Replay | Canada Sales Trends

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July Themes:

July Looks Like June; The Summer Recovery is Slow:

• Sales for July were up slightly to $317 Million, 2.8% higher than June. Although sales were up, they have had relatively stagnant growth
• As a result, we expect 2021 sales to be $3.8 Billion Vs. our $3.85 Billion estimates last month, 45% higher than 2020s $2.6 Billion in sales
• Our estimate is approximately the same as last quarter with a slight revision down due to lower-than-expected growth

TLRY Hype:

• Currently, TLRY is a poorly capitalized roll-up run by a CEO that blew up that last company he ran. I documented the disaster that was HAIN and looked forward to documenting his antics at TLRY
• The promotional CEO stated that his target is to have $4.0 billion in revenues by 2024. Although TLRY reported a net income of $33.6 million or $0.18 per share for the quarter, TLRY's ability to generate net income was related to recognizing $121.5 million in net non-operating income
• So the operating loss for 4Q was ($73.7 million) versus ($75.8 million) last year, yet the company was rewarded with a shortcovering rally of 25% yesterday

CRON/CGC Earnings:

• CRON and CGC will report earnings on Friday. We expect both companies to report lackluster numbers, but the issues are less meaningful for CRON. CGC thought reopening would happen this summer, and it's not happening
• The company reaffirmed guidance for positive EBITDA in the back half of fiscal '22, but the bridge to get there was challenging to see, even with Ace Valley and supreme. The medium-term guidance of 40-50% growth also looks unachievable

Top Headlines:

• TLRY stock surges after reporting Fiscal Q4 Earnings
• Canda based craft soda company Jones Soda announced that it is issuing a $2 Million Convertible Debenture to develop cannabis and CBD lines
• Canada flower prices hit an all-time low at $29.60 for an 1/8^th
• TLRY must deal with declining craft beer category with SweetWater until US legalization arrives
• Health Canada beverage restrictions may be too strict. 6-Packs or larger cannot be sold leading to lower sales

Overall Market Sales and Projections:

• Sales for July were up slightly to $317 Million, 2.8% higher than June
• Although sales were up, they have had fairly stagnant growth
• We expect 2021 sales to be $3.8 Billion Vs. our $3.85 Billion estimate last month, 45% higher than 2020’s $2.6 Billion in sales
• Our estimate is approximately the same as last quarter with a slight revision down due to lower than expected growth

Market Share Trends:

• Smaller players continued to gain market share until this past month where the trend reversed
• Organigram and Pure Sunfarms led this market share gain
• We don’t know how Aurora is still a public company at this point
• Hard to make money in Canada given tax restrictions
• Tilray and CGC had fairly flat growth this past month
• Organigram had the highest sequential growth at 14% followed by High Park at 9% and Pure Sunfarms and Redecan at 5% sequential growth

Sales of Largest Provinces:

• Ontario showing pretty decent growth as Canada’s largest province by population
• Ontario: +101.8% YoY change and +5.7% MoM change
• Quebec: little more flat; +19.8% YoY change and +5.6% MoM change
• Alberta: +1.2% YoY change and -5.4% MoM change

Pricing Trends:

• Flower prices have been on a steady decline with more customers wanting value rather than premium
• Pre-rolled prices have been fairly flat with a slight downtrend as these remain very popular with significant growth
• Vapes also saw strong demand as prices sky rocketed then fell but have remained fairly flat since then
• Standard tier of the cannabis brands saw a large jump this past month taking share away from Premium brands

Subcategory Trends:

• Canada’s 2.0 sector is consistently growing, with largest increases in pre-rolled, concentrates, and edibles
• Flower has declined significantly; more of a fragmented market
• A lot of the flower sales are being picked up by pre-rolled
• Pre-rolled is the fastest growing subsector in Canada with 5.7% market share growth in one year. Tilray is the leader in the market with 32% of its sales coming from Pre-Rolled (Up 8% from two months ago)
• Vapes growth has been fairly flat YoY. Dosecann is the leader in the market which is owned by Auxly under ticker CBWTF
• Edibles have grown to the third largest 2.0 sector. Indiva is by far the market leader in edibles with 51% of all Canada sales coming from them
• Hexo is market leader of Concentrates and Beverages
• 2.0 Products have risen and became the sole focus for Dosecann and Westleaf Labs

Tilray Revenue Breakdown at Wholesale Price:

• The focus is on shifting revenues to the US
• The TLRY/APHA was done out of necessity. The old TLRY still has some baggage
• Flower and Pre-Rolled make up the majority of sales for the largest cannabis company in Canada
• Revenues have consistently been declining in the past eight months
• Canada Cannabis related revenues could be around USD $85- $95M

  

Canopy Growth Revenue Breakdown at Wholesale Price:

• CGC revenue has been consistently shrinking since March of 2021
• Beverages sector of CGC has been making up 6.9%of sales which is up from 6.5% last month
• Rolled are the main drivers of revenue

  

Pure Sunfarms Revenue Breakdown at Wholesale Price:

• These numbers are Pure Sunfarms only, not all of VFF
• Pure Sunfarms showed growth MoM with sales up 5% sequentially
• Pure Sunfarms, owned by VFF, has had accelerating sales since they were acquired
• Out of all the top 3 companies, Pure Sunfarms is the most Flower heavy in sales which has been declining in sales for Canada as a whole