Sales growth in Canada appears to be stagnating for the cannabis sector. Recently, Statistics Canada released August retail sales reporting that cannabis sales increased from July by 0.2% to CA$393.7 million ($288 million). However, in August, sales increased 13.0% from one year earlier, down from July’s 17.2% growth rate.
What Does Data Say? An Expert’s Analysis
According to Cantor Fitzgerald’s Pablo Zuanic, the Canadian adult-use cannabis market “continued to decelerate in the third Quarter of 2022 when taking Year-Over-Year (YoY) trends, with Quarter on Quarter (QoQ) sales up 3%.”
As Hifyre IQ reported, even though 13% YoY growth “is better than the flat trends we are seeing in the US market, Canadian adult-use per capita lags key US rec states by a wide margin.”
“We think structural changes are needed for the market to recover the growth momentum. Prices continue to decline, but less than in the past and we see signs of stabilization,” said Zuanic, who also noted that “companies gaining share tend to enjoy higher average prices,” attributing this to “a more discerning consumer and to companies realizing the race to the bottom is not sustainable.”
At the category level, the analyst noted that “prerolls are the best-performing product growing 46% YoY.” Among the more significant license producers (LPs), in 3Q22 “only Organigram Holdings OGI and Village Farms International Farms VFF grew above the average market pace in QoQ terms, while Canopy Growth CGC and Auxly XLY CBWTF were the worst performers,” he added.
Market growth for calendar 3Q22
According to Zuanic, sales “were up 13% YoY in 3Q22, which we consider a robust pace, even though it implies ongoing deceleration in YoY growth terms.” Moreover, in QoQ terms, Hifyre indicated that “sales in Canada are marginally up sequentially after reversing the negative seq growth trend for the first time back in 1Q22,” reads the report.
Weed sales for 3Q22 totaled $1.16 billion, the highest quarterly sales. Although July sales were the highest individual monthly sales to date, since then, sales have been declining sequentially on a monthly basis.
Moreover, the report analyzed sales by provinces and found that Ontario continues leading the country in total marijuana sales, posting quarterly sales of $459 million followed by Alberta at $202 M, British Columbia at $177 million and Quebec at $149 million, which remains among the most significant in the country.
As for categories, the trend of “smaller” categories showing a gaining share from “flower sales has continued into 3Q22, with flower share falling 270bps seq to 40% of total cannabis sales,” noted Zuanic.
Market Share For Licensed Producers
According to the expert, despite the significant amount of mergers and acquisitions (M&A) and attempted consolidation amongst the Canadian LPs, as time has progressed, sales have become more and more fragmented.
“In 3Q22 the top 5 LPs in terms of $ share accounted for 37% of total cannabis sales, down seq from 39% (51% in 3Q21), and the top 10 accounted for 56% of total cannabis sales, down seq from 58% (70% in 2Q21),” Zuanic noted.
Based on a current company structure, the leading LPs based on the share of $ sales are:
- Tilray Brands Inc TLRY 8.2% in 3Q22 (15.0% in 3Q21);
- OrganiGram Holdings OGI 8.2% (7.3%);
- Hexo Corp. HEXO 8.2%, (12.1%);
- Village Farms Inc VFF 6.3% (6.9%);
- Canopy Growth Corp CGC 5.8% (10.0%);
- Auxly Cannabis Group Inc. XLY CBWTF 4.8% (5.6%);
- Decibel Cannabis Company Inc. DBCCF DB 4.5% (2.8%);
- Cronos Group Inc. CRON 4.3% (4.2%);
- Bzam Cannabis Holdings (“BZAM“) 3.1% (1.6%); and
- Valens Company Inc VLNS2.7% (1.9%).
Additionally, flower prices “continue to decrease in Canada, dropping 4.3% seq to an average price of C$5.12/g, compared to $5.35/g in 2Q22, and down 14% YoY compared to 3Q21 $5.97/g,” according to the report.
Finally, individual LP quarterly Color is described by the report saying: “Among the larger companies, in 3Q22 (Sept calendar quarter) when the overall market was up 3% seq, Tilray was +3%; Hexo (now part of Tilray) -9%; Organigram +4%; Canopy Growth -11%; VFF’s Pure Sunfarms unit +7%; Auxly -9%; and Cronos +3%.”
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