Canadian cannabis producer Tilray has seen around one-third of its market share in Canada evaporate since it merged with Aphria in May, new data suggests, while rival Auxly Cannabis Group has more than doubled its position over the same period.

The latest market share data for October indicates the biggest licensed producers continue to hold flat or falling shares of the market while smaller, more focused companies appear to be picking up more of those sales.

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“The biggest reason we see as a retailer (for struggling large producers) is the craft producers that are coming in. The smaller guys are doing a great job taking significant market share,” Raj Grover, CEO of Alberta-based retailer High Tide, told MJBizDaily in a phone interview.

“Craft producers are doing a really good job focusing on the product itself, and it’s showing in sales.”

The data – from digital retail platform Hifyre – was contained in a note from BMO Capital Markets analyst Tamy Chen.

BMO doesn’t use HiFyre’s extrapolated data for Quebec because there is no point-of-sale transaction data for the province.

Instead, BMO considers sales only at more than 320 stores in Alberta, British Columbia, Ontario and Saskatchewan.

Chen described Canada’s biggest licensed producers as having separated into two groups: share gainers and flat/losers.

Toronto-based Auxly and Moncton, New Brunswick-based Organigram Holdings both gained significant ground over the course of 2021.

Companies that have lost share include Alberta-based Aurora Cannabis, Toronto-headquartered Cronos Group, Quebec-based Hexo Corp., Ontario-based Canopy Growth Corp. and New York-headquartered Tilray.

Pure Sunfarms, the cannabis subsidiary of Village Farms International in British Columbia, has not gained meaningful ground since spring.

“We highlight notable share outperformance by Auxly in September and October and notable share underperformance by Hexo and Tilray over the entire charted period from October 2020 to October 2021,” Chen wrote.

As of October, Hexo was estimated to take the No. 1 market-share position in those four provinces by virtue of sinking more slowly than its main rival, Tilray, over the course of 2021.

Hexo’s estimated share in October was almost 13%, down from 17% at the start of the year.

Tilray’s share fell to approximately 12% in October.

Before Tilray merged with Aphria, the two businesses had combined for almost 20% of Canada’s adult-use cannabis sales one year ago.

Organigram, Auxly stand out

Organigram and Auxly started the year with an estimated market share of 4% and 5%, respectively, in the four provinces, according to the Hifyre data.

As of October, Organigram had almost doubled its share to about 7%.

Auxly did even better, rising to about 10%, overtaking Canopy Growth in the four key provinces, the data suggests.

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Auxly President Mike Lickver credited the company’s ability to pivot and its focus on consumers for its ascent this year.

Lickver told MJBizDaily that Auxly’s growth “continues to be driven by our unwavering commitment to understand and cater to the needs of consumers through insights-driven innovation, strategic planning, and executional excellence.”

He said a differentiator is Auxly’s “capability to innovate and develop products based on consumer insights and then quickly and effectively work with our key channel partners to distribute those products across the country.”

He said the company used that process to launch over 50 new SKUs this year.

“The success we’re experiencing now is the direct result of the dedication and passion of our team across the entire organization who are fired up to keep driving Auxly forward, and we could not be more excited for the future,” Lickver said.

Store-saturation warning

Meanwhile, Chen flagged retail store saturation in some parts of Ontario, the largest regulated cannabis market in Canada, as a growing concern.

“Given the store saturation in parts of (Ontario), we are increasingly worried about the looming possibility of retail closures in the province,” Chen wrote.

“Such a scenario presents downside to all of our LP estimates.”

Some of the biggest cities in the province, including Mississauga, still do not allow legal adult-use cannabis sales.

Chen warned that Canada could experience year-over-year declines in recreational sales starting in 2022 unless more municipalities opt in for cannabis stores.

She said meaningful margin compression at retail is unlikely to abate soon and could especially challenge independent retailers.

“We are worried that 2022 could be a year of retail closures in Ontario,” Chen noted.

Matt Lamers can be reached at matt.lamers@mjbizdaily.com.