In Canada, recreational marijuana use was federally legalized in 2018, creating a number of legal cannabis companies, many of which went public. These stocks are a great way for US investors to participate in the global expansion of legal cannabis, a market that experts say will grow about 18% annually between 2020 and 2027.
Sales are growing to all new highs
Cannabis sales in Canada this year will reach $4 billion, well below projected US market sales of $23 billion.
Most encouraging is that the Canadian cannabis market is expected to grow twice as fast as the US market between 2020 and 2021 and nearly three times as fast from 2021 to 2022.
Spurring on this growth is household spending on marijuana consumed by adults. Regulated channels rose to $918 million ($800 million) in the last quarter of 2020, or $204 million more than expected for illegal marijuana over the same period.
Toronto is leading the way
The Toronto area, which is a leader in cannabis sales in Canada, has experienced significant business growth. They started 2020 with seven regulated stores and ended the year at 87. That jump helped boost sales from $17 million in January 2020 to $40 million ending in December 2020.
Sales of extracts and concentrates tripled between early and late 2020, ending last year with retail sales of $324 million, according to Statistics Canada.
Legal sales were also driven by recreational nutrition products, which had a full first year of sale. Grocery sales rose from $12.7 million in the first quarter to $42.2 million in the fourth quarter.
The legal market is also stimulated by falling prices and increasing product selection.
Medical use sales lag
Medical marijuana sales, recorded separately by the Office of Statistics Canada, continued a sluggish downward trend. Approximately $135 million was spent on medical cannabis products in the fourth quarter of 2020.
In total Canada spent $587 million on medical marijuana last year. That number includes all medical marijuana products sold directly to consumers by state-licensed producers. According to Canadian statistics, that also includes marijuana grown at home for medicinal purposes.Market
Canadian cannabis stocks to pay attention to:
- Aurora international marijuana sales (ticker: ACB) are up 562%.
- Aphria (APHA) up around 700% year over year.
- Canopy Growth Corp. (CGC) by far the largest Canadian cannabis stock by market cap, valued at over $12 billion.
- The growth of the Cronos Group (CRON) can be attributed to its blockbuster expansion into markets outside the US, where sales tripled from just under $4.6 million to $13.5 million annually.
- OrganiGram Holdings (OGI) recently announced a deal with British American Tobacco (BTI) a 19.9% stake in OGI resulted in a surge in shares.
- Sundial Growers (SNDL) the company is shifting from wholesale to retail operations, the latter of which tends to offer much higher margins.
- Tilray (TLRY) is the world’s largest cannabis company by sales and one of the biggest players in the legal marijuana game.
- HEXO Corp. (HEXO) is Canada’s third largest licensed recreational marijuana company.
As strong growth for legalized edible and alternative cannabis products gain steam, keep your eyes open. There’s no doubt that the Canadian cannabis market has tremendous potential.