Canadian Cannabis Market Share

Canadian Cannabis LP’s Market Share

Note: In this section we are referring to calendar year (CY) even though many companies report off-cycle, we use the closest CY quarter.

We think market share is a helpful indicator in gauging company success, more so than just increasing/decreasing sales volumes. Over the past couple quarters it is interesting to see Canopy continue to lose market share along with Organigram. Aphria managed to grow market share significantly in CY Q2  after a disappointing prior quarter. Aurora has yet to report its Q2 results, but it wouldn’t be a surprise to us to see them achieve about 30% market share, overtaking Canopy for the first time ever.

Canopy: Market share in Q2 fell to 22.7% from 25.9% in Q1

Aurora: Market share in Q2 is yet to be reported, was 25.4% in Q1

Aphria: Market share in Q2 rose to 12.9% from 9.1% in Q1

Organigram: Market share in Q2 fell to 10.6% from 17.2% in Q1


Calculating Market Share

Below we step through our full methodology for calculating the above market share numbers, we think it is important in terms of transparency, and also to highlight the assumptions required. While assumptions will lead to a degree of inaccuracy, we think the overall picture is fairly accurate within a reasonable margin of error.

Market share numbers are impossible to determine exactly for cannabis producers in Canada. But we do have enough data to make a decent approximation for how the cannabis companies are doing. We can use the aggregate numbers that we get from Health Canada along with the self-reported numbers from filings for each company to get a pretty decent idea of market share. We can figure out where we are today in terms of market share for each company and also how it has trended over time. With this framework we can continue to track who is gaining and losing market share, which ultimately should be one of the biggest drivers for success in investing in cannabis stocks.


Denominator: Aggregate Sales Data

The first piece of the puzzle is normalizing the Health Canada data,  which we can see below. In order to normalize the data we need to convert the oil sales into cannabis flower equivalency to get a single number, this will be our denominator for market share going forward. It’s important to recognize that this data is aggregated by Health Canada and is the sum of all submitted numbers by the various LPs. Each LP that produces oil does not actually use a consistent figure of cannabis concentration in that oil. For example, Aphria converts its oil at around 4.5:1 while Canopy has much higher average concentration of around 8:1. So, when converting we use a middling number of 6.5:1 which we think represents a fair average for the group.

This results in the following normalized sales data for June 2019:

  • Medical sales of 1,535 + (4,686/6.5) = 2,256 kg equivalent
  • Recreational sales of 8,441 + (4,928/6.5) = 9,199 kg equivalent
  • Total sales of 2,256 + 9,199 = 11,455 kg equivalent

And this is what it looks like since recreational legalization:

But that’s not it – this is just what has actually been sold. We need to include the fact that the LPs report their sales inclusive of channel inventory build. Adding for sales to the provinces (even if it hasn’t moved to the consumer) results in the following:


Numerator: Company Sales Data

Next up is to layer on the numerator, which is each companies actual sales data. It’s worth pointing out that since fiscal years for most cannabis companies are off-cycle, we will have to normalize these as well. This is because we only receive our company data on a quarterly basis, rather than a monthly basis.

We’ll use Aurora Cannabis as an example:

  • In its Q3/19 quarter (ending March 31, 2019) Aurora sold 9,160 kg equivalents
  • Determining the split between medical 3,760 kg and recreational 5,400 kg adds an additional layer of complexity, as these figures are not directly given in the MD&A
  • Additionally, it’s worth noting that Aurora only actually produced 7,935 kg of this product the remainder was purchased from third parties, which we need to be mindful of in our market share analysis as double counting is a possibility
  • We note this excerpt from pg 26 of the MD&A on equivalency: “On average, for the three months ended March 31, 2019, December 31, 2018, and March 31, 2018, one bottle of cannabis oil was equivalent to 8.6, 8.1 and 6.78 gram equivalents of dried cannabis, respectively. On average, for the three months ended March 31, 2019 and December 31, 2018, one bottle of cannabis capsules was equivalent to 3.0 and 3.0 gram equivalents of dried cannabis, respectively.”

The resulting market share for Aurora over the past two quarters is as follows:

  • Q3/19 = 9,160 / (9,676+9,742+16,617) *100 = 25.4%
  • Q2/19 = 6,999 / (14,213+11,969+9,518) *100 = 19.6%
  • In other words, Aurora has been gaining market share at the expense of other companies (likely Aphria in that particular quarter)
  • In order to maintain a 25% market share in its upcoming quarter Aurora will need to sell 11,640 kg equivalents, anything above this would be an increase in market share (aided by the acquisition of Whistler)

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