2021 was a year of big change for the Canadian cannabis industry as 1,430 new retailers opened across Canada, with most of those stores appearing in Ontario, which went from 328 stores at the end of 2020 to 1,295 stores by December 2021.
A vast array of new products also came into those stores along with a lot of innovations in Cannabis 2.0 categories giving stores new product lines to help them compete with the illicit market.
The Brightfield Group provided the following market insights from 2021 in its Canada Cannabis Industry Update.
Legacy Market Gaining on Illicit Market
According to StatsCan, spending on regulated adult-use cannabis has outpaced that of the legacy market in every quarter since Q3 2020, largely following a period where brands focused on bringing flower products to market that undercut legacy prices.
2021 saw significant product innovation, especially in previously neglected Cannabis 2.0 categories including concentrates and topicals, as well as a proliferation of craft brands competing with large LPs for the increasingly sought-after premium flower segment, which offers margins as much as 4x higher than value flower product.
According to the report, vapes are increasingly seeing price differentiation, with more expensive products often being marketed as “live resin” or “live terpene” and created via extraction processes which maintain a greater essence of the flower.
Drink products were slow to roll out, but now have a significant number of varieties in multiple formats, with cold beverages proving to be more popular among both LPs and consumers than hot beverages.
Some lotions and salves were launched in 2021, but this category has seen less innovation and fewer product launches than other Cannabis 2.0 products.
The Competitive Landscape
Companies both large and small launched new and innovative products in 2021. Producers also focused on improving margins by shifting towards premium products which provide better margins than lower-cost, bulk products, although these still form the majority of sales.
There is currently little indication that provinces like Quebec with government-run stores are going to change in the near future, despite lobbying from LPs.
However, 2022 will continue to see new retailers opening in other provincial markets and we can expect to see a lot more new product innovations from LPs.