Investors were eager to see how the first sales quarter developed on the Canadian recreational marijuana market. In the last few days, they received these first results from two of Canada's largest marijuana companies.
Aurora Cannabis (NYSE: ACB) and Canop Growth (NYSE: CGC) each reported the results for their quarters, which ended December 31st selling recreation. While some other Canadian manufacturers still have quarterly updates to submit, Aurora and Canopy provide some important pointers as to what investors can expect for other marijuana stocks.
Increasing sales – but do not expect large market shares
The sales growth that Aurora Cannabis and Canopy Growth achieved in recent quarters was impressive. Aurora increased net sales by 363% year-on-year. Net sales of Canopy increased 283%. As expected, this huge growth came from the initial sales of recreational pots in Canada. TLRY) and other major Canadian marijuana manufacturers report on their financial results over the next few weeks. You can bet that they will also announce tremendous revenue growth. However, do not expect the other companies to have a large share of the Canadian recreational market.
Aurora Cannabis said it had a 20% market share in consumer sales, according to Health Canada. The company achieved this market share with $ 21.6 million in Canadian recreational potential. Canopy's leisure sales were much larger – $ 57.7 million. There is not much market share between Aurora and Canopy for the other manufacturers.
Also keep in mind that Aurora and Canopy use much more production capacity than their counterparts. A company can only sell what it can produce or obtain from another marijuana breeder. With demand for recreational potential in Canada outstripping supply, market share correlates directly with capacity, more than any other differentiation factor between different product brands.
A Blurred Image for Medicinal Cannabis
Based on the Aurora and Canopy updates, there could be significant differences in the performance of other companies in the Canadian medical cannabis market.
Aurora Cannabis reports that sales of dried medicinal cannabis in Canada have increased 12% sequentially. On the other hand, Canadian sales of Canopy Growth for medicinal cannabis declined. Why were there such different results?
Aurora's quarterly comparison was supported by a full quarter of MedReleaf sales. The company completed its acquisition of MedReleaf on July 25, 2018.
Canopy attributed the decline in medical sales in Canada to several factors. First, the company estimates that the opportunity for patients to buy a recovery pot had fewer patients seeking prescriptions for medicinal cannabis. Second, Canopy has targeted its well-known Tweed brand to the recreational marijuana market and reoriented the Spectrum brand for the medical market.
Due to the unique nature of Aurora and Canopy, it is difficult to know how other companies, such as Cronos and Tilray, will evolve when they report Canadian sales of cannabis from Canada. Canopy's speculation that some patients bought a recovery pot instead of receiving medical cannabis could result in low or declining cannabis sales for other marijuana producers.
It is really early for international market opportunities.
Both Aurora Cannabis and Canopis Growth talked about the tremendous opportunities in the international marijuana markets. However, relatively low international sales showed how early it is in many of these markets.
Only 6% of Aurora's total cannabis sales came from international markets, mainly from Germany, and the company reported that European cannabis sales only increased by 1.8%
Canopy Growth had a stronger international one Sales growth, however, accounted for only 15% of the company's medical cannabis sales and just over 3% of net sales.
Tilray surpassed both Aurora and Canopy on the international front. In September 2018, Tilray was the first Canadian marijuana manufacturer to export both cannabis oil and cannabis flower products to Germany. In most cases, however, one can assume that international markets are a great opportunity for marijuana breeders, but stocks only a small percentage of their current sales. However, a snapshot of just a quarter does not provide a complete overview of the industry.
Both Aurora and Canopy expect higher margins for 2019 and are eagerly awaiting the opportunity to launch new products in Canada, including Canada, this year. Cannabis-based foods and beverages. Aurora and Canopy are also optimistic about the potential for entry into the US market in the not too distant future.
This encouraging outlook should also apply to other marijuana stocks, and the global market will continue to grow in the long run. As the old saying goes, a rising tide is raising all boats.