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Canada’s Thriving Marijuana Market: Analysis of Tilray, Decibel, and Village Farms

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Canada’s cannabis industry is rapidly growing, with retail sales expected to reach nearly $4.4 billion (C$6 billion). In a recent report by analysis firm Z&A, the market performance of major players Tilray (TLRY), Decibel Cannabis Company Inc. (DBCCF), and Village Farms International, Inc. (VFF) are examined to understand the divergent paths of Canada’s recreational and medical cannabis markets and who is leading the charge.

Recreational Weed Outshines Medical Marijuana

Canada’s recreational cannabis market has seen impressive 12.3% year-on-year growth, surpassing the U.S. market. Despite regulatory challenges, this market holds significant potential for further expansion. On the other hand, Canada’s medical marijuana (MMJ) market has experienced a decline in recent years, with sales dropping from C$501 million in 2021 to C$401 million in 2023. Leading companies like Aurora (ACB) and Organigram Holdings Inc. (OGI) have been affected by this decline. The allure of recreational cannabis, with its cost-effectiveness and convenience, has contributed to the decline in the medical market.

Exports and Licensed Producer Performance

Canada has seen an upward trend in medical cannabis exports, reaching C$160 million in 2023, with major destinations including Australia and Israel. Among the top licensed producers (LPs), Decibel stands out with a remarkable 77% growth in recreational sales, positioning itself as a strong player in the industry. The Canadian cannabis market presents a mix of challenges and opportunities, with companies like VFF and Decibel making significant strides towards future success.

Leading Players in the Canadian Cannabis Market

Decibel has recorded impressive 77% year-on-year growth in recreational sales in the third quarter, solidifying its position as the second-largest LP with a 7.5% market share. The company has shifted its focus towards pre-rolls, which now account for 70% of their sales and have experienced a 179% year-on-year growth, outperforming the category.

Village Farms International achieved a substantial 10% growth rate in the third quarter and maintains a stable product mix, with flower sales accounting for 75% of total sales. Pre-rolls make up 19% of sales, vapes account for 5%, and edibles account for 1%. The company significantly increased its flower SKUs from 44 in the first quarter of 2022 to 123 in the third quarter of 2023.

Tilray experienced a modest 4% proforma year-on-year growth, but saw promising growth in flower sales, increasing by 11% quarter-on-quarter. Pre-roll sales also increased by 2% quarter-on-quarter. Tilray offers the lowest average flower price at $4.30 per gram, positioning itself as an adaptable and competitively priced option for consumers.

Organigram

Organigram has seen a 1% year-on-year growth in sales. In the third quarter of 2023, the company outperformed the previous two quarters, driven by a significant increase in pre-rolls (+59%) and concentrates (+273%). However, flower sales have declined by 20%, and edibles have remained flat. The sales mix for Organigram consists of 50% flower, 23% pre-rolls, 15% edibles, and 9% concentrates. The average flower price increased to $4.68 per gram from $4.37 in the third quarter of 2022, while pre-roll prices decreased to $5.60 per gram from $6.38 year-on-year. The top three flower SKUs account for 62% of flower sales.

Outlook

While the report does not extensively cover financial performance, key indicators such as price trends and market share suggest a promising future for some LPs. Village Farms International’s price improvement and sales growth, as well as Decibel’s share gains and SKU efficiency, are notable highlights.

For a comprehensive understanding of the topics covered in the report, consider subscribing to and watching Pablo Zuanic’s panel discussions from the recent Benzinga Cannabis Capital Conference held in Chicago on September 27 and 28. Experts delved into crucial aspects such as navigating capital challenges, formulating effective long-term survival strategies, and addressing the future of rescheduling cannabis.

Photo by StellrWeb on Unsplash.

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