Cannabis Slowdown In Canada: Analyst Spotlights What Still Sells And Where The Money Is Going

In a recent report, Pablo Zuanic of Zuanic & Associates analyzed trends in Canada's recreational cannabis market through May 2024.

The report highlights a deceleration in market growth and notable shifts in sales dynamics among leading licensed producers (LPs).

Market Growth Deceleration

The report points to a significant deceleration in Canada's recreational cannabis market. Official data from Statistics Canada shows a mere 2% year-over-year (YoY) increase in recreational sales in the first quarter of 2024, a decline from 11% YoY growth in the previous quarter. However, Hifyre scanner data suggests a potential rebound, with 7% and 10% YoY growth projected for April and May, respectively.

Top LP Sales Trends

Among the top five LPs, Village Farms International VFF, Organigram Holdings OGI, and Cronos Group CRON saw double-digit sales growth from January to May 2024, while Decibel Cannabis Company DBCCF and Tilray Brands TLRY experienced declines.

Specifically, Tilray's sales fell 17% YoY during the March-May period, whereas Village Farms grew by 41%, OGI by 24%, and Cronos by 34%. Village Farms now holds an 8.6% market share, up from 6.8% in the fourth quarter of 2023.

Leading Players By Segment

Village Farms International has significantly increased its share in the flower category, from 10% in the first quarter of 2022 to 16% in the first quarter of 2024. Decibel Cannabis Company leads the pre-roll segment with a 14% market share, up from 5% two years ago.

On a proforma basis (including HEXO and Redecan), the biggest segment share loser in pre-rolls has been Tilray, with its share down to 11% in 1Q24 from approximately 24% in 1Q22. Canopy also dropped by 6 points over the same period.

In the vape category, Motif Labs has emerged as a leader, growing its share from 3% in the first quarter of 2022 to 20% in the first quarter of 2024. Auxly Cannabis Group CBWTF is down from 19% to 10%, and Tilray also shed a share from 17% to 6%.

Growth Trends By Formats

The three-month data through May shows that flower remains the largest category, accounting for 37% of sales. This is followed by pre-rolls at 31%, vape products at 16%, concentrates at 5%, edibles at 5%, beverages at 2%, and oils at 2%. Zuanic notes that "compared with the US market, pre-roll over indexes in Canada, while vape under indexes."

For context, the flower segment was 41% of sales in the first quarter of 2023, down from 48% in the first quarter of 2022 and 57% in the first quarter of 2021. Pre-rolls have grown from 17% in the first quarter of 2021 to 27% in the first quarter of 2023. Vape products have shown a steady increase from 14% in 2021 to 16% in 2023. Edibles have remained relatively stable, while concentrates have seen slight growth over the same period.

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Other Significant LPs

Between the #6 to #14 LPs, Motif Labs, Cannara Biotech LOVFF, and Ayurcann AYUR have shown robust growth. Rubicon Organics ROMJF also reported gains. On the other hand, companies like Canopy Growth Corporation CGC, SNDL Inc. SNDL, and Aurora Cannabis ACB have faced challenges with their market shares either declining or remaining stagnant.

Photo: AI-Generated Image.