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HIGHLIGHTS
  1. Average online pot price in five provinces rises to $10.42/gram
  2. Cowen sees cannabis performance in Alberta an “encouraging signal”
  3. Average pre-roll price jumped 121 basis points to $13.04

The average online cannabis price has risen to nearly $12 per gram in some provinces, despite larger product offerings as strong adult-use demand kept “stockouts” high at 51 per cent, according to Cowen Equity Research data.

Rising prices for dried flower in five Canadian provinces signal that the legal pot industry continues to respond to tight supplies from licensed producers, as some struggle to increase their harvests, despite the government’s efforts to draw users away from the illicit market, where the majority still make their purchases, partly due to lower prices.

The average Stock Keeping Unit (SKU) price for dry flower in British Columbia, Alberta, Ontario, New Brunswick, and Newfoundland is $10.42 per gram. This is up 82 basis points from mid-April and occurred as SKU counts rose by an average of 43 per week since legalization.

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Specifically, the biggest weighted average price increase was in Alberta where it rose by 30 basis points to $11.81 per gram. In Ontario, it rose by 9 basis points to $10.78 per gram. It increased by 19 basis points to $11.95 in New Brunswick, climbed by 11 points to $9.28 in B.C. but dropped by 41 basis points in Newfoundland to $8.92.

“We view performance in particular from Alberta as an encouraging signal for category growth,” Cowen said in a report, noting the provincial regulator lifted its retail licence freeze as its out-of-stock rates fell to 30 per cent and its SKU count rose by 28 per cent.

Cowen said it expects to see firm consumer demand and retail sales increase as stores open in Ontario and industry supply increases.

Still, it was Ontario that added the most new products to its online offerings to 629, up 19 per cent, as a handful of stores opened their doors for the first time in Canada’s biggest province by population. Alberta saw the biggest increase by percentage at 407 SKUs, up 28 per cent, while B.C. raised its by roughly 7 per cent, New Brunswick by 15 per cent and Newfoundland by 7 per cent.

“On the dried [flower] side, there’s such a shortage, almost anything a retailer can get, he can sell, even though prices on the legal market are so much higher than the black market,” said Michael Armstrong, associate professor at Brock University’s Goodman School of Business.

“Although supplies are improving, we’re still basically in a shortage situation where stores generally sell out of whatever dried cannabis they get. If you’re selling out of product, the best thing to do is to raise your price.”

Cowen scraped e-commerce data from 1,099 product offerings with 2,328 SKUs in the five provinces that showed stockout rates fell to 51 per cent from 55 per cent in April.

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“While it is difficult to assess how much of the change is demand versus supply driven, our view is that demand remains strong while supply is limited,” Cowen said.

In-stock SKUs showed Canopy Growth Corp. – which recently added 61 SKUs to reach 435 – maintained the lead in market share at 20 per cent across the five provinces, with the company’s footprint stronger in regions where physical retail stores are open.

Aphria Inc. holds the second-highest SKU count at 343, an increase of 29 SKUs, with CannTrust Holdings Inc. at 237 SKUs and Aurora Cannabis Inc. at 233.

Cowen data showed loose leaf flower represents 71 per cent of total SKUs and this segment saw stockout rates drop by 2.5 points to 54 per cent. Pre-roll stockout rates, by comparison, dropped 12.6 points to 52 per cent. Capsules, which represent 5 per cent of the products available online, saw stockout rates climb by 390 basis points to 35 per cent.

“Pre-rolls’ price premium to dry flower was up 48 bps to 25 per cent and remains healthy while capturing comparable stockout rates, which speaks to consumers’ willingness to pay for value-added cannabis products,” Cowen said.

The average pre-roll price jumped by 121 basis points to $13.04 with the biggest surge taking place in New Brunswick, where it vaulted to $13.20.

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“Once you start hitting the more average consumers who don’t mind paying more but not too much more, then we could see the pricing go lower. I think we could see that at the end of this year or next year," Prof. Armstrong said.

Meanwhile, capsule pricing decreased 1.4 points versus the prior period while oil pricing was down 1.8 points, Cowen said..

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