National pot sales up 25% to $54M in November; Quebec scales back store expansions

pot

Cannabis store sales totalled $54 million in November, the first full month of legal recreational pot sales, according to Statistics Canada.

The cannabis sales for the month a little more than 25 per cent from $43.1 million recorded in October, which included roughly two weeks of legal pot sales after Canada legalized cannabis for adult use on Oct. 17.

"Data for this Canadian industry are presented in unadjusted form as there is no seasonal pattern established by official statistics yet," Statistics Canada said Wednesday.

Pot stores saw the biggest percentage increase in sales amongst the retail sectors tracked by the agency with every other group showing a single digit increase or decrease.

Overall retail sales across Canada slipped 0.9 per cent to $50.4 billion in November. Economists had expected a drop of 0.6 per cent, according to Thomson Reuters Eikon.

The latest data comes as cannabis retailers continue to grapple with a supply crunch more than three months after recreational pot was legalized.

Government-run entities tasked with sales and distribution of adult-use pot have said they have received less product than expected and warned that the shortages could linger for months.

The latest statistics shed light on the market potential of the burgeoning industry, but cannabis sales performance varied widely among provinces.

Sales in Ontario, where cannabis can currently only be legally purchased through a government website, actually fell to $10.1 million in November from $11.7 million in October. In British Columbia, pot sales also slipped to $1 million in November from $2.3 million in October.

Recreational pot retail sales saw an uptick in Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Alberta and Saskatchewan.

Alberta, which had issued 17 cannabis retail licences on Oct. 17, saw the largest overall amount of sales in November at $12.1 million, up from $7.3 million in October.

Statistics Canada did not provide numbers for Northwest Territories, Nunavut or Manitoba, noting that the data was "suppressed to meet the confidentiality requirements of the Statistics Act."

Supply shortages hamper Quebec expansion plans

Quebec's cannabis agency generated about $40 million of sales in its first three months of operation, but supply shortages are forcing the public retailer to reduce its expansion plans.

The province expects to have 40 points of sale in March 2020, 20 per cent less than the 50 outlined in the original expansion plan.

Retail store shelves became empty soon after recreational cannabis was legalized on Oct. 17, a situation observed across the country.

The subsidiary of the Societe des alcools du Quebec cut back its hours of operation so that its 12 stores were open four days a week.

Jean-Francois Bergeron, president of the Societe quebecoise du cannabis (SQDC), says it put the network's expansion a bit on ice, which explains the network size being reduced to 40 stores.

He also said more time is needed to adapt to the recommendations of the provincial government, including a prohibition on stores openings near community colleges and universities.

Quebec Premier Francois Legault says the profitability of the cannabis operations is of little concern to him as he prefers to focus on terms governing the sale and consumption of the substance.

Legault told reporters at the World Economic Forum in Davos that his government has been busy raising the legal age to purchase marijuana to 21 years. The legislation tabled last month would also prohibit consumption in all public places, including parks and playgrounds.

While supply shortages continue, Bergeron said there should be an improvement by late spring when new volumes become available.

However, he said it will take patience before the situation is fully resolved, even as it plans three new store openings by summer.

Bergeron is reviewing plans but for now intends to expand the network even if that means stores must continue to close their doors a few days during the week.

"I think it's better for customers to have a larger network at four days a week than a seven-day network," Bergeron told The Canadian Press. "When branches are open, it's easier to gradually add a day of operation."

Bergeron said he expects the cannabis retailer will generate a profit at the end of its first full fiscal year of operations on March 31, 2020 and will report its performance after six months.

He estimates Quebec's 5.7 tonnes of sales have accounted for 35 per cent of the Canadian legal market. The average price per gram was $7.27 including taxes, compared with the Canadian average of $9.70.

The black market remains the lowest at $5.50 per gram, Bergeron added.

"With supply being below demand, it creates a huge upward pressure on prices," Bergeron said. "Producers know that the market is not balanced. This may create upward pressure in the short term."