Nick Laba | Mugglehead Magazine
June 30, 2021
A 420% expansion in store footprint has spiked sales and consumers care more about THC% than ever.
Ontarioâ€™s wholesaler and sole online seller of legal weed has posted the results for its second fiscal year, detailing the provincial entityâ€™s significant growth and a number of retail data points.
On Monday, the Ontario Cannabis Store posted its annual review for the fiscal year ended March 31, with a wealth of information not seen from other provinces.
The report lists figures for overall sales, velocity by THC percentage, illicit market competition, average price movement, market share and consumer feedback, among several other metrics.
Over the 12-month period, total sales jumped 118 per cent to $840.1 million â€” $707.6 million at private retail and $132.4 million from the OCSâ€™s website. The province sold an equivalent of 99,100,000 grams of weed.
After an initial snailâ€™s-pace rollout of stores, the province shed its lottery system at the end of 2019 and has sped up approvals several times since. Ontario had 42 private storefronts in December 2019, and had 572 by the end of the reporting period.
â€œMost central to the growth of the Ontario cannabis marketplace in 2020-21 has been the rapid expansion of our retail store network,â€ interim president and CEO David Lobo says in the report.
As a result, the provinceâ€™s share of national sales has climbed to 29 from 25 per cent. While speculation swirls on retail saturation in some areas, the fact that Ontarioâ€™s 14.6 million people make up almost 39 per cent of Canadaâ€™s population suggests thereâ€™s still room to grow.
Due to the increase in stores, the OCS says it now captures 44.1 per cent of provincial sales, up from just 19 per cent a year ago. A majority of sales are still from illicit sources.
With the rollout of cannabis 2.0 goods at the beginning of 2020, the product landscape has shifted dramatically. At the end of last fiscal year, dried flower made up 73 per cent of sales. Now, dried flower still has a commanding lead at 59 per cent.
Overall flower sales have increased almost 78 per cent to $487.9 million.
At the end of the previous fiscal year, vape sales made up just 4 per cent of sales. Now they make up 16 per cent of sales, growing from $14.8 million to $129.5 million.
Pre-rolls have a 12-per-cent share of sales, and edibles have just 4 per cent.
THC over everything
One of the most striking charts in the report shows just how important high-THC products are to Canadian consumers.
According to the OCS, sales velocity in private stores for products above 20-per-cent THC is 344 times that of products with 2â€“0.699-per-cent THC. Figures also suggest that high-CBD products are second-most in demand, as goods with 0â€“1.99-per-cent THC had sales velocity of 138 times.
â€œOur best-selling products are cannabis flower that is the best perceived value (by price or quantity) for the highest THC they can get in their budget,â€ says Jennawae McLean, whose privately owned store Calyx + Trichomes Cannabis racked up the most sales in the â€œEastâ€ region.
â€œOverall we are going to see the price of 20-per-cent-plus flower going down. People care less about brand or even strain and more about whether they feel theyâ€™re getting the best value for their money,â€ she tells Mugglehead. â€œOver 70 per cent of our flower sales are for items that are 20-per-cent plus, exclusively.â€
Among OCS.ca customers, â€œqualityâ€ (85 per cent of returning consumers) was rated the most important product attribute, followed by â€œpotencyâ€ (76 per cent) and â€œpriceâ€ (72 per cent).
â€˜At this point 20 per cent is even considered low for some people who are spoiled by choice,â€™ says Calyx + Trichomes co-owner Jennawae McLean.
McLean predicts more large-format offerings above 20-per-cent THC will come to market as well.
The Ontario â€œhalf quarterâ€ 3.5-gram flower format is still the most popular at 66 per cent in stores, but has waned from 73 per cent at the beginning of the fiscal year. The 7-gram format has grown the most, to 12 from 7 per cent, while single-gram offerings have slid the most to 10 from 17 per cent.
For vapes, 510 thread cartridges have jumped to 84 per cent from 67 per cent of store-bought vapes. Disposable pens have dropped to 9 per cent from 23 per cent.
Gummies have come to dominate the edibles category â€” rising to 54 per cent from 28 in stores â€” overtaking chocolate, which melted to 19 from 46 per cent.
B.C.â€™s Pure Sunfarms, owned by veggie grower Village Farms International, Inc. (TSX: VFF) (Nasdaq: VFF), has risen to the top spot in flower sales, taking 15-per-cent market share. Other brands including Redecan (12 per cent), Good Supply (11 per cent), Daily Special (11 per cent) and Edison Cannabis Co. (6 per cent) trail behind.
Redecan, recently bought by Hexo Corp. (TSX: HEXO) (NYSE: HEXO), leads the vape category with 16-per-cent market share, with Good Supply, owned by Tilray Inc. (TSX: TLRY) (Nasdaq: TLRY), in second with 10 per cent.
Ontario cannabis retail undergoes massive growth spurt, far from maturity
Average prices for dried flower have dropped 10 per cent to $8.87 per gram in stores, and almost 13 per cent to $6.17 at OCS.ca. Surprisingly, the OCS reports illicit market prices have jumped 20 per cent to $9.59 per gram. The OCS says it sources pricing data from mail-order websites.
Mugglehead asked for comment on the illicit market prices and other items of the report, but the OCS didnâ€™t get back by press time.
Prices for many extract products have dropped as well. The cost of shatter per dried-flower gram equivalent fell 22 per cent to $15.73, and oil capsules dropped 23 per cent to $27.09.
Access to stores has improved significantly over the year, with store count jumping from 110 to 572. Average distance to a retail storefront has shrunk to 6.5 kilometres from 19 kilometres.
Tokyo Smoke leads the province in number of locations with 27, followed by Fire & Flower (26), Sessions Cannabis (25) and Spiritleaf (25).
Out of five regions, the West ($219.7 million) and East ($213.1 million) made up the bulk of sales. Revenue-per-location was higher in the East (123 stores) compared to the West (188 stores) and the Greater Toronto Area (179 stores).
Legacy retail veteran McLean describes topping her region as achieving a huge personal goal.
â€œI see our number-one status as a win for independents overall,â€ she says. â€œWe did this with our own vision, our own drive and our own investment.â€