Wednesday, Nov. 11, will be all things Canadian cannabis at MJBizCon’s Passholder Days. Topics range from the role of small producers to global opportunities for Canadian companies, among others. More information is available here.
Cannabis stores and cultivators aren’t the only businesses cashing in on the early success of Canada’s regulated marijuana market.
Ancillary businesses catering to the niche home cultivation segment are also faring well, according to government data and industry sources.
Experts cite a number of factors for the niche market’s success, such as:
- A strong seasonal element.
- A pandemic-related boost.
- Improved selection of genetics in regulated channels.
BC Northern Lights, which caters to the home cultivation market, has seen “a huge spike” since the COVID-19 pandemic hit.
A seasonal factor is at play, too, as consumers look to take advantage of the summer growing season.
Health Canada data shows seed sales rose eight times between February and June this year. Sales fell off again at the end of summer but remained relatively strong through August.
Most provinces allow home cultivation of four plants per household.
“To some extent, you can attribute it to people being at home and they have time. People are stressed out and they’re burning through more product,” BC Northern Lights founder Tarren Wolfe told Marijuana Business Daily.
Aurora Cannabis acquired the company in 2017 to capitalize on the grow-your-own market, but earlier this year Aurora sold BC Northern Lights back to its founders to focus on “core competencies.”
“Sales quadrupled,” Wolfe said. “We had a two-month back order at one point.”
Wolfe said people are becoming more comfortable with home cultivation, whether it’s outdoor in the warmer months or indoor during the winter.
“As they come out of the closet due to legalization, more friends are being told, so our organic growth has increased,” he said.
Gatekeeper ups game
Earlier this year, the Ontario Cannabis Store (OCS) promised to create a “robust” regulated marketplace for seed varieties to bite into the entrenched market share of illicit sellers.
It was a bold vision given that the OCS, the province’s sole cannabis wholesaler and online sales channel, was essentially starting from scratch.
The efforts have borne fruit, according to recent data – though the person responsible for the category acknowledges there remains a long way to go.
The OCS moved roughly 175,000 Canadian dollars ($140,000) of seeds between April and June, equating to about 12,800 grams (12.2 pounds).
In an interview with MJBizDaily, OCS Category Manager Peter Shearer said the retailer has made significant progress, but he acknowledged the task ahead.
“Currently, the illicit market offers a much broader assortment of seeds, and I would assume the vast majority of seed sales still reside in the illicit market,” he said.
“To that point, I think there’s an amazing opportunity to continue to develop the assortment and entice these consumers who purchase seeds quite frequently.”
Shearer is working to close the gap.
“The goal is to make OCS.ca and Ontario’s retailers a destination for seed purchases. It’s going to take some time,” he said.
“I think the success of the category will hinge on us bringing in a broader assortment. I don’t think that we will be a destination for the vast majority of consumers purchasing seeds until we have a better selection.”
Shearer said sales picked up earlier this year partly as a result of the pandemic.
“Much like baking sourdough and taking up a bunch of other hobbies, growing cannabis has certainly been part of that mix of new activities people are pursuing during the pandemic,” he noted.
“There’s always going to be a seasonal boost. Springtime is always going to result in more sales for seeds, but as we develop the category and broaden the assortment, we’re going to capture more of those indoor home growers.”
Some retailers have sold more grow-your-own accessories and genetics.
Steven Fry, CEO and co-founder of Ontario-based retailer Sessions Cannabis, said he has seen an increase in sale of seeds month over month.
“And the category has doubled in sales from July to October,” he said.
The top month for seed sales was September, Fry said, suggesting consumers are planning to take their outdoor grows indoors for the winter.
“Sessions Cannabis likely sees higher sale of seeds given we are a full-service cannabis shop that sells indoor (and) outdoor growing equipment,” he said, adding that the category is a small percentage of overall sales.
Across the board
Grow It All, a business in Toronto focused on the home cultivation market, is seeing an uptick across the board – not limited to homegrown cannabis.
Owner Trevor Wilkinson attributed strong sales to an interest in home cultivation in general.
“We’re seeing an uptick, but it isn’t just related to cannabis,” he said.
“Everybody’s growing all sorts of things. A lot of people are growing food, microgreens, mushrooms.”
Wilkinson also suggested that consumers are looking for ways to support small businesses.
“I think we’re also seeing there’s been a bit of a backlash against the larger companies, and people want to support whatever small companies are out there,” he said.
Matt Lamers is Marijuana Business Daily’s international editor, based near Toronto. He can be reached at email@example.com.