Medical Cannabis sales have been steadily rising in Canada after the recent legalization of adult use Cannabis. Canada has followed a very common trend that we’ve observed happening in many U.S states after they ended their own statewide prohibitions. Volumes of Medical Marijuana oils swelled to nearly 5,000kg in January, compared to 4,400kg in October 2018. Overall patient growth remains a mystery, as we wait for Health Canada to update the numbers. Dried Medical Cannabis flower sales now hover around 1,800kg, building a strong monthly average.
Recreational sale of dried flower is now legal but it may be cannibalizing into medical sales as the only way to access authorized medically prescribed Cannabis is through a practitioner then a licensed producer. Some industry analysts are predicting medical sales to decline as the adult use market grows, but this prediction could be years away from fruition.
The comprehensive effect of Canada legalizing Marijuana has led to a massive supply shortage as well as a reduced selection. If medical sales do begin to decline this wouldn’t be far off from the observable data from U.S. states, such as Nevada and Oregon. Years ago these states actually saw an immediate decrease in medical patients when adult use Cannabis was legalized. It seems people felt they would better treat themselves, and thus it would be more economical to shop for similar strains.
Colorado, however, was an outlier, seeing an increase in medical clients after their adult use legalization. We suspect the inverse effect is very likely to happen here in Canada as well, where medical patients may increase as the average new user may trust a trained physician, over their own limited knowledge. Overall it depends on the market’s reaction to cheaper recreational prices, however, the de-stigmatization and growth in popularity of Cannabis has led to growth in the overall consumer base.
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According to Health Canada, inventories for adult use dried Cannabis flower continue to build as we approach the eventual retail shop openings. Inventories of dried flower that are held by federally licensed holders, wholesalers and retailers also rose to a total of 19,500kg. This is defined as properly groomed, inspected, accounted for, and ready for sale.
If inventories continue to grow at this pace, the province of Ontario alone will soon be sitting at a ratio of 4:1 – Cannabis inventory to sales… a figure that contradicts the echoing claims of a “shortage” since legalization. It seems the market no longer has a shortage of Cannabis but rather is well prepared for the 2019 spike in sales. Industry experts say, the real shortage seen in the regulated market is not necessarily reflective of total Cannabis available for sale, but in the particular products or brands that consumers are searching for. The data does not differentiate between inventoried Cannabis for medical or recreational use.
Cannabis oils continue to be the leading vertical as Health Canada data shows that sales of oil have grown every month since October when 1,700 liters were sold. That figure rose to 2,200, 2,500 and 2,800 liters in subsequent months. At the same time, inventories of finished Cannabis oil held by federal license holders, wholesalers and retailers sky-rocketed from 2,600 liters in October to over 19,000 liters in January 2019.
It seems we are at a tipping point of oversupply for even oils now. Overall, Health Canada is making bold moves, granting more than double the number of licenses in the last 12 months than in the last 4 years combined. It seems they expect a large push of new users and sales for the upcoming 2019 spring and summer months.
Stay tuned for the next Medical Cannabis sales and inventory update once the new Health Canada data is released.
Stay connected to the industry & Happy Investing!
Alex S.
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