Ontario is Canada’s biggest province. It was also terribly slow to roll out retail stores but is now rolling out eighty a month (834 stores at end of June 2021).  The OCS has put out six report cards: One from start of legalization to March 31, 2020, then quarterly Q2C2020, Q3C2020, Q4C2020, Q1C2021 (but it is for the full fiscal year), and Q2 C2021.

Ontario is 36% of Canada’s total recreational cannabis sales in the quarter ended June 30, 2021, and 39% of the population.   

Ontario 1.0 and 2.0 by Q:

Sales have increased to $307 million for the June 30, 2021 quarter from $270 million +13%. Stats Canada reported $339 million in Ontario sales for the same Q ended June 30, 2021, or 10% higher than Ontario reported.  Stats Canada reported March 31, 2021 quarterly sales at $278 million, or +3% higher than Ontario reported.  Not sure why Ontario and Stats Canada are that different in June 2021 Q.

OCS online sales was settling in to 15-16% of total sales until this Q when it dropped to 8%, likely covid related, as stores opened up from curb side only, as well as new stores opening. Also notable is that 2.0 product penetration over the last five Q’s ranges between 75-78% and seems to have stabilized.   

Let us peak at more detailed Q1 C2021 data before we start looking at more trends.

OCS Detail: Quarter ended June 30, 2021

Top 3 product segments are not surprising: Dried Flower 56% (-1% QoQ), Vapes 15% (0% QoQ) and Pre-Rolls 15% (+4% QoQ after sliding backwards last Q) aggregating 86% (86% previous two Qs) of the market.

In every segment except topicals, the OCS pricing per gram sold beats the retail stores.  The outliers:

• OCS is $7.75 and $7.04 gram less expensive than retail in Oils and Capsules, respectively.  Could be these are slow moving items at retail and therefore needs a bigger margin to support.
• Topicals at OCS are $4.42/gram more expensive than at retail.  Courier costs? But beverages, who would also have larger courier costs, are only $0.17/gram cheaper at OCS.

Flower is the dominant market share.  This is where you need to be most competitive to drive traffic. And we see this is where OCS lower cost benefit versus retail is the least across the top four segments at $1.04/gram better than retail.

The other thing that stands out is that with an 92% of cannabis purchased at retail stores pre rolls differ most from that base with 96% being purchased in a store, the highest retail advantage by segment.  Impulse/convenience buys the likely reason, as pricing wise online is 20% cheaper. In June 30, 2020, retail held 79% of pre roll sales. No surprise that as more stores open more pre rolls are sold and a higher percentage of overall pre rolls sales tilts towards retail.

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.

Pre rolls slightly overtook vapes this Q. Concentrates and Beverages also moved up one spot in segment rankings.

OCS Sales by Product Segment: % per Segment

Dried flower is 56% (-4% QoQ) of the overall Ontario market, followed by vapes at 15% (0% QoQ) and pre-rolls at 15% (+4%) reversing a 2% decrease last Q.

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 $43 million a quarter in Ontario revenue (+$7 million from Q), less if you remove distribution and retail margin (in order to determine what LP’s are generating).

OCS $ Delta QoQ by Product Segment:

Notable $ increases QoQ:

• Largest $ increases pre-rolls +$16 million and flower +$10 million
• Vapes +$4.2 million, Concentrates +$2.5 million and edibles +$2.3 million were the next biggest delta.
• Heading in reverse: none this Q.

OCS % Delta QoQ by Product Segment:

If you want the % growth QoQ you get a different look.

• Pre-rolls +54% after -2% last Q.
• Concentrates +37%
• Beverages +22% after -6% last Q.
• Edibles +20%
• Vapes +10%
• Dried flower +6%
• Seeds +82%… growing season was getting underway… but very small segment.

Segments that backed up:

• None