It's a buyers market.
Cannabis companies in the U.S. and Canada are turning to discounting their products to reduce inventories as the burgeoning marijuana market starts to get crowded with new players.
A growing number of adult-use brands and products are available to retailers, leading to aging inventories, Krista Raymer of cannabis consulting firm Vetrina Group told MJBizDaily.
The combined discount on mainly recreational cannabis sales in nine U.S. states (Arizona, California, Colorado, Illinois, Massachusetts, Michigan, Nevada, Oregon, and Washington) have jumped to 15% in April 2022 from 7% in June 2017, according to retail data from analytics firm Headset.
Total flower discounts in Washington, for instance, reached 20% for the first time in November 2021 and rose above 23% in April 2022.
In Nevada, total discounts on flower were higher than 20%. Of all the states that were tracked, only Massachusetts (one of the newer markets) had comparatively low discounts below 3%.
Meanwhile in Canada, total discounts in all provinces increased from less than 1% at the start of 2019 to 3.4% in April this year.
Shape of the Canadian Market
Aurora Cannabis (ACB), Tilray (TLRY), and Canopy Growth (CGC), three of Canada's biggest weed retailers, all mentioned inventory issues in their latest earnings calls.
Canopy for instance said that it took a C$119 million ($94.95 million) charge in its most recent quarter due to inventory write-downs "resulting from strategic changes to our business."
Meanwhile, Tilray says its "thesis" going forward remains that demand for higher end brands will rise as the pandemic retreats further in the rearview.
"However, in the meantime, as the industry is still in its early stages of development, the multitude of new entrants has led to increased competition, which resulted in loss of market share and price discounting," Tilray CFO Carl Merton said on his company's earnings call.
Aurora cannabis has openly expressed its need to cut costs.
"Simply put, our business is bigger than what we need, and we must position ourselves to better secure our path to profitability and ultimately be successful in this industry in the long term,” Chief Executive Miguel Martin said in a video message to employees.
The company says the sale is part of a plan to save Aurora between C$150 million and C$170 million (US$118 million to US$133 million) in annualized costs by the first half of next year.
Aurora also announced that it is selling its Sun facility in Alberta for C$47 million ($36 million) in a deal that hasn't closed yet.
The selling price is a fraction of the more than C$250 million the company spent on the greenhouse facility.
Cannabis Buyers Market
U.S. and Canadian cannabis companies have been discounting their products in order to move inventory.
The industry continues to dig out of the explosive buildout that occurred leading up to the pandemic.
Illinois, in its third year of legal recreational and medical cannabis sales, is experiencing the ups and downs of the marijuana market.
Data from May has both good and bad news.
For the second year in a row, adult use sales saw a big jump between February and March. Sales in Illinois increased to nearly $131 million from about $114 million, according to the state.
A year ago, sales figures jumped to $109 million from $80.7 million between February and March.
The bad news from May is that sales fell sequentially from April.
However, the plant's growth from $39.2 million in sales in January 2020 to $129.8 million in May 2022 has never been linear.
