CANADA CANNABIS SPOT INDEX — January 24, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 24, 2020

*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$6.61 per gram this week, up 2.3% from last week’s C$6.46 per gram. This week’s price equates to US$2,292 per pound at the current exchange rate.

This week we examine the potential cannabis market landscape in Alberta through the end of 2020. A Statistics Canada survey estimates 662,000 cannabis users in Alberta, or roughly 18.8% of the province’s adult population. In many ways, Alberta has been seen as the most liberal and forward-looking province for making legal cannabis available to users. The Alberta government’s framework to license and regulate cannabis retailers has been simple and quick, similar to the way it operates liquor stores.

Our latest cannabis store count puts Alberta well ahead of the rest of the country with 55% of Canada’s cannabis retailers located in the province. Accessibility has been one of the biggest impediments to the growth of legal cannabis sales in Canada, but Alberta’s unique approach has been effective in driving sales into the legal market. We have reported in the past that roughly 80% of cannabis across Canada is still being purchased in the illicit market, but Alberta looks to be doing better than the other provinces on that front. Kelley Holmes, the manager of cannabis account services for the Alberta Gaming, Liquor, and Cannabis Commission (AGLC), recently stated that “Colorado, during its first year of legalization … had around 15% of the market move to the legal market;” but, in Alberta, Holmes estimates the proportion is between 25% and 30%.

Source: Cannabis Benchmarks

As we have established in past reports, there is a very strong relationship between retail sales levels and the number of cannabis stores in a province. Accordingly, Alberta has one of the highest per capita sales levels. We project the number of stores will continue to grow and estimate that by December 2020 there will be 668 stores open across Alberta, with 292 more stores opening over the course of the year, for a growth rate of 78%.

 

Increased sales will come with growth in the number of stores. Cannabis Benchmarks projections for retail cannabis sales in Alberta and the number of licensed storefronts projected to open each month through the end of 2020 are illustrated in the charts below.

Source: Cannabis Benchmarks

As of the last retail report from the Government of Canada, Alberta’s monthly sales for September and October averaged C$27M. We are now forecasting legal retail cannabis sales in Alberta to average C$37M per month in 2020, with the addition of the new retail locations and Cannabis 2.0 products, generating C$40.5M in sales by December 2020. 

In total, we forecast C$441M of sales in Alberta in 2020, with Cannabis 2.0 products expected to be C$61M, or 14%.  

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

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

CANADA CANNABIS SPOT INDEX — January 17, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 17, 2020

*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$6.46 per gram this week, down 0.7% from last week’s C$6.51 per gram. This week’s price equates to US$2,246 per pound at the current exchange rate.

This week we continue our discussion of both the current availability and prospects related to the Cannabis 2.0 market. As a quick reminder, Cannabis 2.0 refers to the legalization of edibles, extracts, and topicals. Unlike last year at the onset of legalization – when there appeared to be a massive shortage of flower and supply dynamics were opaque – the provincial governments, licensed producers, and retailers have this time been vocal in setting expectations. They have been open about both the timeline to release products and their limited initial availability. That said, demand for the new products has been roaring. Most shops sell out their stocks immediately.

As part of the roll out of Cannabis 2.0, Health Canada has put strict regulations on the level of THC contained in each product, as well as on packaging and labeling. 

  1. These products cannot contain nicotine, caffeine, or alcohol; hence no infused coffee or alcoholic beverages will be available. 
  2. Edibles (food, candy, or beverages) cannot contain more than 10 milligrams of THC per container. For example, a package of the Grape Oasis Gummies shown below comes with five pieces that contain two milligrams of THC each. 
  3. Cannabis oil extracts are limited to 1,000 milligrams of THC per container.
  4. Topicals, such as lotions, cannot contain more than 1,000 milligrams of THC in a container.

Ontario was one of the few provinces that gave private brick and mortar stores a head start on receiving and selling Cannabis 2.0 products. Starting January 6, the 25 Ontario retailers were able to procure a limited range of products to sell ahead of the government-run Ontario Cannabis Store (OCS). Yesterday, was the first day that the OCS online store sold Cannabis 2.0 products and they were sold out of edibles within hours of their initial availability. In fact, there was a digital queue of thousands of orders showing the strong demand. Currently there is only one cannabis edible product listed on the OCS, but even that is out of stock.

The coming months will be interesting in this industry as the Canadian population becomes accustomed to the new product types. We will be tracking the sales growth associated with these new products, as well as how dry flower sales might be impacted.

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

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

CANADA CANNABIS SPOT INDEX — January 10, 2020

CANADA CANNABIS SPOT INDEX (CCSI) 

Published January 10, 2020

*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$6.51 per gram this week, down 1.8% from last week’s C$6.61 per gram. This week’s price equates to US$2,260 per pound at the current exchange rate. 

Let’s start by clarifying the definition of Cannabis 1.0 and Cannabis 2.0.

Cannabis 1.0 refers to the first phase of THC product legalization in Canada, which included the sale of dry flower (combustible products), cannabis oils, and cannabis plants and seeds. These products first became available for recreational use on October 17, 2018. At the outset, this new industry faced some turbulence in the form of supply shortages that quickly turned into oversupply. Today, with over 100 different licensed producers (LPs), the market is flooded with dry flower of different qualities and strengths. Consumption has not tracked with the growth in supply; most cannabis consumed in Canada is still bought from illicit sources due to the legal market’s inadequate accessibility and high prices.

Cannabis 2.0 refers to the legalization of edibles, extracts, and topicals. While these expanded product lines were formally permitted on the one-year anniversary of legalization in October 2019, a full product offering is not yet available in most provinces due to regulatory timelines and approval processes put in place by Health Canada. Cannabis cultivators are required to apply for an amended license, submit products for a 60-day review period, and pass strict quality assurance standards. When products meet these criteria, they may be introduced to the market; hence the earliest these products could be available would have been Dec 17, 2019.

As of this week, while most provinces are authorized to sell these products, retailers have very limited, if any, product selection.

Major Provinces Cannabis 2.0 roll out details:

Saskwetchwan & Manitoba: Limited product available as of late December, with more selection available at retail shops expected in late January.

Quebec: Limited products available as of January 1. 

Ontario: Limited selection available in stores starting January 6. Stores have been given a head start in selling new products ahead of the provincial online store due to limited availability initially. The online store is scheduled to start sales on January 16.

British Columbia: The BC online store had its first batch of four products available on December 20. Products were to arrive in stores by late December

Alberta: Products are expected to be available in mid-January.

Per-item prices for edibles are expected to range from $7 to $14, beverages are set to cost between $4 and $10 each, and vapes will be priced anywhere from $25 to $125 per unit. 

Cannabis 2.0 is expected to kick start additional demand in the legal market. Despite many stores not being stocked with the new product offerings currently, LPs are more prepared this time around relative to the start of Cannabis 1.0. The initial supply shortages are not expected to persist for as long as the shortages for dried flower and oils that occurred in late 2018 and early 2019. These products will fetch a hefty premium over dry cannabis, as this category does not compete directly with most cannabis products coming from the illicit market.

The variety of products should expand the current cannabis user base by bringing in novelty buyers, as well as attracting consumers away from the illicit market. We anticipate additional spending for Cannabis 2.0 products and forecast the boost in sales to reach 25% of the total spend in this market by Q4 2020.

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

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