Marijuana: Canadians bought $2.6 Billion of cannabis in 2020 amid slowing pace of growth
Canadians bought more than $2.6 billion worth of legal recreational cannabis products in 2020, more than double the amount purchased the year before, according to year-end Canadian retail sales figures from Statistics Canada.
StatsCan showed that Canada's recreational market stood at $2.62 billion last year, up 120 per cent from 2019. The year ended with roughly 1,400 licensed cannabis stores operating in Canada, up from about 760 shops at the end of 2019. U.S. producers sold US$18.3 billion worth of cannabis products last year, a 71-per-cent increase over 2019, according to Leafly.
The sales gains come amid a turbulent year in Canada's cannabis sector that saw COVID-19 weigh heavily on retailers. However, new stores continued to open up across the country while new product formats under the so-called "Cannabis 2.0" banner, like edibles and extracts, helped to draw new consumers to the market.
Ontario continued to lead the country with $727.5 million in sales last year, followed by Alberta with $573 million cannabis products sold, the StatsCan data showed.
In hindsight, many analysts' forecasts for the Canadian market in 2020 were wildly off target. BDS Analytics forecast that Canada's market would reach $3.3 billion last year, while Cowen & Co. said the industry's sales would hit $3.5 billion. Most market observers expect Canada's retail cannabis sales to reach between $5 billion and $8 billion at maturity.
Of course, no one could have imagined the sheer impact that COVID-19 had on the broader economy, where retailers juggled providing customers with curbside pickup, home delivery, and in-store service.
According to StatsCan, Canada sold almost $300 million of cannabis products in December, up 14.3 per cent from the prior month. Once extrapolated, that shows the country's market is operating at an annualized run rate of $3.58 billion. However, analysts expect that sales in the first quarter of this year will be soft given the number of COVID-related lockdowns that took place in the first two months of the year.
That slow pace of growth could extend even further amid early signs of a softening in cannabis sales in the fourth quarter of last year relative to prior three-month periods, according to Craig Wiggins, managing director of independent cannabis research firm The Cannalysts Inc.
As well, Wiggins noted that the launch of the Cannabis 2.0 products didn't spur as many sales as market observers expected, although specific figures on that segment were not immediately available.
"Our concern is that sales going forward is going to be a knife fight," Wiggins said in an interview. "That's why Aphria bought Tilray. That's why Hexo bought Zenabis. They're not buying them for more cultivation capacity, they're buying them for sales."
Stifel-GMP Analyst Andrew Carter said in a research note that he projects Canadian cannabis sales to climb to $4 billion in 2021 with additional growth expected to come from Ontario.
"The Canadian market’s development has trailed expectations, but the acceleration has really taken hold in 2020 with the expansion of retail access as well as the rollout of second generation products," he said.
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