Indica, or Hybrids).

 

Of the 14 products, the calculated average selling price for one gram was C$11.66 (inclusive of the 13% retail sales tax) with a range of C$9.25 to C$17.25.

Source: Cannabis Benchmarks, Ontario Cannabis Store

Using our in-house pricing models, we were able to back calculate the average LP’s selling price to C$6.72/gram. This falls roughly inline with the posted CCSI price over the past 7 weeks. Here are the components of our pricing model:

Lastly, we looked at the volume discount customers are given when they buy quantities larger than one gram. For many of the 14 products we analyzed, there were prices listed but no product available in those larger quantities.

 

As can be seen in the chart below, the discount was almost standardized as consumers purchased larger quantities with a 4.9% discount when customer purchased 3.5g, and 9.7% discount when customers purchased 7g.

Source: Cannabis Benchmarks, Ontario Cannabis Store

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

CANADA CANNABIS SPOT INDEX — February 1, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published February 1, 2019

 

The CCSI moved 2.6% higher this week to C$6.53 per gram, from C$6.35 per gram. The index continues to fluctuate within a narrow C$0.28 range. C$6.53 per gram equates to US$2,240 per pound at current exchange rates.

 

On January 29th, Health Canada released another snapshot of the preliminary data on sales, finished inventory and unfinished inventory with December 2018 included. This data is released as part of the Cannabis Tracking System instituted by the Canadian government to ensure illegal supply does not cross into legalized markets. This data set is important for many reasons, but primarily to give industry participants a look at the fundamentals of non-medical cannabis sales in Canada.

 

With three full months of operation behind us we have more data on consumer habits and inventory. Let’s start by looking at total non-medical sales. From the report we see that total recreational sales in December grew by 5% or to 7,252 kg, but that is not actually the case because December has 31 days. When we normalize for the number of days in each month, sales are essentially flat, more clearly showing Canada currently consumes approximately 232 kg per day.

 

Next let’s look at the Inventory on hand. The reported amount of finished dried cannabis inventory, or product that is ready of sale, as of the end of December was 19,085 kg, or 2.7x the total dried cannabis actually sold on average during November and December to medical and non-medical customers. Perhaps more thought provoking is the December end of month unfinished dried cannabis inventory, or product that has been cultivated but not packaged or labelled. This inventory sits at 109,236 kg of dried cannabis or 15x the total dried cannabis actually sold on average during November and December to medical and non-medical customers. Lets ask the same question again: Is there really a supply shortage?

This dataset is released every two weeks, and its labelled as “Preliminary”; therefore we want to discuss how much the October and November data changed. The table below gives the full comparison, but in this report we focus on a couple of the big moving factors.

 

First to note is the total medical sales in November dropped by 1,922 kg. This could be a result of a consumers that have a medical prescription procuring product from the non-medical sector.

 

The next piece of information that has changed is the finished inventory ready for sale. The end of month volume held by Federally licensed holders dropped by 4,785 kg in November. Simultaneously, the unfinished end of month inventory held by Federally licensed holders jumped by similar amount or 4,470 kg. Our quick take is that product that was assumed to be ready for sale in fact was not quite ready.

With each release of the report we will continuously assess data and highlight the changes.

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

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

CANADA CANNABIS SPOT INDEX — January 25, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 25, 2019

 

The CCSI dropped 4.5% this week to C$6.35 per gram, from C$6.64 per gram last week. The index has been particularly stable over the past five weeks, with prices bouncing within a tight C$0.29 range. C$6.35 per gram equates to US$2,164 per pound at current exchange rates.

On January 23rd, Statistics Canada issued more detailed market data – the monthly retail sales by province and territory. This published dataset gives us a full glimpse into a complete month of post-legalization sales from the provincial online stores and brick & mortar stores. Initial revenue figures are relatively low. November sales across Canada totalled C$54M.

With recreational cannabis being legalized on October 17th, Cannabis Benchmarks made adjustments to the reported October sales numbers to normalize for a full month of sales. This takes the total sales for October from C$43M to C$89M. With that adjustment, we observe November sales dropping by 39%. As we outlined last week, there are many potential reasons for this massive sales decline, with possibilities including October numbers being inflated by initial excitement about legalization. Alternatively, lack of product availability and high prices may have pushed customers back to the black market. The two aforementioned possibilities may also have been occurring simultaneously.

Drilling deeper into the provincial data exposes even more critical information. British Columbia’s total adjusted October sales dropped by 79% to C$1M, while Ontario total adjusted October sales dropped by 58% to C$10M. Alberta was one of the few provinces that did not see massive month-on-month declines, with only a 19% drop when compared to the total adjusted October sales.

 

Taking the analysis one step further, we broke down these figures into a monthly sales per person.

These simple calculations give an even more brutal look at the start of legalization. In this analysis we assume that every Canadian citizen is of legal age and would be willing to consume cannabis. On average during November, each Canadian citizen spent only C$1.55 to purchase cannabis from a legal outlet, less than many individuals spend on a coffee. British Columbia saw the lowest spend per person at only C$0.22. Low per-person spending figures indicate that the black market still likely looms large over the legal one in the early days of legalization in Canada.

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

CANADA CANNABIS SPOT INDEX — January 18, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 18, 2019

 

The CCSI jumped 3.9% this week to C$6.64 per gram, from C$6.38 per gram last week. The index has been stable over the past 4 weeks. C$6.64 per gram equates to US$2,271 per pound at current exchange rates.

 

On January 15th, Health Canada released preliminary data on sales, finished inventory and unfinished inventory for October and November, 2018. The Canadian government has instituted the Cannabis Tracking System to ensure illegal supply does not cross into legalized markets. This data snapshot gives the industry a fundamental view of the first complete month of non-medical cannabis sales in Canada with lots of interesting nuggets to consider.

With recreational cannabis being legalized on October 17th, Cannabis Benchmarks made adjustments to the reported October non-medical sales quantity to normalize for a full month of sales. This takes the reported non-medical sales quantity for October from 4,511 kg to 9,323 kg. Surprisingly, November non-medical sales dropped by 45% to 5,146 kg. There are many potential reasons for this massive sales decline but possibilities include:

 

1. Initial sales rush upon legalization leading to a higher October sales volume;

2. The lack of product availability at online and retail locations impacted November sales; and

3. High prices pushed customers back to the black market.

We’ll get a better perspective on the primary drivers for demand as we get more monthly data from Health Canada.


The reported amount of finished dried cannabis inventory, or product that is ready of sale, as of the end of November is also interesting. The combined inventory of Federal licence holders (inventory held by cultivators and processing facilities) and Provincial distributors/sellers (inventory held by government and privately run online and brick-and-mortar stores) was 25,607 kg., or 2.9x the total dried cannabis actually sold in November to medical and non-medical customers. Is there really a supply shortage?

The last piece of information provided is the end of month unfinished dried cannabis inventory, or product that has been cultivated but not packaged or labelled. According to monthly reported data, there was 93,254 kg of dried cannabis or 10.5x November consumption sitting at either cultivation or processing operations. Can the current reported supply shortage be resolved quickly?

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

18 January 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — January 11, 2019

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 11, 2019

 

The CCSI declined another 3.4% this week to C$6.38 per gram, from C$6.60 per gram last week. The index has been steadily dropping over the past 5 weeks. C$6.38 per gram equates to US$2,178 per pound at current exchange rates.

StatsCan analysis found that recreational dried cannabis sold from a licensed supplier sold for C$9.70 per gram on average since legalization. This is drastically higher than the calculated C$6.51 per gram paid by consumers in the still thriving illicit markets. The entire industry is closely watching these prices as legalization was expected to set back the illegal supply while also controlling quality and bringing in tax revenue. Cannabis Benchmarks expects the price of cannabis to continue to drop as the current licensed producers increase business operation efficiencies and add capacity over the next 18 months. This follows a similar trend to that observed in the early years of most recreational U.S. markets.

One of the major Canadian licensed producer, Aurora Cannabis, gave industry watchers some additional insight into how the legalization process has been going so far. On January 8th, Aurora announced guidance for its Q2 2019 results, or quarter ending December 31. These early estimates show revenue of C$50 to C$55 million, net of the excise tax. The guidance indicates C$17 million in recreational sales from the start of legalization (C$20.6 million extrapolated back to the beginning of the quarter), which is lower than analyst estimates. Aurora earnings are scheduled to be released on February 11, 2019.

 

Lastly, up to 8,000 entrants are expected to enter a lottery today for licenses for the first 25 cannabis stores to open in Ontario starting April 1. The licences are being divided regionally, with five going to the east of the province, seven in the west, two in the north, six in the Greater Toronto Area and five in Toronto itself. Recreational cannabis can only be bought through the Ontario government-run website at the moment.

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

11 January 2019 Copyright © 2019 New Leaf Data Services, LLC.  All rights reserved