Health Canada released the latest data on cannabis sales yesterday evening, posting results for the month of April 2019. When fully brought into context, the figures are rather disappointing to say the least.
Many industry followers had anticipated a notable uptick in sales of cannabis for the month of April as a result of Ontario stores opening for retail recreational sales. While recreational sales increased by 13% month over month, the increase accounted for only 795 KG of additional cannabis sold in the month when compared to March. Medical sales fared much better, posting an increase of 25% month over month. Total dried cannabis sales came in at 8,853 kilograms of product, a 16% increase over the previous month.
While dried flower sales were slightly disappointing, sales of oil products fared much worse overall. Recreational sales boasted a gain of 20%, climbing from 2,854 litres to 3,436 litres on a month over month basis. However, medical sales fell 6% month over month, to bring the overall increase in monthly sales to a small 3% suggesting that users have switched from medical to recreational products. Total oil sales for the month of April came in at 8,196 litres.
When it comes to finished inventories of dried cannabis flower and oils, its quite apparent that the mythological “supply problem” facing the cannabis sector is dead on arrival. Dried cannabis flower inventories rose 3.5% to total out at 31,880 kilograms of product, leaving producers and retailers enough product for just under four months of operations. Cannabis oils increased by a remarkable 16% for the period, with 72,246 litres of product on warehouse shelves among producers and distributors. Current inventories for cannabis oils could sustain just under nine months of sales before retailers ran dry.
The situation gets worse when including unfinished inventories into the mix. A total 215,665 kilograms of dried cannabis are sitting in combined inventories, which Health Canada is quick to point out equates to over 24x sales recorded during the month of April. Cannabis oil combined inventories fairs slightly better than that of dried flower, coming in at 119,696 litres, or 16x sales for the month of April.
While many licensed producers within Canada continue to tow the tired line of a supply problem existing within Canada, the data has repeatedly shown otherwise. What’s becoming quickly apparent is that it’s not a supply problem, but rather a quality problem with companies such as Canopy Growth and Organigram Holdings seeing their product sit on store shelves for extended periods of time relative to competitors.
The Ontario Cannabis Store identified this problem earlier this week when a Globe and Mail article identified that several products in their inventory had been exempted from retailer cap limits due to oversupply. A handful of companies made up the list of producers for the nine SKU’s placed on the exemption list. Based on industry data its likely that several other products will be added to the list as inventories grow exponentially relative to sales growth.
Information for this briefing was found via Health Canada. The author has no securities or affiliations related to any companies discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.