Dried flower is the largest part of this young cannabis market by units and by value, but investors can’t afford to ignore the oil market. The infrastructure that is successfully serving it has the inside track on the coming extracts and edibles market, having already gone through the time and expense of developing relationships and dialling in the hardware and processes.

The various grades of oil make it impossible for us to do a straight across equivalency conversion from litres to kgs, but it’s fair to say that oil is a much smaller portion of the rec market than flower products. Dried flower SKUs out-numbered oil and capsule SKUs in our sample dispensaries 1764 – 201, and in-stock flower products out number in-stock oil products 951-178.

Nationwide cannabis oil sales and inventory

Cannabis oil sales are distinctly flat period over period, but the real action is in the inventory numbers. A pronounced drop in inventory at the distributor level indicates that the provinces and the retail shops are having trouble moving what they have.

It’s important to note that 4,296 litres of the 9,854 litres sold to Canadians in July was sold on the medical market direct to patients, and we don’t have the data to break those numbers down. But our scrapers were able to get a good read on the retail half of the oil market. Let’s have a look:

The SKU scrape is illustrating product that tends not to move. Almost everyone is able to keep everything they have listed in stock. Product count leader Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) showed 54 in-stock products out of 58 listed this time, and 59 in stock out of 93 listed back in January. It’s been noted that WEED has had trouble moving capsules. The Smith Falls, ON company made $8 million worth of allowances for capsule returns in their Q2 financials. Their oil and capsule product mix has changed slightly since our last scrape.

Rival mega-grower Aurora Cannabis (TSX:ACB)(NASDAQ:ACB) was stocking 16 of 29 listed products in January, and has grown to stock 32 of 43 products listed in October. Apart from ACB, these profiles are consistent with product that likes to stay on the shelf.

The flat sales and drop in provincial inventory in July doesn’t square with license holders making more of it. Medical sales track the same flat line as broad sales, so it’s hard to imagine what the LPs think they’re doing with these concentrates. We expect that the three month lag between the Health Canada data and this latest store scrape will end up showing lower inventory totals at LPs as orders from the provinces dry up.

Bulk oils market

The processor that appears to be taking the most advantage of the wholesale oils market is Medipharm Labs (TSX:LABS), who printed $31 million in Q2 revenue making custom concentrates for larger LPs, including Canopy and Cronos Inc. (TSX:CRON)(NASDAQ:CRON), and laying the groundwork for an extracts relationship that will try to make some use out of Canopy’s mountain of unsellable dry flower when edible and extracts sales open up in January.

Aurora likes to talk up the high-tech extraction capabilities of their portfolio company Radient Technologies (TSX.V:RTI), but only received their first shipment from RTI this past May. The literature leaves the impression that the Vancouver-based processor will figure in to Aurora’s plans for extract production more than concentrate production. ACB is either making this oil in house, or they’re the LABS mystery client.

LABS is the only public company who appears to be doing any significant business in the Canadian concentrates market at present. Indications of a flattening market and their head start building relationships with the larger growers is going to make it difficult for the burgeoning licenses to compete in the concentrates market, but that doesn’t keep them from selling stock on the prospect that they can do it anyways. Much aggressive promotion has made hay out of the as-yet unknown potential of the coming extracts market, and we’re going to have a look at those fledgling companies, along with several other producers notably absent from these consumer markets in the next edition of Marijuana Datajam.

This post and the graphics it contains are the author’s original work, created with data sourced from Health Canada and scraped from the catalogs of the BC, Ontario, PEI and Newfoundland on-line cannabis sales portals. Fundamental Hype has received no consideration, financial or otherwise, from any of the companies or entities referenced in this post. It is not sponsored content, and is not investment advice (or even “tips!”). More on all that here.