The latest equity research report from Pablo Zuanic of Zuanic & Associates highlights key trends in Canada’s cannabis market, noting a deceleration in recreational sales growth.

Data from StatCan reveals that sales for 2Q24 were down 4% year-over-year (YoY), contributing to a 1.3% decline year-to-date (YTD) compared to 14% growth in 1H23. In contrast, Hifyre data shows a 6% YTD growth through August.

If annualized, this growth would project a total recreational market size of C$5.47 billion for calendar year 2024, translating to US$102 per capita.

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Market Share Shifts Among Top Players

Zuanic’s report highlights notable shifts in market share among the top licensed producers (LPs). Tilray TLRY, once a dominant player, saw its share drop by 1.5 percentage points to 9.6% in August, continuing its decline over recent quarters. Decibel DB also experienced a decline, dropping 0.9 percentage points to 5.2%.

Meanwhile, Village Farms VFF experienced strong growth, increasing its market share to 7.9%, up from 6.1% a year ago, representing a 34% year-over-year growth. Similarly, Cronos CRON and Organigram OGI posted gains, with Cronos maintaining a steady 5.3% share (up 24% YoY), and Organigram growing its market share to 7.2%, up from 6.6% a year ago, reflecting 15% (YoY) growth.

Additionally, Auxly CBWTF and Cannara Biotech (unlisted) gained 0.5 points each, reaching 5.2% and 3.4% market shares, respectively.

Here is a breakdown of the major players:

• Village Farms: sales grew +34% YoY, holding a 7.9% market share in August (up from 6.1% a year ago).
• Cronos: +24% YoY growth in sales, maintaining a 5.3% share, consistent with previous quarters.
• Organigram: +15% YoY growth in sales, with a market share of 7.2% in August, up from 6.6% a year ago.
• Tilray: -20% YoY decline in sales, with a 9.6% market share in August, down from 10.1% earlier in the quarter.
• Decibel: -25% YoY decline in sales, holding a 5.3% market share, down from 7.4% a year ago.

Format Preferences Continue To Evolve

The Canadian cannabis market is shifting towards newer product formats, with some segments outperforming others. Flower remains the largest category, accounting for 36% of sales in June-August 2024, down from 41% in 1Q23 and 57% in 1Q21. This decline reflects changing consumer preferences, as pre-rolls and vapes gain market share.

Pre-rolls now represent 34% of total sales, up from 27% in 1Q23 and 17% in 1Q21. The segment grew 11% year-over-year (YoY) in the June-August period, driven by consumer demand for convenience. Decibel leads with a 10.4% share, though it fell to 9.7% in August. Tilray holds 8.3%, and Organigram has 6.4%.

Vapes account for 16% of sales, up from 15% in 1Q22 and 14% in 1Q21, supported by 8% yoy growth. Motif Labs leads with 20.6%, followed by Auxly CBWTF at 12.4%, up from 10.7% in 2Q24.

Other formats, like concentrates, edibles, beverages, and oils, hold smaller shares. Concentrates and edibles each represent 5%, while beverages and oils account for 2% each. Concentrates grew 5% YoY, while edibles declined by 5%. Beverages saw a 6% YoY increase, indicating gradual consumer adoption.

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