North America: Canada – The Global Cannabis Report 5th Edition

Six years after legalising adult-use cannabis in 2018 and 23 years after legalising medical cannabis in 2001, Canada’s cannabis ecosystem is one of the most developed globally, with big names that play an important role in the international cannabis supply chain and industry related investments and technology, putting its cannabis sector at the vanguard of the global industry.

Despite mixed news for the cannabis industry in the last year, and coming from a couple of years with underperforming cannabis stocks, there are reasons to remain confident in the Canadian cannabis sector, with sales recovering, timidly, from the late 2023 fall, and consumer behaviour trending towards practicality, with pre-rolls and vapes growing their share of sales. Meanwhile, medical cannabis exports continue to increase, bringing hope to the industry as Canadian companies also try to continue having an international presence.

Adult-use cannabis has been legal at the Federal level in Canada since 2018, but each of the ten Canadian provinces and its three territories has the capacity to regulate the industry and its consumption, and even municipalities, within those provinces, can establish local regulations, such as age restriction.

For instance, in eight provinces the minimum age to use cannabis is set at 19 years old, but it is 21 years in Quebec and 18 years in Alberta, and only Manitoba and Quebec authorise for personal cultivation, while it is permitted but limited in Nunavut, representing just 27% of the country’s population and 23% of its GDP.

The Cannabis Act from 2018 is the main legal framework for cannabis in the country. It was amended in 2019 to include edibles, extracts and topicals with THC limits of 10 milligrams for edibles and extracts, 1,000 milligrams for vapes, and 1,000 milligrams for topicals. It prohibits cannabis imports that are not destined for medical or scientific purposes, creating an entry barrier to international suppliers of adult-use cannabis, and the same limitations apply to Canadian exports.

In terms of public use, the country is split in half, with seven regions prohibiting public use of cannabis and six where it is legal, but with limitations. As for possession, most regions do not have limits, but three do: British Columbia (1,000 grams per household), Nunavut and Quebec (150 grams in both regions).

Adult-use cannabis sales in 2023 hit the US$3.8 billion mark, a 12% increase compared to 2022. In 2024 the downward trend from late 2023 continued, but the last few months have been generally positive with sales increasing tentatively, around 2%, and expectations to close the year positively thanks to Q3 and Q4 growth, particularly from the provinces of Alberta and Quebec, that helped to compensate for the downward demand trends observed in Ontario and British Columbia from the last few months.

Regarding how Canadians consume cannabis, both adult-use and medical, data from Q1 2024 indicated that 52% of cannabis sales are dried flowers (from which pre-rolls take the biggest share), followed by edibles with 26% and cannabis extracts with 22%, with vaping popularity growing in the country.

An interesting trend that also seems to be migrating to the US is the substantial increase of pre-roll sales, which accounted for over 31% of all sales in Canada in 2023. Existing data suggests that pre-rolls accounted for 34% of all sales in 2024 Q1, while it represented 27% in Q1 2023, which translates to a 25.9% increase. In terms of shares, three companies, Decibel, Tilray and Organigram account for 10.4%, 8.3% and 6.4% of pre-roll sales respectively. Vapes continue to grow its market share slowly, with Q1 2024 suggesting vapes represented 16% of sales, compared to 15% in Q1 2023 and 14% in Q1 2022.

Concentrates and edibles accounted for about 5% of sales in Q1 2024, while beverages accounted for about 2%, the same as oils. Regarding market share of Canadian companies for mid 2024, Tilray are leading with close to a 10% share, Village Farms have 8%, Organigram close to 7%, while Auxly, Chronos and Decibel each have a 5-6% market share. Cannara Biotech has a 3.4% share. All the companies listed above represent about half or 50% of the total market.

In terms of revenue and with data from mid 2024, Tilray (TLRY) continues to lead in terms of revenue, with a trailing twelve months (TTM) (last 12 months) revenue at US$788 million, and a market capitalisation of US$1.6 billion. Sundial Growers (SNDL) reported a TTM revenue of US$579 million and a market capitalisation close to US$600 million. High Tide (HITI) reported a TTM revenue just above US$500 million, and its market capitalisation stands at US$140 million. Meanwhile, TerrAscend Corp. (TSNDF) TTM revenue stood at US$328 million, with a market capitalisation just above US$400 million. Canopy Growth Corp. (CGC) TTM revenue was close to US$245 million, and its market capitalisation US$515 million. Village Farms International (VFF) TTM revenue almost hit US$230 million, and its market capitalisation stood at US$113 million. Aurora Cannabis Inc. (ACB) had a TTM revenue of US$200 million, and a market capitalisation of US$330 million. These are the top seven Canadian companies in terms of TTM revenue in July 2024.

In a positive trend, medical cannabis exports continue to grow, with the last report from the 2023-2024 financial year reporting a total of CA$218 million exports, a 36% increase compared to the previous period, and following a run of four years of substantial increases, beginning in 2019 with exports of only CA$8 million. This brings hope to local producers in the context of domestic sales falling close to 13% over the same period.

A main issue in the Canadian cannabis industry continues to be the imbalance between the country’s supply and demand, with almost 54 million cannabis products being left unsold in December 2023 alone. A similar trend has been observed in previous months with the cannabis products inventory largely surpassing total sales.

The country continues to struggle with offers from the illicit market, which has put pressure on legal cannabis companies to compress their prices to a minimum, thereby affecting the industry’s high revenue expectations.

In terms of access, most provinces continue to have a hybrid system between public and private suppliers, while the provinces of Northwestern Territories, Saskatchewan and Manitoba only have a private supply and Quebec and Nova Scotia only have a public supply.

Regarding retail licences, Ontario leads, unsurprisingly, as the province makes up about 38% of the country’s economy and population, with over 1,600 licences issued, followed by Alberta with over 760 licences, and British Columbia with 441 licences. Saskatchewan has about 157 licences and Manitoba 167; all other provinces have less than 100.

Canada has also witnessed an increase in participation from First Nation groups in the supply chain of the cannabis ecosystem. In the Shxwhá:y Village, in Chilliwack, British Columbia, a First Nation owned company is now transitioning from a dispensary to a national player and exports have been reported. The company is part of the indigenous network of cannabis companies, All Nations.

In Quebec, the Kanien’kehá:ka (Mohawk) group is reportedly in the final stage of granting three cannabis licences. Complaints about lack of access to funds are commonplace among Canadian indigenous groups that were particularly affected during the cannabis prohibition years.