Weed Stocks – May 30 2019 – RICH TV LIVE – MAY 30 2019 –
Health Canada Releases March Cannabis Sales And Inventory Data – Inventories Continue To Rise
With sales generally slightly up in Q1 2019 versus Q4 2018, it appears that LPs that significantly increased sales Q over Q did so primarily from gains in market share. Aurora (ACB), for example, reported a 31% increase in kilograms sold quarter over quarter. That level of increase indicates an increase in market share versus market growth. Similarly, Tilray (NASDAQ:TLRY) reported a 47% increase in kilograms sold in Q1 (albeit from a much smaller base than ACB), the majority of which was likely attributable to market share gains. Similarly, Hexo (HEXO) showed a large increase of 142% in volumes sold quarter over quarter (also from a very small base). Some smaller producers showed a decline in sales, such as CannTrust (CTST). It will be interesting to see Canopy’s numbers when they report.
Dried cannabis inventory levels continue to increase, with March showing an acceleration of both unfinished and finished inventory levels. Finished dried cannabis inventories at the end of March stand at 4x monthly demand and unfinished dried cannabis inventories at the end of March stand at an incredible 18.8x monthly demand. This is a very concerning sign. Oils inventories in March did not show the same acceleration in supply. Perhaps firms are beginning to keep a portion of production for edibles manufacturing later this year.
The data shows that inventory oversupply is coming – the only question is when. Tilray’s management (who it must be said have been some of the more reasonable in their industry predictions) said on their recent call:
We now believe there could be a supply balance in Canada in the next 18 months to 24 months, as the market finds an equilibrium between supply and demand. This is longer than our estimate just eight weeks ago, as the industry continues to struggle ramping production in the existing regulatory environment.
Maybe so, but 18 to 24 months seems awfully long considering the trends in the data through March, particularly when factoring in the flood of new supply coming online this year.
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