Canadian Cannabis Sales Continue To Accelerate

There were more strong numbers for Canada’s legal cannabis industry in August. According to Statistics Canada, the legal cannabis industry notched CAD$127.3 million in sales for the month of August.
 

• This is an 18.6% month-over-month gain
• It’s the second consecutive month that retail sales have topped CAD$100 million
• With the exception of June, Canada’s cannabis industry has recorded double-digit increases in sales every month since March
• Ontario and Quebec are now leading the way in cannabis sales

As Canada reaches the end of Year 1 of full cannabis legalization, August cannabis sales reflected one of the largest gains in sales (in percentage terms) since initial legalization of recreational cannabis in October 2018.

Cannabis sales are not merely increasing at a very robust rate (double-digit monthly gains), these increases in sales are starting to accelerate.

June: +6.2%
July: +12.5%
August: +18.6%

This is significant for three important reasons.

First, it reflects the fact that Canada’s provinces are now becoming more efficient in licensing additional retail stores. This has been the single, greatest problem for the legal cannabis industry since Canada legalized recreational cannabis in 2018.

Second, Canada’s largest provinces (by population) are now finally leading the way in cannabis sales. Ontario (population 14 million) topped provincial sales at CAD$33.8 million. Quebec (population 8 million) was second at CAD$26.8 million.

In proportionate terms, Quebec sales roughly match the provincial average. Quebec represents 21.6% percent of the population and generated 21.1% of cannabis sales.

Ontario is still a laggard. It represents 38.3% of Canada’s total population but (in August) generated only 26.6% of sales.

The problem for both of these provinces continues to be lack of stores. Quebec has 22 cannabis stores. Ontario, with roughly a 70% larger population, has only 25 stores. It was also the last province to start opening cannabis stores, in April of this year.

In comparison, Alberta – Canada’s cannabis leader – has now topped three hundred cannabis stores (301). This is for a population of only 4 million people.

British Columbia (population 5 million), which was also slow to get into the game, now has 85 cannabis stores. But its population hub, Greater Vancouver (2.4 million) has only 14 of these stores.

Third, Phase 2 of legalization brings not only a wide array of new products for consumers, but also value-added (higher margin) products for the cannabis industry. This is expected to add roughly 3 million new consumers to the legal market (many of them female), which translates into roughly a 50% increase in the total consumer base.

The good news is that Canada’s legal cannabis industry is now sustaining strong month-over-month gains in sales, despite the lack of retail stores in most of its largest population centers.

The even better news is that this means there is plenty of untapped demand to sustain this rate of growth as these larger centers gradually get proportionate access to retail storefronts. Put another way, Canada’s black market still controls roughly 85% of revenues. That equates to the potential for a six-fold increase in sales/revenues all by itself.

Phase 2 of legalization is now here and products are due to start hitting store shelves in December. This means Canada’s legal cannabis industry is poised for a strong finish to 2019 – and a much stronger year for the industry in 2020.