CANADA CANNABIS SPOT INDEX — December 28, 2018

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 28, 2018

 

The CCSI declined 6% this week to C$6.63 per gram, from C$7.08 per gram last week, and is down 15% over the past two weeks. C$6.63 per gram equates to US$2,212 per pound, which places the CCSI at 188% of the U.S. Cannabis Spot Index, currently at US$1,175 per pound.

Wholesale prices in Canada headed lower with supply shortages; howevever, not as extreme as reported in November when AGLC had only 20% of their product delivered and Quebec closed retail locations due to insufficient supply. 

 

Supply shortages still exist, yet inventory on provincial online sites is not as limited as it was in November. AGLC showing nearly 80% of dried flower products available on the online site. Experienced consumers, frustrated with limited quantity, could be turning back to the black market while supply shortages get resolved. One of the contributing factors to the initial supply shortage was incorrect packaging and labeling. Reports from the field indicate that some LPs have been able to resolve these issues. 

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

21 December Copyright © 2018 New Leaf Data Services, LLC.  All rights reserved

CANADA CANNABIS SPOT INDEX — December 21, 2018

CANADA CANNABIS SPOT INDEX (CCSI) 

Published December 21, 2018
The CCSI declined 9% this week to C$7.08 per gram, from C$7.79 per gram last week, and is down 14% over the past two weeks. These declines may suggest that broad media coverage of shortages across the country, as well as actions by the provincial regulators, are tempering supply expectations from end-use consumers. C$7.08 per gram equates to US$2,387 per pound, which places the CCSI at 208% of the U.S. Spot Index, currently at US$1,147 per pound.
 
Activity across the country was notable as regulators moved to produce a more equitable approach to accessing supplies, while tempering demand, including moving to a lottery system in Alberta for purchase from the Provincial supplier, temporarily shutting government run stores in Quebec to provide time to re-stock shelves, and moving to a lottery system in Ontario for retail dispensary licenses (which is dramatically lower than the up to 1,000 brick and mortar stores expected to just 25 in the spring of 2019).

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CANADA CANNABIS SPOT INDEX — December 18, 2018

CANADA CANNABIS SPOT INDEX (CCSI) 

Cannabis Benchmarks announces the launch of the first benchmark price to track wholesale adult-use cannabis prices in Canada, as governed by the The Cannabis Act. Sales to consumers began on October 17, 2018. The Canada Cannabis Spot Index (CCSI) is the assessed price paid by retailers to the Provincial body controlling supplies.

The CCSI was launched to assess prices at the national level. Provincial indices for Ontario, Quebec, Alberta and British Columbia will be introduced in the first quarter of 2019. Cannabis Benchmarks assesses the average wholesale price that an online or retail location pays for dried cannabis flower from Licensed Producers (LPs) under supply agreements with the provinces. Cannabis Benchmarks’ methodology includes working directly with market participants from both the supply and demand sides, including analysis of public and private data, such as StatsCan and LP company filings, to assess the average wholesale price paid each week.

For the week ending December 14th, the CCSI was up 0.8% to C$7.79/gram, equating to US$2,678/pound.

The CCSI has been quite volatile over the past nine weeks since legalization. Cannabis Benchmarks has recorded wholesale prices averaging C$7.50/gram or US$2,576/pound* over this time frame. The price range was C$6.66/gram to C$8.23/gram.

The structure of the Canadian cannabis market is fundamentally different than those of state markets in the U.S. While the U.S. market is a free market with wholesale prices established between buyers and sellers, the Canadian government exerts more control over the market, with wholesale prices and distribution set in large part by the provinces. Each province has a similar structure with a provincially-appointed government agency working directly with LPs to procure the region’s supply.

      In Quebec, New Brunswick, Nova Scotia and Prince Edward Island, cannabis is sold through government owned retail stores and online sites with both wholesale and retail prices set by the provinces.

      In Ontario, cannabis is currently available only through the Ontario Cannabis Store, a government controlled online store, with privately owned retail stores opening in April, 2019; however, the Ontario Cannabis Store will still be the exclusive wholesaler to these retail stores.

      In Alberta, although cannabis is distributed through privately owned retail stores that can set their own prices, the wholesale price is established by the Alberta Gaming and Liquor Commission through supply agreements with the LPs.

      British Columbia has a hybrid system with both government owned and privately owned retail stores, supplied by the British Columbia Liquor Distribution Branch.

      Manitoba, Newfoundland and Labrador, and Saskatchewan allow privately owned retail stores, regulated by the provincial liquor control commission and supplied through supply agreements with the LPs.

With the exception of Manitoba, all the provinces also run government owned online websites. Although the provinces have a large role in establishing both wholesale and retail pricing, there is still a wide range of prices across the country.

Wholesale price movement should be expected when implementing such vast legislation on a nation-wide scale. The recent weekly movement in prices was predominantly driven by supply shortfalls at the outset, resulting in retailers looking for any inventory to satisfy buyers. Despite supply shortfalls, which could have been used as an opportunity to capture higher margins, our research and data indicate that short-term windfalls by retailers were not pursued. Rather, retailers seemed disposed to securing new customers and creating a positive experience in the legal markets.


*At an average exchange 1.32 Canadian dollars per U.S. dollar

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

Copyright © 2018 New Leaf Data Services, LLC.  All rights reserved