The Reality of Aphria’s 2020 $1 Billion Canadian Cannabis Sales Run Rate Guidance

This morning, Aphria Inc (TSX: APHA) (NYSE: APHA) reaffirmed on its conference call that the firm is expecting a run rate of $1 billion in Canadian cannabis revenue by the fourth quarter of calendar year 2020. The firm had previously provided such guidance, and elected to reaffirm it despite recent guidance cancellations from other licensed producers within the sector.

The problem with this guidance, however, is that cannabis in Canada, 10 months into recreational legalization, has yet to see $1 billion in recreational retail sales as per Statistics Canada. The latest data, which extends from October to July, places total retail sales of recreational cannabis at $676.4 million. July was the first month in which retail sales crossed the $100 million mark.

Turning to our outlook. For fiscal 2020, we continue to expect to report net revenue of approximately CAD650 million to CAD700 million with distribution revenue representing slightly more than half of the total net revenue. In addition, we expect to report adjusted EBITDA of approximately CAD88 million to CAD95 million. Applying our average selling price to our future production capacity, we continue to expect annualized revenue of CAD500 million in Canadian cannabis sales once all facilities are in full crop rotation. And two, annualized revenue of CAD1 billion in Canadian cannabis sales by the end of Calendar Year 2020, both of which strengthen our position as a leading global cannabis company.

Carl Merton, CFO of Aphria. From the transcript of the first quarter conference call.

Aphria investors will be quick to point out here the oncoming cannabis 2.0 and medical markets as evidence of data bias. However, Stats Can also publishes medical figures, albeit within a different location.

Here, at the Cannabis Stats Hub, it identifies that during roughly the same time period – Q4 of 2018, to the end of Q2 2019, medical cannabis accounted for $424 million in sales. There’s also some discrepancies with the data, wherein the Cannabis Stats Hub reports $992 million in total recreational sales to date. The difference within the data suggests that retail sales may not include e-commerce figures from that of provincial regulators, such as the Ontario Cannabis Store.

Even if we elect to use the most bullish data, total sales to date since cannabis became recreational legal suggest that $1,416 million worth of cannabis has been sold. While figures continue to rise month over month, sales data history from recreationally legal states such as Colorado suggest that we can expect to see a slowdown of sales through the winter months.

The current belief that Aphria will manage to secure over 50% of cannabis sales on an annualized basis is simply absurd, given the amount of producers within the space and current market runrates. The notion that licensed producers will be able to sell all product produced, despite evidence of vast overproduction already occurring in the space, is a fallacy that investors within the cannabis sector will need to come to terms with in very short order.

While cannabis sales in Canada continue to grow, albeit at a slower than anticipated rate, producers are quickly coming to terms with the fact that market share is becoming fragmented as more producers receive sales licenses and enter the marketplace. Canopy Growth, for instance, has now posted two quarters of declining cannabis revenues as consumer options increase. Aphria’s marginal 7.6% increase in quarter over quarter sales published today, while inventory levels rose a corresponding 23.4%, only reaffirms this.

Cannabis 2.0 products, which become legal this Thursday, will undoubtedly provide a bump to current sales figures within the sector. However, flower sales still outpace those of concentrates and other cannabis products in fully legal US states, suggesting that the bump in revenues will not be sufficient in the near term to allow any one producer to obtain a run rate in the billions in the near term.

Aphria, despite its best ambitions and intentions, is thus in reality unlikely to hit a one billion run rate in Canadian cannabis sales within roughly the next year – as is any current licensed producer.

Information for this briefing was found via Sedar and Aphria Inc. The author has no securities or affiliations related to this organization. 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 and CannaInvestor Magazine among others.