“It’s going to be a very interesting year,” says Brightfield Group’s Managing Director, Bethany Gomez. With sales expected to hit $8.8 billion by 2027, the Canadian cannabis market is on fire. Thanks to consumer demand, large LPs have mostly abandoned the “sea of green” monocrop concept and have narrowed in on premium flowers. The CBD market suffers from regulatory constraints. But opportunity exists for a US foothold. Smaller, craft brands are still competing against the larger LPs with their deeply rooted distribution networks. But things look much different in 2022 than they did in 2020. “We see a lot of disruptive craft brands that are starting to come up,” says Bethany.
Relative to its population, Alberta outperforms all of Canada.
They rank highest spent per capital on Canadian cannabis products. Alberta‘s free-market approach means fewer regulatory hurdles retail licensees have to jump through. Allowing for more free competition, by 2027, Alberta expects to hit over a billion dollars in cannabis sales revenue.
In contrast, Canadian cannabis in Quebec continues to underperform
Despite its population size. Quebec has taken the opposite approach to Alberta‘s. All retail is government-owned and controlled. By limiting competition among entrepreneurs, the government has limited product choice and potency. Edibles, concentrates, and vapes are illegal. For this reason, many of Quebec’s consumers continue to use the legacy market.
British Columbia is the historic birthplace of Canadian cannabis.
So it’s no surprise that the province expects to overtake Alberta in sales by 2027. A lot of this depends on whether BC removes its distribution middle-man. And whether they put in place a direct farm-to-consumer model. Like Alberta, the industry expects to grow to over a billion in sales by 2027. British Columbia is also (finally) taking steps to bring the legacy producers into the legal market. Reliance on the legacy market is likely why sales in the province are so low. Additionally, the province has brand labels for consumers. There is BC-Grown, BC certified organic, Indigenous-grown, among others.
Ontario is becoming the epicentre for Canadian cannabis.
As of early 2022, there are over 1,500 cannabis retailers operating in Canada’s most populous province. Their 2022 sales are projecting over $2 billion and by 2027 that’s expected to increase by 12%. Despite their successes, market oversaturation remains an issue. Some businesses expect to fail as high mark-ups by the government supplier (OntarioCannabis Store) eat up margins.
Canada’s CBD Industry
The Canadian cannabis market has an unfortunate CBD sector. CBD products are available only through approved cannabis retail channels. This limits its distribution and purchasing rates. Most CBD sold in Canada has at least a 20% markup. Most LPs aren’t focusing on developing CBD products. There is little variety on Canadian store shelves. In response, Canadian companies have taken to teaming up with American companies. The idea is to get ready for US legalization that would open up the entire North American cannabis market.
“The battle is shifting to premium,” says Bethany Gomez. Craft cannabis continues to dominate the Canadian cannabis market. Big LPs are shifting away from value-priced products and focusing on premium flower.
2021 was a tough year of many large LPs. Revenues stagnated while smaller, craft producers grew their sales. “The large LPs just can’t any larger,” says Brightfield Group’s Managing Director, Bethany Gomez. “There’s a lot of competition from disrupter brands that are starting to shape the face of the industry. The market today in cannabis does not look like what most folks thought it would look like on the eve of legalization.”
Yet, as craft brands continue their rise, the top distributed brands in Canada are still the ones with core-priced offerings. “This is a very price-sensitive market,” says Bethany, “and producers have to be able to offer high-quality products at a price people will spring for.”