Another record month for adult-use sales in Canada (APHA, CGC, CRON)
Canadian adult-use retail sales grew to a record C$244.9 million in August, a 94.4% YoY increase, and a 5.2% MoM increase. August’s sales suggest annualized revenues of C$2.9 billion. The three provinces with the strongest sales were: Ontario, with a 27.3% share of August sales, which grew 10.9% MoM; Alberta, with a 21.5% share of August sales, which grew 1.0% MoM; Quebec, with an 18.2% share of August sales, grew 1.7% MoM.
The Canadian marijuana market is showing robust, organic growth. However, for Canadian operators, the headwinds are numerous: there is an increasingly crowded competitive landscape with new entrants, an illicit market with light regulation, and declining wholesale prices, while a temporary boon to margins makes for an unsustainable environment for positive margin growth. Canadian LPs are still grappling with the country’s oversupply issue, which has led to inventory write-downs and impairment charges.
Cannabis lobbying pulls back spending
Major cannabis industry groups have cut back on lobbying efforts amidst the pandemic. The National Cannabis Industry Association spent just $170,000 as of 3Q20 compared to spending over half a million in 2019. The Cannabis Trade Federation cut its spending from close to $1 million in 2019 to only $415,000 as of 3Q20. The pullback in federal lobbying may be due to organizations shifting their funds towards state races and ballot measures and the fact that lawmakers prioritize COVID-related measures as opposed to cannabis bills.
Newly legal markets have higher wholesale prices than mature states.
In Cannabis Benchmark’s weekly report ending October 16th, east coast states with recently legalized adult-use markets continue to be priced higher than western states with more mature markets. Illinois and Massachusetts, which have been experiencing high demand, had the highest wholesale costs for October at $3,930 and $3,576, respectively. Meanwhile, states with outdoor grow operations led the bottom with California and Colorado at $1,540 and $1,618, respectively.