An important trend in the Canadian recreational market is related to the pricing of cannabis products and we believe our readers need to be aware of this. Last year, retailers and producers lowered prices for all types of recreational cannabis products in an attempt to capture additional market share.

Price compression has been an important theme in the cannabis industry and we expect the trend to continue in 2022. According to cannabis data analytics firm Headset, concentrates and vape pens recorded the largest price decrease in 2021. The data analytics firm said the average cost of concentrates and vape pens fell by approx. 35% in 2021 and we will monitor how prices for these two verticals in Canada are impacted this year.

In late 2018, Canada’s recreational cannabis market opened and there were major supply shortages at this time. Since then, the supply-demand scenario has changed and several Canadian Licensed Producers (LPs) closed large-scale cannabis facilities after the market became overly saturated with cannabis products.

2021 was a challenging year for many Canadian cannabis companies and we believe the tough market environment led to an increase in the amount of consolidation in the sector. From Canadian LPs to retailers, we are seeing consolidation across the entire cannabis value chain and expect this trend to continue in 2022 and beyond.

For many years, Canadian cannabis operators have been fighting the illicit market for market share. Last year, the legal market captured market share from the illicit market and we believe the lower prices for legal cannabis products was the primary catalyst for this. Going forward, we expect the legal market to capture additiona market share from the illicit market and are favorable on how this will impact licensed operators.

According to data published in the journal Drug and Alcohol Dependence, there has been an increase in the number of Canadians who are purchasing it from licensed businesses. Based on a survey by investigators who are affiliated with the University of Waterloo, School of Public Health Sciences, the primary reasons for consumers switching from the illicit market to the legal market are increases in retail availability and falling prices for cannabis products.

We expect the greatest beneficiaries of this trend to be Canadian LPs and retailers. Some of the operators that we expect to benefit from this include: Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC), Aurora Cannabis Inc. (TSX: ACB) (Nasdaq: ACB), High Tide Inc. (TSX Venture: HITI) (Nasdaq: HITI), Fire & Flower Corporation (TSX: FAF) (OTC: FFLWF), and Organigram Holdings Inc. (TSX: OGI) (Nasdaq: OGI).

If you are interested in learning more about the evolution of the Canadian cannabis market and the companies that are positioned to benefit from the evolution of the industry, please send an email to support@technical420.com with the subject “Canadian Cannabis Beneficiaries” to be added to our distribution list.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.