Supreme Cannabis Company Inc. (The) T.FIRE

FROM BNN

[jfogarty12]

September cannabis sales may point to possible plateau ahead
 

Sales of cannabis products continue to trend higher in Canada, but the pace is slowing down.

Canadian retailers sold $256.3 million worth of cannabis in September, Statistics Canada reported on Friday. That's up by just 1.8 per cent from the prior month, but more than double from the prior year, according to StatsCan. Taken on a per-day basis, cannabis sales edged up about 5 per cent in September from August.

"The Canadian market is featuring robust growth, but we continue to outline a negative approach overall for the Canadian producers with lofty valuations prevailing against uneven execution in a fragmented, difficult, and increasingly competitive category," said Stifel Analyst Andrew Carter in a report to clients on Friday

Much of that growth was led by Ontario, which saw a 5.3-per-cent sales increase to $77.9 million in September, while other big provinces such as Quebec and Alberta reported modest gains.

That alone could be a sign that cannabis sales may be plateauing in Canada. Despite the steady gain in the country's licensed cannabis operators, three provinces reported monthly sales declines in September, the first time that's happened in more than three months.

Omar Khan, who runs the cannabis practice for Hill + Knowlton Canada, said in an email that the sales figures show the legal sector is making slow but steady inroads against the illicit market.

He notes that pricing has gradually become more competitive, while Ontario - the country's largest consumer market - has more bricks-and-mortar stores open, and said many of the Cannabis 2.0 products are now of a higher quality than what’s available through illicit channels.

To keep sales from sagging further, Khan said that regulators should "keep this momentum going by exploring ways to boost margins for retailers, such as reducing the excise tax and letting retailers do home delivery in Ontario to give them a strong tool to further eat into illicit market share."

Further exasperating the problem is whether Canadians' homegrown cannabis harvests this fall will put a dent into dried flower sales. With most Canadians able to grow four cannabis plants at home for the second-straight year, there's a possibility that sales figures from October to December may face pressure from cannabis users who prefer to consume their own harvests rather than venture out in the middle of a pandemic to buy products from licensed producers.

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