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 four report cards: One from start of legalization to March 31, 2020, then Q2, Q3 and now Q4C2020.
Ontario is 23% 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:
For the second Q in a row OCS online sales were 15% of overall Ontario sales.
Also notable is that 2.0 product penetration over the last three Q’s is 78%, 77% and 75% and seems to have stabilized.
Let us peak at more detailed Q4 C2020 data before we start looking at more trends.
OCS Detail: Quarter ended December 31, 2020
Top 3 product segments are not surprising: Dried Flower 57% (-3% QoQ), Vapes 16% (+1%) and Pre-Rolls 13% (+1%) aggregating 86% (87% last Q) of the market. In every segment, except topicals, the OCS pricing per gram sold beats the retail stores. The closest is beverages at only a $0.14/gram differential. This is likely due to the “free shipping” that OCS offers. They likely need a higher per unit price to cover that “free” shipping.
Retail Store owners must like competing with their supplier (snark). This suggests that retail stores will likely see pricing pressure as neighborhoods start to see multiple store fronts. I would also extend that to the publicly traded retailers FAF, HITI and ISH, and I would suggest investors pay close attention to their retail gross margins on cannabis sales.
The other thing that stands out is that with an 88% 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 +30% cheaper.
Edibles are the second largest 2.0 seller but rings in at 4% (no change QoQ) of the market at $11 million in sales (+$3 million). The much celebrated (by investors anyway) beverage category rings in at 2% (no change QoQ) of sales with $4.2 million in sales (+$1 million QoQ)
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 57% (-3% QoQ) of the overall Ontario market, followed by vapes at 16% (+1%) and pre-rolls at 13% (+1%). 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 revenue, less if you remove distribution and retail margin.
OCS $ Delta QoQ by Product Segment:
As we do not have a clean view of the Q1 C2020, the deltas for Q2 to Q3 and Q3 to Q4 are the ones worth looking at.
Notable $ increases QoQ:
- Largest $ increases Vapes +$8.6 million and pre rolls +$6.9 million
- Edibles were the next biggest delta at +$3.1 million
- Followed by concentrates at +$3.0 million and oils at +$1.4 million
- Beverages at +$1.0 million
OCS % Delta QoQ by Product Segment:
If you want the % growth QoQ you get a different look Q4 vs Q3.
- Dried flower +18%
- Vapes +28%
- Prerolls +28%
- Concentrates, working off a very small base, +101%
- Beverages +32%
- Edibles +38%
Aggregated Top 5 Ontario Online Brands and Top 5 Retail Store Brands: Dried Flower
One thing I want to clarify with the next three slides is that the OCS Report card lists top 5 brands by OCS and top 5 by Retail Stores. As sales tilts heavily to retail stores a top 5 OCS online brand might not make the top 5 (or top 10) retail brand. Notwithstanding, I have aggregated the sales provided by each of OCS and Retail Stores and presented them in descending order. IF there were more than two brands from a single company, I aggregated them on the right-hand side for ease of reference. One last item, I stopped after doing the top 3 segments, as that covers 86% of the market. To do the lower segments produces diminished returns on the value of the data.
PSF increased +26% dried flower sales QoQ to take the top spot from Aphria (+30%) and Aphria’s combined Good Supply + RIFF brands. Aurora saw their Daily Special shrink -47%. TWD makes an appearance with strong growth +400% to $5.1 million.
On a market share basis: (Note: This is JUST market share IF they were in Top 5 of each category and does not include other brands not represented or they made one top 5 list and not the other) the aggregate of top 5 make up only 35% of the Ontario flower market.
Aggregated Top 5 Ontario Online Brands and Top 5 Retail Store Brands: Vapes
QoQ saw Redecan (+7%) maintain its number one position in vapes, followed by Aphria Good Supply and Solei (+0.5%), and Auxly’s Foray and Kolab brands disappear from Top 5 as does Canaca (Tilray). Daily Special from Aurora appears at $3.2 million in the Q and both Back Forty and PSF make an appearance at $1.7 million each.
On a market share basis: (Note: This is JUST market share IF they were in Top 5 of each category and does not include other brands not represented or they made one top 5 list and not the other) the aggregate of top 5 make up only 13% of the Ontario vape market.
Aggregated Top 5 Ontario Online Brands and Top 5 Retail Store Brands: Pre-Rolls
Aphria’s Good Supply is the #2 brand for pre-rolls and Aphria brands Good Supply, RIFF and Solei hold a 25% (down from 35% last Q) share of Ontario pre-roll market at $7.8 million in sales. Their sales decreased -16% QoQ or -$1.5 million.
Redecan slots in at #1 brand at $4.7 million in sales +228%.
Organigram’s Edison brand comes was #4 for Q3 but wasn’t in top 5 this Q. OGI did have Trailblazer record a Top5 at $1.5 million in sales.
On a market share basis: (Note: This is JUST market share IF they were in Top 5 of each category and does not include other brands not represented or they made one top 5 list and not the other) the aggregate of top 5 make up only 45% of the Ontario pre roll market. This is the highest concentration of sales in Dried Flower, Vape and Pre Roll categories.
And that’s a wrap on the OCS Report Card review.
The preceding is the opinion of the author and is in no way intended to be a recommendation to buy or sell any security or derivative. The author has a position in Aphria and will not start one or divest in the next five days.