How to understand legal cannabis market penetration and store counts in Ontario

The CCSI was assessed at C$5.52 per gram this week, up 1.0% from last week’s C$5.47 per gram. This week’s price equates to US$2,014 per pound at the current exchange rate.

Each week, Business of Cannabis delivers a series of insights from our partners at Cannabis Benchmarks®.

Last week the Ontario Cannabis Store (OCS), the Provincial wholesaler and e-commerce provider, released their annual Cannabis Insights report for the period from January through March 2021.

In today’s report, Cannabis Benchmarks focuses specifically on the market share of the legal markets. The latest report shows the legal cannabis market in Ontario makes up 44% of total cannabis sales. Meanwhile the average price of legal dried flower, including sales taxes, dropped by 3% from the previous quarter to C$6.17 per gram.

While the legal market has continued to build market share over the past two years, growth slowed significantly during the past quarter. Even though the legal cannabis industry appears to be moving in the right direction, by lowering cannabis prices and providing better access with more retail stores, illicit cannabis channels have maintained a strong presence. Up until this last OCS report, the growth of the legal cannabis sector has had a very strong correlation to the number of storefronts open for business. The chart below, which combines the average number of stores in each province in the past nine quarters as tracked by Cannabis Benchmarks, versus the share of the legal cannabis market, shows the legal cannabis market share seems to have plateaued despite an increase in store counts.

The slowdown in market penetration is a cause for concern for the legal cannabis sector. For the government, this change could undermine its goal of legalizing cannabis to stamp out the illicit market altogether and to generate taxable legal sales. For the Canadian LPs and other market participants, the slowdown will impact projected revenues from domestic sales, as the export market is also facing growing competition from producers in Europe, Africa, and Colombia.

Source: Canada Cannabis Spot IndexCannabis Benchmarks

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