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ing trends in Canada's consumer market; RBC's market update

 

 

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Can't see this email properly? View Online Reader Note: Cannabis Canada Weekly will be taking a brief hiatus until August 21  Older, higher and fewer newbies: Four new trends in Canada's cannabis market       As Canada's cannabis market reaches another level of maturity, industry consultancy Brightfield Group sees a significant shift in how Canadian consumers engage with the product. Product usage and demographic profiles have shifted considerably since Canada legalized cannabis, offering producers and retailers alike a different perspective in what items could be a success or what could be deemed a failure. Here's a look at four trends observed by Brightfield in the Canadian market following a quarterly survey of 3,000 adult cannabis users released by the consultancy on Friday:  More older users: While there was a presumption during the early days of legalization that older Canadians were a mostly "canna-curious" group, and that most sales would occur from a younger demographic, Brightfield found that the average consumer age has increased over the past year. Roughly one-quarter of cannabis users are under the age of 30 in the first quarter of 2021, down from 33 per cent observed a year earlier. And a majority of users are more likely to be male than female, a trend which has strengthened over the past year, Brightfield found.  High demand for high THC: Canadian cannabis users who prefer their products with THC were found to be the most frequent consumers, with 48 per cent of those so-called "THC-dominant consumers" using marijuana at least once daily, while 28 per cent of them said they consume multiple times a day. Those same users are also seen to consume highly potent THC dried flower products, while spending on products with greater than 35 milligrams of cannabinoids rose three per cent in the first quarter of the year from the prior quarter.  Fewer newbies: The amount of new people entering the cannabis market is trending down, a sign that the total consumer base may be plateauing in the Canadian market. Brightfield found that only 25 per cent of Canadian consumers who have used cannabis for less than two years consumed dried flower in the first quarter of the year, while 34 per cent consumed edibles. That's down from 35 per cent and 43 per cent from the prior three-month period, respectively, Brightfield found.  Illicit market shift: Ontario cannabis consumers are increasingly moving away from the illicit market and engaging more with legal retail options as they become more widely available and convenient, according to Brightfield's data. Nearly one-quarter of Ontario survey respondents said they obtained their cannabis from an "informal dealer or delivery" in the first quarter of the year, while 34.5 per cent said they get their pot from a "friend". That's down from 38.4 per cent and 48.2 per cent, respectively. "This confirms that Ontario’s move to provide greater access is paying dividends by driving illicit market consumers toward legal channels, rather than keeping them incentivized to stay on the legacy market," said Jamie Schau, senior insights manager at Brightfield Group.     THIS WEEK'S TOP STORIES Houseplant, Canopy Growth end partnership after three years  Seth Rogen's Houseplant brand and its Canadian partner Canopy Growth Corp. have amicably parted ways, according to a release from both companies. The two began working together in 2018 with a number of flower and infused beverage offerings, the latter of which found some success in the nascent market segment. Houseplant launched about a year ago in the U.S. market but Canopy was not a partner in that venture. It is unclear how Houseplant will continue to operate in the Canadian market, but a statement from Rogen said the brand plans to "evolve" in Canada.   Tilray Q4 results help drive shares higher; CEO exploring U.S. options  Shares in Canadian cannabis giant Tilray Inc. soared after it reported its fiscal fourth-quarter results this week, reporting US$142.2 million in revenue and US$12.3 million in adjusted EBITDA. Analysts expected Tilray to report US$150 million in revenue in its fourth quarter while posting US$5.8 million in EBITDA. Canadian cannabis sales were up 36 per cent in the quarter to US$53.7 million. Tilray CEO Irwin Simon told BNN Bloomberg that he's lobbying federal and provincial regulators to find a better way to advertise Tilray's cannabis products to Canadians. Simon also commented on Tilray's plans to head south of the border, with an expectation the company is exploring acquisitions of a U.S. cannabis operator through an option deal ahead of U.S. lawmakers passing a legalization bill.  CannTrust trial delayed to September as lawyers request more time The high-profile court case surrounding three former executives of CannTrust Holdings over accusations of securities charges related to an unlicensed growing scandal saw their case delayed to September. A lawyer representing one of the accused executives told a virtual court session that recently acquired disclosures would "need some time to digest what's been provided". CannTrust's former chief executive Peter Aceto, former vice-chairman Mark Litwin, and former chairman Eric Paul face several charges including fraud and making false or misleading statements. The court case was adjourned to Sept. 20.     Pre-roll sales up in first five months of 2021 as pandemic nixes joint sharing Pre-roll joints are seeing a surge in sales as more people opt to minimize the sharing of cannabis amid the COVID-19 pandemic, according to a report commissioned by Canopy Growth. The report - released in conjunction with a new Canopy pre-roll product launch - found that pre-roll sales were up 48 per cent across the entire market between January and May 2021. A total of $97 million of pre-rolls were sold in the fiscal year ending March 2021, up from $42.6 million, according to the Ontario Cannabis Store.    Canadian cannabis industry contributed north of $18B to GDP in May: StatsCan Statistics Canada said Friday that the country's cannabis industry - which includes the illicit market - contributed $18.3 billion to the country's economy in May, crossing the $18 billion mark for the first time. The legal industry represented about $12.6 billion of that figure while the illicit segment continued its gradual decline and influence on the broader market, accounting for $3.79 billion in economic activity. Cannabis producers accounted for the bulk of the industry's GDP contribution with $16.4 billion, while retailers accounted for about $2 billion.      Analyst Call of the Week - RBC Capital Markets on Canadian market outlook   While the Canadian cannabis market continues to grow, RBC Capital Markets Analyst Douglas Miehm notes that the valuations of many Canadian licensed producers are down materially from their highs last seen in February during frenzied speculation about the U.S. moving closer to legalizing cannabis. He sees that decline occurring from weaker-than-expected results from several cannabis companies as well as how COVID-19 restrictions and changes to how some provincial wholesalers manage their inventory. Overall, share prices of a basket of Canadian cannabis companies are still up roughly 32 per cent since the beginning of the year, Miehm noted. "On a fundamental level, we believe valuations can be supported by a recovery from COVID-19 leading to a resumption in growth within the Canadian cannabis market," Miehm said in a report to clients this week. "Additionally, increased balance sheet strength, and cost reduction initiatives should support further valuation upside." Miehm forecasts Canada's cannabis sales to hit $3.8 billion this year, trimming a previous estimate of $3.9 billion, while the country should see 2,700 licensed cannabis retailers by the end of the year  CANNABIS SPOT PRICE: $5.39 per gram — This week's price is down 2.2 per cent from the prior week, according to the Cannabis Benchmark’s Canada Cannabis Spot Index. This equates to US$1,953 per pound at current exchange rates.