Canada’s Cannabis Retail Market 2020 has been a period of strong growth for the Canadian cannabis retail market and we are impressed with how the sector was able to perform during some of the darkest months of the COVID-19 pandemic.
We believe the two primary growth drivers for the Canadian cannabis retail market were the launch of cannabis 2.0 products (i.e. edibles, vape pens, concentrates, topicals, and more) in late 2019 and an increasing number of retail cannabis outlets. These are trends that we expect to become more significant in 2021 and believe the sector is flying under the radar.
One of the reasons we are bullish on the Canadian cannabis retail market as we head into 2021 is related to how businesses were able to adapt and execute on a curbside/pickup model when the pandemic started. We believe the pandemic stress tested the Canadian cannabis retail market and are of the opinion that the vertical passed the test with flying colors.
In 2021, we expect the Canadian cannabis retail trend to become even more significant and forecast continued growth. The basis of our thesis is supported by the belief that we will see more consumers purchasing cannabis products from licensed outlets. We also expect to see a substantial increase in the number of licensed Canadian cannabis outlets that are open, which should prove to be a substantial catalyst for growth.
The landscape of the Canadian cannabis market is much different when compared to that in the US. Health Canada put high barriers in place for the cannabis retail sector and in doing so created a system that will limit the amount of saturation in the vertical over the long-term.
With 2020 coming to a close tomorrow, we want to provide an update on the Canadian cannabis retail market as we head into 2021. This is the first part of a two part series that covers the Canadian cannabis industry which we believe is flying under the radar and is in the early innings of a major growth cycle.
Currently, Health Canada has only reported sales data that is as recent as September and we expect to receive October data in the near future. In September, Health Canada reported that more than 10 million cannabis products (medical and recreational) were sold across Canada and we consider this number to be a major milestone.
Of the 10 million products that were sold, almost 30% of them were cannabis extracts and edibles. During that month, there were almost 100,000 more sales of cannabis edible products than cannabis extracts and this is a trend that we are closely following.
When compared to cannabis flower, the margins that are associated with cannabis edible products and cannabis extracts are much more attractive. We are favorable on the trend that is associated with the Canadian cannabis retail market from a revenue and product makeup standpoint.
We expect 2021 to be a banner year for the Canadian cannabis retail market and believe that many pure play cannabis retail operators are trading at a huge discount to Canadian Licensed Producers (LPs) that also own retail outlets.