Canada’s Cannabis Sales Continue Record Streak

Canadian adult-use retail sales grew to a record C$270 million in October with sequential growth at 5.1%, a slight uptick from September’s slowed growth of 2.1% MoM. October sales represent an increase of 109.4% YoY, C$2.06 billion in YTD sales, and annualized revenues of C$3.24 billion.

Ontario was the primary driver of growth, with a 31.1% share of October sales and a growing 7.6% MoM.  Alberta's province had more subdued growth; Alberta, with a 20.9% share of sales, grew 1.0% MoM. Quebec posted more robust growth on par with Ontario, with a 17.8% share of sales and 6.7% MoM growth. 

The Canadian market has shown robust, organic growth throughout the pandemic, especially given lockdowns and a dearth of tourism. 

However, for Canadian operators, the headwinds are numerous: there is an increasingly crowded competitive landscape with new entrants, an illicit market with relatively light regulation, and declining wholesale prices while providing a temporary benefit 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, impairment charges, and the paring down cultivation facilities.

Ontario will be going into a second-wave, province-wide lockdown starting December 26^th for a minimum of two weeks in northern regions of the province and four weeks in southern areas.  Toronto, the country’s largest city, will be under lockdown for four weeks. 

The province of 14.57 million makes up the largest share of adult-use cannabis sales, comprising close to a third of adult-use sales.  Cannabis retail stores will only be open for curbside pick-up or delivery. 

The Ontario Cannabis Store (OCS) has warned that the legal industry’s market share may be dampened with COVID-19 lockdowns since temporary store closures make the illicit market more attractive to consumers.