Ontario is Canada’s biggest province. It was also terribly slow to roll out retail stores but is now rolling out eighty a month. The OCS has put out five report cards: One from start of legalization to March 31, 2020, then Q2C2020, Q3C2020, Q4C2020 and now Q1C2021 but it is for the full fiscal year.
Ontario is 33% of Canada’s total recreational cannabis sales in the latest Q and 39% of the population. This suggest further growth is available.
Ontario 1.0 and 2.0 by Q:
OCS online sales are settling in to 15-16% of total sales. Also notable is that 2.0 product penetration over the last four Q’s ranges between 76-78% and seems to have stabilized.
Let us peak at more detailed Q1 C2021 data before we start looking at more trends.
Note: We distilled this data as we subtracted the previous three quarters from the year end report. So, we deducted the prior three quarterly reports from this annual report… And there are errors in OCS calculation of grams sold for oils and capsules, either on the 12-month March 2021 report or one of the quarterly reports, as Oils would be selling negative 744,000 grams in Q1 C2021 based on the cumulative previous three quarters. Capsules also looks very off: Q1C2021 by deduction 65,600 grams sold versus prior three quarters of 103,000 grams, 124,000 grams and 138,400 grams. The dollar amounts look reasonable on a quarterly progression for oils and capsules. Where the deducted data is questionable, we marked it in red.
OCS Detail: Quarter ended March 31, 2021
Top 3 product segments are not surprising: Dried Flower 57% (+3% QoQ), Vapes 15% (-1%) and Pre-Rolls 11% (-2%) aggregating 86% (86% last Q) of the market.
In the quarter ended March 31, 2021, OCS is cheaper than retail in three of top four segments.
Until this Q, in every segment except topicals, the OCS pricing per gram sold beats the retail stores. This Q that changed:
- OCS had better pricing than retail in: vapes ($2.37/g), pre-rolls ($4.90/g), edibles ($0.39/g), concentrates ($1.36/g), beverages ($0.32/g) and seeds ($0.66/g)
- Retail stores had better pricing than OCS in: flower ($3.56/g), oils (data is questionable $12.86/g), capsules (data is questionable $651.58/g) and topicals ($2.31/g).
What we said last Q: This suggests that retail stores will likely see pricing pressure as neighborhoods start to see multiple store fronts.
This Q: That seems to have been the case. Flower is the dominant market share. This is where you need to be most competitive to drive traffic.
QoQ online increased to 16% of mix versus 12% last Q, likely due to covid restrictions. The biggest deviation from that average is seeds 38% OCS, oils 26% OCS, capsules 27% OCS, and topicals 22% OCS. Seeds makes sense as you can get more info on OCS than likely in a store and selection is likely better on OCS. Topicals are again an item that likely has better selection on OCS than in store. Oils and capsules are 1.0 offerings with likely a dedicated repeat consumer. Although capsules and oils are cheaper at the retail store front and are the two items that have the most cost differential from OCS.
The other thing that stands out is that with an 84% of cannabis purchased at retail stores pre rolls differ most from that base with 95% being purchased in a store. Impulse/convenience buys the likely reason, as pricing wise online is 100% cheaper. I am wondering if there is not a problem with data here again.
Pricing Delta’s Over Time: Retail versus OCS
Interestingly, dried flower flipped to Retail cheaper than OCS in March 2021 Q, after OCS being cheaper the prior three quarters. Again, this is your biggest traffic driver at retail. What is odd is the amount it swung: from -$1.78/gram to $3.56/gram, that is a swing of $5.34/gram. Again, wondering about OCS data integrity.
Pre rolls are way cheaper on OCS but the convenience factor shines through here.
OCS Cannabis Sales by Product Segment: Including Dried Flower
Dried flower is the behemoth of the industry. So much so, two charts down we will remove them and look at the remaining segments without the skewing.
OCS Sales by Product Segment: % per Segment
Dried flower is 60% (+3% QoQ) of the overall Ontario market, followed by vapes at 15% (-1%) and pre-rolls at 11% (-2%). We will look at QoQ deltas below.
OCS Sales by Product Segment: Excluding Dried Flower
This gives us a cleaner view of the segments as we have removed dried flower. If you were to further remove vapes and pre rolls there are a lot of companies slinging different formats competing for $36 million a quarter in Ontario revenue (same as last Q), less if you remove distribution and retail margin.
OCS $ Delta QoQ by Product Segment:
Notable $ increases QoQ:
- Largest $ increases Vapes +$19 million and vapes +$2.3 million
- Concentrates were the next biggest delta at +$0.9 million
- Heading in reverse: Oils -$1.2 million, Pre Rolls -$1.2 million, Beverages -$0.2 million
OCS % Delta QoQ by Product Segment:
If you want the % growth QoQ you get a different look Q1C2021 vs Q4C2020.
- Dried flower +13%
- Concentrates +16%
- Topicals +12%
- Seeds +118%… growing season.
Segments that backed up:
- Oils -14%
- Beverages -6%
- Prerolls -4%