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OCS Year in Review: Products and Profits

According to the Year in Review report from the Ontario Cannabis Retail Corporation (OCRC) and the Ontario Cannabis Store (OCS), during the second full fiscal year of selling legal recreational cannabis, 99,100,000 grams were purchased in the province, representing an increase in volume of 182% compared to the year before.
Seeing increases as the industry grows and evolves is natural, and an increase of 182% certainly seems impressive, but how do the OCS and Ontario retailers really stack up?

Retailers vs. OCS

When it comes to sales, private retailers brought in 84%, or 81,500,000 grams. Comparatively, customers only bought 17,600,000 grams online from OCS.ca.

Despite serving 78% of the population with 3-day express delivery, the people of Ontario still seem to prefer shopping in-store for their cannabis products. The report observed that with the growing popularity of extracts and vape products, which grew a whopping 795% over the year, customers have questions about products that they aren’t finding the answers to online. The OCS also noted that it received the highest number of complaints and returns on extracts and vape products.

While barriers to purchasing at OCS.ca have been reduced since Q3 of 2020, the most common complaints are still lack of bulk pricing, quality, and products being out-of-stock. Despite the improvements that have been made, returning visitors to OCS.ca dropped from 3.4 million in Q1 2020 to 1.2 million by the end of the year, and new visitors dropped from 2 million to 1.5 million, however, the website maintains a high conversion rate of around 10%, much higher than the average e-commerce website.

Regions By The Numbers

With the Alcohol and Gaming Commission of Ontario (AGCO) approving 30 Retail Store Authorizations (RSAs) per week, the degree of saturation in the province has been a hot topic of conversation.

According to the report, by the end of 2020 Ontario had 572 retail stores serving 122 communities, more than 10x as many as the year before. Stores in Toronto grew to 179 by Q4 2020, and over the year brought in $178.2 million in sales, or 20.6 million grams. Similarly, East and West Ontario earned $213.1 million and $219.7 million in sales, respectively, for their 123 and 188 stores.

Compared to northern Ontario and even the Greater Toronto Area (GTA), these areas seem to be doing very well, but that may not actually be the case.

If Toronto’s 179 stores sold 20.6 million grams total, that means each store sold around 115,084 grams each, or $995,530 in revenue.

In Northern Ontario, however, where 31 stores sold 10.7 million grams, each store moved 345,161 grams, worth $2.8 million in revenue. In the GTA, it’s the same story—the 51 stores in the region brought in $141.8 million in revenue, meaning that each store sold $2.78 million, or 313,725 grams.

As Statistics Canada’s monthly retail reports show, stores in Toronto, as well as in rural areas, are continuing to notice a decline in revenue as store-count rises.

Emerging Product Categories

In an interesting twist, extracts have taken over edibles as the new novelty cannabis product. Edibles, which used to make up a growing share of purchases, have taken a backseat to extracts and vape cartridges, which have increased in popularity 795% over 2020.

Dried flower always stays on top, but by the end of 2020, vapes made up 16% of sales with edibles only accounting for 4%.

According to the report, customers are losing their sweet tooth for edibles, now favouring candies and gummies over chocolate and cookies. Resin, rosin, and fun new styles and flavours of vape products have surged in popularity as more offerings become available—a phenomenon we are seeing in topicals and other wellness products like bath bombs.

Despite struggles with COVID-19 lockdowns, restrictions, and the uncertain future brought on by rapidly blooming store numbers, Ontario remains the largest market for recreational cannabis in Canada, at least in terms of revenue. Can they keep it up? We’ll find out.