The Canadian cannabis market is experiencing consistent growth and is expected to reach C$8.8 billion in sales by 2027, according to a new report from a research firm.
Bethany Gomez, managing director at the Brightfield Group, told the Investing News Network (INN) that 2021 brought year-on-year growth of 39 percent for the domestic market.
The company’s recently issued report, titled “Battle of the North: Canada Market Update,” includes new datasets and shows a renewed picture of the Canadian market and its evolution.
Gomez told INN this study was completed as part of the Brightfield Group’s regular reviews of the industry.
Sales still “consistently” growing in Canada
As mentioned, domestic market sales were up 39 percent in 2021, coming in at C$4.39 billion.
The firm’s projected path out to 2027 represents a compound annual growth rate of 10 percent.
When it comes to which products are catching the eye of Canadian consumers, the study shows that the pre-roll, vape and dried flower categories all have a stronghold in terms of growth in the market.
“There’s that consistent growth, consistent level of sophistication growing in product types,” Gomez said.
“Consumers looking for more potent products are not well served by the edibles market due to regulatory constraints on THC limits,” the report states.
Premium category takes leading position
Trends move quickly in the Canadian market. After a fervor surrounding the value-priced category, it now appears premium is in, and a higher-cost cannabis product type is building up momentum.
The report states:
“As competition stiffens in the premium market, we will need to pay attention to how licensed producers (LPs) decide to market their products: Will they be able to highlight their products’ competitive advantages, or will they be competing on price as they were in the value-priced market?”
The emergence of premium products is coming from higher demand for craft cannabis items.
“Brands in this category have really started to take hold in the Canadian cannabis space,” Gomez said. “We see them as some of the fastest-growing brands in terms of shelf space (and) receptivity from consumers.”
Gomez added that budtenders across Canada have gravitated towards craft cannabis, and this has also added heavily to the emergence of higher-cost items.
Big-name Canadian LPs have been caught trying to jump on the bandwagon of what consumers want.
Gomez explained that the domestic market has seen waves in terms of which category has gained market attention, and cannabis companies are trying to catch up with what consumers are looking for.
“LPs will either need to keep acquiring those brands to maintain their share, or we’re going to see some more disruption from those small to mid-size brands,” Gomez said.
Provincial markets duke it out for top spot
The Brightfield Group’s report shows Ontario remains the leader in Canada for its cannabis market. According to the firm’s data, in 2022 the province is projected to produce sales worth C$2.12 billion.
While Alberta is now one of the biggest markets in the nation, BC is reportedly set to overtake it by 2027.
This change is being caused by some regulatory adjustments, including the opening of retail availability and the option for producers to sell through the popular farmgate method, meaning directly from their facilities.
The farmgate strategy has proven popular with small craft growers as it allows them to reach passionate consumers directly.
When asked what the data says about the current Canadian cannabis market, Gomez told INN she is interested in seeing how players develop as consumers steadily evolve.
“There’s a lot of questions on whether the strategy that the LPs have been leveraging to date is sustainable, or if there’s an opportunity for those in a more disrupter class of brands to be able to come up and really give them a run for their money,” Gomez said.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.