Cannabis has more room to grow in Canada

Warning message

The subscription service is currently unavailable. Please try again later.
Twitter icon

Some feel there are too many dispensaries in Ontario, Canada's most populous province.  But a new study suggests there is more room to grow.

Canada's cannabis market has seen better days. 

Over the last few weeks, multiple Canadian operators have released earnings reports showing sequential declines in revenue. 

Partly to blame is an oversaturated market that retailers say is driving down sales. 

The problem is so pronounced that even Canadian legislators have begun to take notice and some are even vowing to take action.

In Ontario for instance, Canada's most populous province, the Liberal Party has campaigned on a promise to crack down on the number of cannabis stores opening, according to the Ottawa City News. 

The province had nearly 1,500 licensed stores open as of May 2, with another 445 active store authorizations in review. This is for about 14.6 million people living in Ontario. 

That's about one cannabis store for every 7,300 per resident, but when you factor in that overall only 17% of Canadians age 16 and older report using cannabis, the problem becomes apparent. 

But in a new study, one Connecticut-based market data firm says that Canada could actually use more dispensaries without reaching saturation. 

Canada still has room to grow (cannabis)

Cannabis Benchmarks estimates that Canada can sustain more than 5,100 brick-and-mortar retailers. Overall the country currently has less than 3,200.

According to Cannabis Benchmarks, the optimal number of stores for a wealthy country of 38.5 million people is about one store per 7,500 Canadians. 

Their figure is based on per-capita store count figures in the U.S. markets of Colorado and Oregon. In Colorado, there is one recreational retailer for about every 9,600 residents. In Oregon, there is one legal store for every 6,150 people. 

According to the study, Alberta is the only province in the country that could use a cannabis dispensary hair cut. Cannabis Benchmarks expects the number of stores in Alberta to decline over the 24 months as competition increases and the economics become less favorable. 

Canada's Cannabis Reality

Canada's big cannabis retailers are hurting, despite the study that says there is room for more growth. 

Canadian cannabis company Canopy Growth  (CGC) - Get Canopy Growth Corporation Report is going through another round of layoffs, announcing last week that it is letting go of 245 employees, or about 8% of its workforce.

The newest round of layoffs means that the company has reduced its headcount by 1,600 since 2020, which was CEO David Klein's first year as CEO.

The company, which has yet to post a profit, has been struggling in the Canadian market as sales fall.

Canadian cannabis sales fell 2% in January sequentially and 3% sequentially in February. 

As of the end of March, the Canadian Cannabis LP Index was down for the ninth consecutive month.

Canopy's market share in Canada fell to just 7% in the January-March quarter from more than 11% a year ago, according to a recent note from Cantor Fitzgerald that cited data from analytics firm Hifyre.

The company recently said that the cost-cutting moves would help them achieve a target of cost savings between $150 million and $200 million

e-mail icon Facebook icon Twitter icon LinkedIn icon Reddit icon
Rate this article: 
Article category: 
Regional Marijuana News: