It’s hard not to be encouraged by cannabis retail revenue in Ontario — with the country’s most populous province cementing its lead position — and the pace of growth likely continuing for a couple more years before reaching store saturation.

The sleeping giant that is Ontario cannabis retail seems to be waking, with the province registering the highest revenue of any jurisdiction in the country for the third month running.

“The industry is continuing to grow and that’s really good for all the key players involved,” Trang Trinh, founding director and CEO of TREC Brands, which stands for trust, respect, equality and compassion, says of Statistics Canada’s latest monthly figures.

The numbers show that legal retail weed sales in Ontario were about $66.9 million in August, an amount that has grown steadily over recent months from $40.3 million in April to $41.1 million in May, $48.9 million in June and $60.3 million in July.

Beyond the steady growth, Ontario revenue for June, July and August were also higher than for Alberta, the early and impressive pacesetter for cannabis retail in the country.

From April to August, Statistics Canada reports that Alberta’s monthly weed retail revenue for those five months was $42.3 million, $46.3 million, $46.7 million, $51.8 million and $52.6 million.

The next two provinces with the biggest revenue haul, Quebec and B.C., have also generally seen figures go up since April. Quebec’s weed retail revenue was $44.6 million in August and B.C.’s was $36.5 million, according to Statistics Canada.

Alberta’s performance was quickly first-rate compared to Ontario. / Photo: Andrii Sedykh / iStock / Getty Images Plus / Photo: Andrii Sedykh / iStock / Getty Images Plus

“The revenue should be greater than Alberta as long as we continue to get our distribution right,” Trinh says of Ontario.

Alberta’s performance was quickly first-rate compared to Ontario, which stumbled out of the gate with a lottery system that has since been scrapped. “At least for the short term, the next year to two years, the market will continue to be on this explosive growth path,” Trinh expects of Ontario cannabis retail. “If you look at the number of LCBOs (Liquor Control Board of Ontario), that’s probably how many stores that Ontario could support, so I think that’s over a thousand stores for sure,” she told The GrowthOp.

Figures from the LCBO’s annual report for 2018-2019 indicate there are 666 LCBO stores serving Ontario communities, it is the wholesaler to 363 grocery stores around the province and there are 209 LCBO Convenience Outlets.

Asked about whether or not she expects more stores in Alberta in future, Trinh tells The GrowthOp: “I think Alberta is likely at its saturation point.”

The reason that Ontario is now outpacing Alberta in revenue relates to distribution and the decision by the Alcohol and Gaming Commission of Ontario to double the pace of store authorizations. / Photo: iStock / Getty Images Plus iStock / Getty Images Plus

The reason that Ontario is now outpacing Alberta in revenue, she suggests, is because of distribution and the Alcohol and Gaming Commission of Ontario (AGCO) announcement on Sept. 1 to double the pace of store authorizations.

By Sept. 29, AGCO reported that it would be issuing five to 10 authorizations weekly. As of that date, there were 194 authorizations and 173 authorized stores up and running in the province, the commission noted, adding it will continue to work with the provincial government to up the number of authorizations.

If all goes according to plan, Trinh says that could mean Ontario has about 300 stores by the end of 2020. That would move Ontario toward Alberta territory, which has about 530 stores, indicates an Alberta Gaming, Liquor and Cannabis listing.

What Trinh sees as Alberta’s current (or fast approaching) saturation point may simply come down to population: There were 4.4 million people in Alberta in 2019 compared to 14.6 million in Ontario.

In some parts of the country, there’s still seems to be plenty of room for growth. / Photo: stockce / iStock / Getty Images Plus / Photo: stockce / iStock / Getty Images Plus

Having previously worked at Deloitte, Trinh says the company estimated in 2018, before products had become available, that the cannabis sales as a whole could hit the $7 billion mark. In mid-2019, the company reported that just the Cannabis 2.0 products could create a consumer market for edibles and other alternative cannabis products worth more than $2 billion a year.

If those figures are correct, that means there’s still plenty of room for growth. The Statistics Canada figures for the single month of August show that the country’s cannabis retail revenues were $244.9 million. That is up from a country total of $178.4 million just four months earlier in April 2020.

In an opinion piece, Trinh calls the growth explosive, with July’s total at $232.7 million more than $30 million up from the $201.1 million in June, representing “the largest monthly increase since the opening of the legal market almost two years ago.”

Clearly, there are now more stores and more products available, but compare Canada’s latest single-month total of $244.9 million to the $908 million in retail and online sales for the whole of 2019.

Consolidation, some of which is already being seen two years into the cannabis experiment, is expected to unfold. / Photo: THE CANADIAN PRESS/Darryl Dyck THE CANADIAN PRESS/Darryl Dyck

Regardless of province, one should expect that as saturation nears, there will be another shift in the lay of cannabis retail land. Trinh’s expectation is top-tier companies and brands will buy out stores that, for example, may not have backend efficiencies and can no longer make a profitable go of it.

Companies that do have those efficiencies “can probably turn around those stores that probably aren’t making as much money,” she notes.

Consolidation, some of which is already being seen two years into the cannabis experiment, is expected to unfold, followed by regular business performance reviews.

Companies will “review their stores and ones that aren’t profitable, they’ll probably get rid of, others, they’ll keep,” Trinh suggests. “So I think that definitely once we get to saturation, that will happen.”

Until that point, stores in a number of provinces are expected to continue to grow. The Ontario Cannabis Store (OCS), responsible for legal online sales, recently offered some encouragement that efforts to make a dent in the persistent illegal weed market — 40.1 per cent of polled consumers said they obtained weed from an illegal supplier in 2019 compared to 51.7 per cent in 2018 — are working.

“More Canadians are accessing cannabis legally than ever before.” / Photo: robertsrob / iStock / Getty Images Plus robertsrob / iStock / Getty Images Plus

The OCS reports that the average price of dried flower per gram on the provincial retailer’s website for Apr. 1 through June 30 was $7.05 including taxes, compared to an average $7.98 for flower on illicit mail-order sites.

And while not directly comparable because of differences in survey methodology or design, according to Statistics Canada, “more Canadians are accessing cannabis legally than ever before.”

Trinh is encouraged. “While we are increasing our revenues in the legal channel, we are also taking market share from the illegal market as well,” she points out.

“I do think that, especially the new consumer or the canna-curious, will continue to feel more comfortable going into a legal storefront or buying online than reaching out to the neighbourhood drug dealer,” she says. “And especially with COVID, people want alternatives to be able to relax and distress and alcohol is not the best alternative.”

Trinh suggests that just being two years from legalization has helped to stamp down stigma. / Photo: Getty Images/iStockphoto Getty Images/iStockphoto

Trinh points out that other than more cannabis stores, having more new formats bodes well for the health of the industry as a whole. Providing everything from flower to vapes, topicals, tinctures, edibles and beverages as options “makes the product more accessible to people who are not wanting to light up a joint,” Trinh says, adding that she believes “it will only continue to get better.”

Beyond more stores and more products, though, Trinh suggests that just being two years from legalization has helped to stamp down stigma. That being the case, “you get more new users to the market,” she says. “I’m not saying the stigma has been completely eradicated, but it’s definitely decreasing.”

It’s something that TREC Brands — which oversees a number of cannabis brands that were developed based on how consumers shop — hopes to advance. The company donates 10 per cent of its gross profits back to transformative causes identified by surveyed customers and focuses on educating consumers and destigmatizing cannabis use.