Cannabis Production in CanadaNovember 2018 1
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Joint venture: The legalization of recreational
marijuana has brought revenue to new highs
This report was provided to
University of Alberta (2133882029)
by IBISWorld on 08 September 2019 in accordance with their licence agreement with IBISWorld
IBISWorld Industry Report 11141CA
Cannabis Production in Canada
November 2018
Ediz Ozelkan
2
About this Industry
16 International Trade
32 Regulation and Policy
2
Industry Definition
17 Business Locations
33 Industry Assistance
2
Main Activities
2
Similar Industries
19 Competitive Landscape
34 Key Statistics
2
Additional Resources
19 Market Share Concentration
34 Industry Data
19 Key Success Factors
34 Annual Change
3
Industry at a Glance
19 Cost Structure Benchmarks
34 Key Ratios
4
Industry Performance
22 Barriers to Entry
4
Executive Summary
23 Industry Globalization
4
Key External Drivers
6
Current Performance
25 Major Companies
8
Industry Outlook
25 Aurora Cannabis Inc.
22 Basis of Competition
10 Industry Life Cycle
35 Jargon & Glossary
26 Canopy Growth Corporation
27 Aphria Inc.
12 Products and Markets
12 Supply Chain
29 Operating Conditions
12 Products and Services
29 Capital Intensity
13 Demand Determinants
30 Technology and Systems
14 Major Markets
31 Revenue Volatility
www.ibisworld.ca | 1-800-330-3772 | info @ibisworld.ca
Cannabis Production in CanadaNovember 2018 2
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About this Industry
Industry Definition
This industry includes all companies
licensed by Health Canada to
cultivate, produce and sell products
containing marijuana for medical
and recreational consumption. The
Main Activities
The primary activities of this industry are
value of medical marijuana grown
privately and illegal purchases of
cannabis products for recreational
use are both excluded from
this industry.
Growing marijuana
Retailing marijuana products
Processing marijuana into derivatives and consumer products
The major products and services in this industry are
Capsules/seeds
Concentrates
Dried cannabis
Other
Similar Industries
31214CA Distilleries in Canada
Distilleries produce spirits and other alcoholic beverages.
31222CA Cigarette & Tobacco Manufacturing in Canada
This industry manufactures cigarettes and other tobacco products.
32541aCA Brand-Name Pharmaceutical Manufacturing in Canada
This industry manufactures pharmaceutical products used to treat illnesses.
Additional Resources
For additional information on this industry
www.canada.ca/en/health-canada
Health Canada
www.mpp.org
Marijuana Policy Project
www.norml.org
National Organization for the Reform of Marijuana Laws
www.statcan.gc.ca
Statistics Canada
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Provided to: University of Alberta (2133882029) | 08 September 2019
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3
Industry at a Glance
Cannabis Production in 2018
Key Statistics
Snapshot
Revenue
Annual Growth 13–18
Annual Growth 18–23
Profit
Wages
Businesses
$916.6m 115.3%
53.6%
$-183.0m $342.9m 120
Number of adults aged 65 and older
Revenue vs. employment growth
Market Share
Aurora Cannabis
Inc. 25.9%
1600
8
Canopy Growth
Corporation
16.1%
Million people
% change
1200
800
400
0
Aphria Inc.
9.2%
-400
Year 10
12
14
16
Revenue
18
20
22
24
7
6
5
4
Year 10
12
14
16
18
20
22
24
Employment
SOURCE: IBISWORLD
p. 25
Products and services segmentation (2018)
5.3%
Key External Drivers
7.8%
Regulation
Other
Capsules/seeds
Number of adults
aged 65 and older
External competition
Per capita disposable
income
Total health expenditure
56.0%
Concentrates
30.9%
Dried cannabis
p. 4
SOURCE: WWW.IBISWORLD.COM
Industry Structure
Life Cycle Stage
Revenue Volatility
Capital Intensity
Growth
Very High
High
Regulation Level
Technology Change
Heavy
Medium
Barriers to Entry
High
Industry Assistance
Medium
Industry Globalization
Low
Concentration Level
Medium
Competition Level
High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 34
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 4
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Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive Summary
Over the five years to 2018, the
Cannabis Production industry in
Canada has transitioned from a single
government-sponsored provider of
medical cannabis products to a highly
competitive industry comprising dozens
of private companies. In late 2013,
Canada enacted the Marihuana for
Medical Purposes Regulations, which
expanded access to medical marijuana by
enabling Health Canada to issue licences
for private companies to cultivate,
The
opening of the recreational market is
expected to sustain industry revenue growth
produce and sell cannabis products to
registered patients with medical
prescriptions. This policy shift has
resulted in surging demand for medical
cannabis, with the number of clients
registered at Health Canada’s licensed
providers increasing from just 15,545
clients in December 2014 to over
330,000 clients in May 2018. As a result,
industry revenue is estimated to increase
at an annualized rate of 115.3% to $916.6
million over the five years to 2018.
Key External Drivers
Regulation
In recent years, the loosening of
government regulations on the sale
and consumption of medical marijuana
has resulted in surging demand for
industry services. In 2018, the degree
of government regulation affecting
this industry will likely decline, in line
with the passage of the Cannabis Act
in October. This development
represents a potential opportunity
for industry operators.
Number of adults aged 65 and older
Individuals aged 65 and older are more
likely to require medical marijuana
The Cannabis Act was implemented
in October 2018, which legalized
recreational marijuana for individuals
over the age of 18. The flowering
recreational market has only just begun
to influence industry operations, but it
offers the newfound enterprises that
comprise the industry room to grow. This
budding industry is projected to flower as
a loosened regulatory environment
fertilizes the consumer landscape
permitting cannabis producers to take
root, leading to a 111.0% spike in industry
revenue in 2018 alone as recreational
marijuana is legalized.
In turn, this legislation substantially
increased the industry’s total customer
base, as the population of Canadians who
have used cannabis products is expected
to reach 5.1 million people in 2018,
according to data from Statistics Canada.
The opening of the recreational market is
expected to sustain industry revenue
growth. However, initially high retail
prices due to insufficient supply is
expected to be ameliorated in upcoming
years, limiting industry revenue growth.
Ultimately, industry revenue is forecast
to grow at an annualized rate of 53.6% to
$7.8 billion over the five years to 2023.
products, as health conditions commonly
treated with medical marijuana (e.g.
Alzheimer’s disease) are particularly
prevalent among members of this age
group. As the population ages, demand
for industry services will grow, resulting
in revenue growth. The number of adults
aged 65 and older is expected to increase
in 2018.
External competition
Providers of medical marijuana must
compete with conventional healthcare
services and products, as well as blackmarket alternatives, as the vast majority
of marijuana in Canada is still sold
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Industry Performance
illegally. External competition from
traditional drug and healthcare
providers, as well as from black-market
sources, is expected to grow in 2018,
posing a potential threat to the industry.
Per capita disposable income
While demand for medicinal products
that require a prescription is generally
unaffected by fluctuations in overall
consumer expenditure, many consumers
pay out of pocket for industry products.
As a result, the industry’s medical
cannabis services benefit from rising
levels of disposable income and
improving consumer conditions. Per
capita disposable income is expected to
increase in 2018.
Total health expenditure
Total health expenditure captures
the total amount of private and
public spending on healthcare
services and products. Since the
bulk of industry revenue is derived
from the lucrative medical market,
increases in health expenditure should
place upward pressure on industry
revenue. In 2018, total health
expenditure is expected to rise.
Per capita disposable income
Number of adults aged 65 and older
8
3
7
2
% change
Million people
Key External Drivers
continued
6
5
4
Year 10
1
0
12
14
16
18
20
22
24
-1
Year
12
14
16
18
20
22
24
SOURCE: IBISWORLD
Provided to: University of Alberta (2133882029) | 08 September 2019
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Industry Performance
Cultivating the
recreational market
Over the five years to 2018, the Cannabis
Production industry in Canada has
experienced several major shifts in
industry regulations, as well as broader
public perception, sprouting numerous
cultivation and processing operations in
the process. Historically, the industry
has been composed of a small number of
independent companies that are
licensed by Health Canada to provide
medical marijuana to patients with
prescriptions. However, this competitive
market for medical cannabis products
was only formed in 2013. As a result, the
past five years have been characterized
by a wave of new operators entering this
budding market, in addition to
significant product innovation.
Ultimately, industry revenue is
estimated to increase at an annualized
rate of 115.3% to $916.6 million over the
five years to 2018, primarily driven by a
loosening of the medical marijuana
regulatory framework.
Furthermore, while the industry has
taken root in the medical marijuana
market, opportunities abound in the
recently flowered recreational
consumption market. The Cannabis Act,
implemented on October 17, 2018,
legalized recreational marijuana use
domestically. The anticipation of this
legalization prompted myriad newfound
enterprises and catalyzed profound
capital expenditures to develop an
agricultural, processing, distribution
and retail infrastructure for the
cultivation and sale of cannabis products
to the consumer market. Accordingly,
the structure of the industry and its
potential for growth has fundamentally
changed, facilitating a projected
expansion of 111.0% in 2018 alone.
Amid surging consumer demand for
medical marijuana and the legalization
of recreational marijuana in late 2018,
the number of enterprises in the
Cannabis Production industry is
projected to increase at an annualized
rate of 82.1% to 120 companies over
the five years to 2018, while total
industry employment has grown an
annualized 44.6% during the same
period, reaching an estimated 6,959
employees. However, despite strong
downstream demand, compliance costs
and significant initial capital outlays
have made it difficult for operators in
this emerging market to generate profit
as industry operators create the
infrastructure that will enable returns in
the long run. Overall, the industry is
estimated to record an average profit
margin of -20.0% in 2018, though
industry profitability will likely improve
in coming years, as the industry begins
to benefit from economies of scale,
increased purchasing power and other
operating efficiencies that are common
in more well-established industries.
Industry revenue
1200
900
% change
Current
Performance
600
300
0
Year 10
12
14
16
18
20
22
24
SOURCE: IBISWORLD
Provided to: University of Alberta (2133882029) | 08 September 2019
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Industry Performance
Budding market for
medical marijuana
For decades, proponents of medical
marijuana have argued that cannabis
products could be used to treat or
ameliorate a wide range of ailments,
including Alzheimer’s disease, anorexia,
glaucoma, cancer, arthritis, epilepsy,
nausea, migraines and multiple sclerosis.
In 2001, Canada became one of the first
countries to legalize the production and
consumption of marijuana for medical
purposes, though these early operations
were somewhat limited in scope. Under
new regulations, individuals with a
medical prescription were permitted to
grow a small amount of their own
cannabis or purchase cannabis from a
single Health Canada-affiliated producer,
Prairie Plant Systems Inc. (PPS). PPS
remained Canada’s sole legal provider of
medical cannabis until 2013, when the
Marihuana for Medical Purposes
Regulations were enacted. Under this
law, private companies could apply to
Health Canada for a licence to produce
and distribute dried marijuana flower to
individuals holding a prescription;
however, these regulations also
Extracting demand
The development of cannabis derivate
products has also spurred greater
consumer acceptance of medical and
recreational marijuana. Cannabis
derivates primarily take the form of oil,
which can then be used for medical
purposes in capsules and topical
solutions or for consumer applications in
beverages and food, also known as
edibles. Edibles can take the form of
food, extracts and oils, ranging from
marijuana-infused oils to finished
products such as candies, baked goods
and beverages, among many other
products. Edibles provide a more
convenient and familiar product to
consumers, stimulating consumer
prohibited patients from growing their
own medical cannabis at home.
Since then, dozens of companies
have entered the market for medical
marijuana, while a series of court
decisions has caused the Canadian
government to redefine and further
loosen restrictions on medical marijuana
sales, including the re-establishment of
provisions for patients to grow their own
cannabis and the expansion of legal
forms of medicinal cannabis to include
oils, edibles and other previously niche
products. As a result of these trends, the
use of medical marijuana has increased
substantially in recent years. According
to data from Health Canada, more than
330,000 clients were registered to
purchase medical cannabis through
licensed producers in May 2018, up from
just 15,545 clients in December 2014.
This trend has been supported by the
country’s growing population of elderly
individuals, a demographic that typically
consumes a disproportionately large
share of healthcare services, including
medical cannabis.
Edibles
provide a more
convenient and familiar
product to consumers
demand for marijuana products. Many
providers have also expanded their
product lines to include vaporizers, joints
and other cannabis products. Leading
operators have embraced product
development, causing the production of
cannabis derivatives and concentrates to
overtake traditional dried cannabis
products in 2017, marking a paradigm
shift in industry production and
downstream demand.
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Industry Performance
Industry
Outlook
Moving forward, the Cannabis
Production industry in Canada will
continue to blaze a trail through the
Canadian economy, though industry
revenue growth will decelerate as the
explosions of activity following recent
policy changes begin to settle down. This
budding industry is projected to flower as
a loosened regulatory environment
fertilizes the consumer landscape
permitting cannabis producers to take
root. After the passage of the Cannabis
Act in October 2018, the industry is
projected to benefit from substantial
pent-up demand for recreational
marijuana, as many of the estimated 2.1
million individuals in Canada who
consume cannabis at least once per week
Legislation and
consumer trends
The Cannabis Act created a legal
framework for controlling the
production, distribution and
consumption of recreational cannabis
products in Canada. This bill follows
favourable trends in the public
perception of marijuana, which is
expected to instigate demand for legally
purchased marijuana in upcoming years
as early prices, inflated by insufficient
supply, begin to come down. According
to the law, individuals aged 18 and older
would be able to legally possess up to
30.0 grams of dried cannabis, purchase
cannabis products from provincially
licensed retailers and grow up to four
cannabis plants per residence,
substantially expanding the market for
marijuana products.
As recreational marijuana is generally
considered a discretionary purchase, the
industry is projected to benefit from
rising levels of disposable income. Over
the next five years, per capita disposable
income is forecast to grow at an
annualized rate of 2.4%, while total
consumer spending is projected to
increase an annualized 1.6% during the
will be able to legally purchase cannabis
products for the first time. This new
source of industry revenue will be
supplemented by increasingly favourable
attitudes toward medical marijuana,
causing demand for higher-margin
medical cannabis products to germinate.
Overall, industry revenue is forecast to
increase at an annualized rate of 53.6%
over the next five years, reaching an
estimated $7.8 billion in 2023. In
addition to industry-specific trends in
regulation and public sentiment, industry
revenue is also expected to benefit from
improving consumer conditions, as rising
levels of disposable income, increased life
expectancy and other economic drivers
bolster demand for cannabis products.
The
industry will benefit
from rising levels of
disposable income
same period. These bullish trends will
enable a greater number of Canadians
to purchase medical and recreational
marijuana products or trade up to more
expensive varieties. As a result of these
positive trends, the number of licensed
cannabis providers in Canada is
projected to increase at an annualized
rate of 47.4% to 836 enterprises over
the five years to 2023. Similarly, the
number of employees involved in
legal cannabis production is forecast
to grow an annualized 50.9% during
the same period, totalling 54,386
workers in 2023. Simultaneously,
wage expenditures are expected to
grow more rapidly than employment,
suggesting a higher average salary for
industry employees as companies
focus on research and development.
Moreover, industry profitability is
expected to improve modestly in
Provided to: University of Alberta (2133882029) | 08 September 2019
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Industry Performance
Legislation and
consumer trends
continued
coming years, though overall industry
profit margins will likely remain
negative during the upcoming period as
industry operators establish their
footing through heightened capital
expenditures to develop a cultivation
and distribution infrastructure endemic
to mature industries.
At the same time, the industry will
remain subject to a high degree of
government oversight; under the
Cannabis Act, provinces and territories
are largely responsible for overseeing
the distribution and sale of cannabis
products in their region. For example,
provincial governments are able to
Demographics and
medical marijuana
Building off significant expansion
during the current five-year period,
the market for medicinal marijuana will
also experience substantial growth in
coming years, bolstered by the gradual
aging of the Canadian population and
the anticipated market acceptance of
medical marijuana products as the
industry focuses on the development of
new products. Over the next five years,
the median age in Canada is projected
to increase at an annualized rate of
0.5%. Supporting this age increase, the
total number of Canadians aged 65 and
older is expected to grow at an
annualized rate of 3.4% to 7.5 million
people over the five years to 2023. In
turn, this trend will lead to a growing
number of people with health conditions
that can be treated or alleviated with
marijuana (e.g. cancer and glaucoma),
as these conditions generally increase
in incidence with age. For instance, a
growing number of doctors and patients
will turn to the unconventional
treatment offered by medical marijuana
for conditions such as arthritis,
migraines and Alzheimer’s disease. The
growing prevalence of chronic health
ailments, such as obesity and diabetes,
increase the minimum age for
recreational use, lower the possession
limit within their region and create
additional rules for growing cannabis
at home. Plus, provincial governments
have limited the retail potential of
cannabis to key provincial providers,
similar to alcohol. For example, in
Ontario, recreational cannabis can
only be purchased at Ontario Cannabis
Retail Corporation establishments
while the sale of medical cannabis is
still relegated to specialized
dispensaries. Consequently, industry
performance will continue to vary
among provinces and territories.
The
market for medicinal
marijuana will experience
substantial growth in
coming years
will also augment demand for medical
marijuana as industry operators
continue to innovate and expand the
medicinal potential of cannabis.
Additionally, while demand for
medicinal products that require a
prescription is generally unaffected by
fluctuations in overall consumer
expenditure, many consumers pay out of
pocket for industry products since most
insurers do not cover cannabis
treatments. As a result, the industry’s
medical cannabis segment will also
benefit from rising levels of disposable
income and improving consumer
conditions. At the same time, medical
marijuana dispensaries will likely
encounter competition from
conventional healthcare providers, as
some medical professionals remain
skeptic of the legitimacy and
effectiveness of medical marijuana.
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Cannabis Production in CanadaNovember 2018 10
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Industry Performance
Life Cycle Stage
The industry is growing at a significantly faster
pace than the broader Canadian economy
The number of industry enterprises has
experienced surging growth in recent years
Customer acceptance of industry products is increasing
The recent legalization of recreational marijuana
will stimulate consumer demand
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 11
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Industry Performance
Industry Life Cycle
This
industry
is G
rowing
The Cannabis Production industry in
Canada is in the growth stage of its
economic life cycle, as illustrated by a
wave of new companies entering the
market, shifting consumer attitudes and
the legalization of recreational cannabis in
2018 which introduces a new market for
industry operators. Moreover, industry
value added, which measures the
industry’s contribution to the broader
economy, is projected to grow at an
annualized rate of 80.1% over the 10 years
to 2023, while Canadian GDP is forecast
to increase at an annualized rate of just
1.9% during the same period. The sizable
contrast between these two growth rates
indicates that the industry will account for
an increasingly significant share of the
overall Canadian economy in coming
years as it establishes its footing.
In 2013, Health Canada began issuing
licences to Canadian companies to
produce and distribute dried marijuana
flower to individuals holding a medical
prescription. Since then, the number of
companies providing medical marijuana
in Canada has grown from just one
government-affiliated provider to more
than 100 independent enterprises in
2018. This expansion has been supported
by shifting attitudes toward both medical
and nonmedical cannabis consumption.
Moreover, data from Statistics Canada
suggests that an estimated 14.0% of all
Canadians aged 15 and older reported
using some form of cannabis in the
past three months, making the newly
opened recreational market an
important contributor to industry
expansionary potential.
The October 2018 passage of the
Cannabis Act legalized the recreational
production and consumption of cannabis
for individuals aged 18 and older, making
Canada the first developed nation to fully
legalize marijuana. In turn, the passage of
this law dramatically expanded the
industry’s total customer base overnight.
For example, whereas Health Canada
reports that just over 330,000 clients were
registered with the agency’s licensed
marijuana producers as of June 2018, data
from Statistics Canada indicates there are
more than 5.0 million cannabis users
across Canada in 2018. This factor
suggests that there is significant room for
the industry to continue growing in
coming years. This budding industry is
projected to flower as a loosened
regulatory environment fertilizes the
consumer landscape permitting cannabis
producers to germinate.
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Cannabis Production in CanadaNovember 2018 12
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Products & Markets
Supply Chain | Products and Services | Demand Determinants
Major Markets | International Trade | Business Locations
Supply Chain
KEY BUYING INDUSTRIES
44611CA
Pharmacies & Drug Stores in Canada
Pharmacies purchase medical marijuana for retail purposes.
9901CA
Consumers in Canada
Consumers are individuals with prescriptions from health care practitioners to purchase
medical marijuana.
KEY SELLING INDUSTRIES
Products and Services
32531CA
Fertilizer Manufacturing in Canada
Some medical marijuana growers use fertilizers to improve soil nutrient.
32532CA
Pesticide Manufacturing in Canada
Some medical marijuana growers use pesticides during the growing process.
33511CA
Lighting & Bulb Manufacturing in Canada
Indoor medical marijuana growing is heavily dependent on artificial lighting.
33522CA
Major Household Appliance Manufacturing in Canada
Refrigeration equipment is commonly used to store cannabis products in dispensaries.
Products and services segmentation (2018)
7.8%
5.3%
Other
Capsules/seeds
56.0%
30.9%
Concentrates
Dried cannabis
Total $916.6m
Concentrates
Cannabis concentrates represent the
largest product category for industry
operators, and this segment includes any
product created by an extraction process.
Common forms of concentrate include:
kief, a dry sift or pollen of the cannabis
flower; hash, a concentrate made from
compressing cannabis plant resin; butane
hash oil (BHO), or a potent concentrate
consumed for dabbing and other
vaporization methods; CO2 oil, used in
SOURCE: IBISWORLD
portable vaporizer pens; Rick Simpson
Oil (RSO) or Phoenix Tears, which is
orally administered or applied directly to
the skin; and tinctures, a liquid form of
concentrate. This high degree of product
innovation, and particularly the surging
popularity of vaporizer pens, has been
bolstered by growing consumer demand
for electronic cigarettes as an alternative
to traditional cigarettes.
Ultimately, the various potential
applications for concentrates is the
Provided to: University of Alberta (2133882029) | 08 September 2019
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Products & Markets
Products and Services
continued
Demand
Determinants
fundamental facilitator of its widespread
production as opposed to the traditional
dried cannabis business model. For
example, eEdible marijuana products
(edibles), or marijuana-infused products,
are goods that contain cannabis that can
be consumed orally. Edibles can take the
form of food, extracts and oils, and range
from marijuana-infused mints and
candies to baked goods and beverages,
along with many other products. Over the
past five years, edible marijuana products
have grown rapidly as a share of industry
revenue and are expected to continue
growing as a share of industry revenue
over the next five years, particularly as
the passage of the Cannabis Act expands
the industry’s customer base to include
relatively young recreational users.
Overall, concentrates represent one of
the industry’s fastest-growing segments,
and these products are expected to
account for 56.0% of total industry
revenue in 2018.
muscle spasms. In general, indica
provides more physical relaxation than
the sativa strain, and many consumers
use indica as a sleep aid. Common indica
strains include White Berry, Blueberry
and Northern Lights. In contrast, sativa
cannabis products are commonly used as
a stimulant to improve appetite, relieve
depression, migraines, pain and nausea.
Sativa is also more popular for patients
during the day because it can increase
alertness. Popular strains of sativa
include Haze and Trainwreck.
Over the past five years, this product
segment has declined considerably as a
share of industry revenue, as oil-based
products have become increasingly
popular. According to data from Statistics
Canada, cannabis oil overtook dried
marijuana in May 2017 as the largest
product category (by volume) for Health
Canada’s licensed producers.
Dried cannabis
Smokable marijuana products, also
known as flower or bud products,
represent the traditional source of
revenue for industry operators,
accounting for an estimated 30.9% of the
industry’s total revenue in 2018. There
are several varieties of cannabis plant,
with indica and sativa plants representing
the most common families of marijuana
strains. Indica products are often used to
treat anxiety, chronic pain, insomnia and
Other
Other products commonly sold by
industry operators include smoking
paraphernalia, such as grinders, lighters,
bongs and pipes, as well as other
miscellaneous strains and varieties of
cannabis. Plus, many operators,
vanguards of proprietary cultivation and
processing procedures, also sell growing
equipment, formulas for feeding cannabis
plants and processing machinery.
Collectively, these operations are
expected to constitute the remaining
5.3% of total industry revenue.
Demand for industry products is
primarily determined by government
regulation. Historically, recreational
cannabis consumption has been illegal
and medical marijuana consumption
was permitted in 2001. Notably, as
outlined more fully in the regulation and
policy section of this report, recreational
marijuana consumption was legalized in
October 2018 under the Cannabis Act.
Under this legislation, individuals aged
18 and older can possess up to 30.0
grams of legal dried cannabis, share up
to 30.0 grams of legal cannabis with
other adults, purchase a variety of
cannabis products from provincially
licensed retailers and grow up to four
cannabis plants per residence.
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 14
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Products & Markets
Demand
Determinants
continued
Major Markets
Population demographics,
particularly age, also dictate demand
trends for medical marijuana, since
adults aged 50 and older are more
likely to develop health conditions
such as cancer, Alzheimer’s, chronic
pain, glaucoma and other diseases
that can be treated with medical
marijuana. Household income is
another significant determinant of
consumers’ ability to acquire cannabis
products. The legalization of medical
marijuana has created a market for
high-quality cannabis, which can be
expensive. Furthermore, because
medical marijuana is typically not
covered under health insurance plans,
demand is largely dependent on
patients’ income levels. However, these
demographic trends are not necessarily
representative of the market for
recreational marijuana. Should the
Cannabis Act become law, factors such
as price, marketing and availability will
likely become increasingly important
determinants of consumer demand, as
the industry will gradually begin to
resemble the market for alcohol and
other controlled substances.
At the recreational level,
macroeconomic factors that contribute
to consumer spending are boons for the
industry. For example, rising levels of
per capita disposable income, lower
unemployment rates and high consumer
confidence are positive catalysts of
industry demand. If individuals have
more money and believe that the
economy is doing well, they are more
likely to purchase discretionary items
such as alcohol and cannabis. However,
health consciousness is a persistent
threat to demand as the health effects of
cannabis become more widely studied.
Nonetheless, most of the detrimental
health outcomes are a result of smoking
rather than the consumption of cannabis
in totality, leaving demand for edibles
and other derivates-based products
largely untouched.
Major market segmentation (2018)
3.0%
Consumers aged
65 and older
4.4%
Consumers aged 15 to 17
42.2%
24.9%
Consumers aged 45 to 64
Total $916.6m
Consumers aged 25 to 44
25.5%
Consumers aged 18 to 24
The following data represents an agebased breakdown of Canada’s overall
marijuana-consuming population, and it
includes illicit marijuana purchases.
SOURCE: IBISWORLD
According to data from Statistics
Canada’s National Cannabis Survey, an
estimated 14.0% of Canadians aged 15
and older reported using some form of
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Products & Markets
Major Markets
continued
cannabis in the past three months,
though this figure varies considerably
among provinces, ranging from just
10.0% of respondents in Quebec to a
relatively high 20.0% of individuals in
Nova Scotia. Additionally, among those
individuals who have consumed cannabis
in the past three months, an estimated
40.0% use it daily.
Consumers aged 15 to 17
According to data from Statistics Canada,
more than 92,000 Canadians between
the ages of 15 and 17 consume marijuana
at least once per week. At the same time,
consumers in this segment represent a
declining source of revenue for marijuana
producers over the past five years, while
the number of consumers in every other
age category has experienced
considerable growth. In 2018, these
individuals are estimated to account for
just 4.4% of the total marijuanaconsuming population.
Consumers aged 18 to 24
Young adults in this market segment
constitute the second-largest source of
revenue for Canadian marijuana
producers, accounting for an estimated
25.5% of the nation’s total marijuana
sales. Over the past five years, the
number of young adults who consume
cannabis at least once per week has
increased at a stable annualized rate of
1.8%, reaching an estimated customer
base of more than 531,000 individuals in
2018. Despite relatively modest growth in
the size of this segment, growing demand
from consumers within this demographic
has resulted in significant product
innovation, including the surging
popularity of edible and oil-based
cannabis products. Moving forward, this
segment will likely expand as a share of
marijuana revenue, as the passage of the
Cannabis Act in October 2018 will enable
many consumers in this segment to
legally purchase cannabis.
Consumers aged 25 to 44
Consumers between the ages of 25 and
44 represent the largest and fastestgrowing customer base for marijuana
providers in Canada. In addition to
representing a dominant share of the
total Canadian population, consumers in
this market segment are equipped with
relatively high levels of disposable
income. Moreover, older consumers are
more likely to require medical marijuana
to treat chronic pain and other ailments.
As a result of these factors, this segment
is estimated to represent 42.2% of total
marijuana expenditure in Canada. This
demographic is expected to remain a vital
source of demand for marijuana products
in coming years, with the total population
of individuals in this age category who
consumer cannabis at least once per week
increasing at an annualized rate of 5.2%
to over 900,000 individuals over the five
years to 2018.
Consumers aged 45 and older
In 2018, individuals between the ages of
45 and 64 are expected to account for
24.9% of all marijuana-related sales in
Canada, with consumers over the age of
65 representing an additional 3.0% of
total cannabis expenditure. While this
market segment accounts for a relatively
modest share of total marijuana sales,
older consumers constitute a
disproportionately large share of medical
marijuana consumption, as these
individuals are most likely to have the
discretionary income and physical
ailments needed to legally purchase
cannabis products in Canada. Moreover,
the population of older consumers who
consume marijuana at least once per
week has increased at a strong
annualized rate of 5.0% over the past five
years, causing this segment to represent a
rising share of total demand for
marijuana products. Still, recreational
cannabis consumption among the 65 and
over population is much lower compared
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WWW.IBISWORLD.CA
Products & Markets
Major Markets
continued
with other age groups, limiting this
segment’s share of industry revenue.
International Trade
The Cannabis Production industry in
Canada does not participate in
international trade. As a schedule II
drug under the Controlled Drug and
Substances Act, medical marijuana
cannot legally be transported across
Canada’s international borders. Some
companies are certified to export
medical cannabis products to particular
markets such as Europe and Australia,
but this trade information is not
recorded by Statistics Canada as of the
time of this writing. Still, due to myriad
public health and regulatory concerns in
different countries. exports are limited.
According to Health Canada, for the first
quarter of fiscal 2018 (March to June),
exports of medical cannabis products
were less than 750.0 kilograms,
comprising a negligible share of total
industry output.
Nevertheless, strong consumer
demand for nonmedical marijuana
and existing infrastructure for the
transportation of illicit drugs means
that a substantial volume of cannabis
products is imported and exported
from Canada every year. According
to data from Statistics Canada, the
value of illegal cannabis sales to foreign
markets reached an estimated $1.2
billion in 2017, with illegal purchases
from abroad representing an additional
$317.2 million; however, these figures
are excluded from industry-relevant
revenue calculations.
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Products & Markets
Business Locations 2018
Establishments (%)
Less than 5%
5% to less than 20%
20% to less than 40%
40% or more
NT
YT
NU
NORTHERN TERRITORIES
0.0
BC
22.6
AB
6.8
SK
3.0
MB
1.5
ON
NL
QC
0.0
9.0
51.9
NB
2.3
PE
NS
0.8
2.3
SOURCE: IBISWORLD
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Products & Markets
Distribution of establishments vs. population
60
50
40
30
20
10
Saskatchewan
Quebec
Ontario
Nova Scotia
NW Territories
Newfoundland
Prince Edward Island
Establishments
Population
New Brunswick
Manitoba
Alberta
0
British Columbia
Establishments in the Cannabis
Production industry in Canada include all
facilities in Canada that are authorized to
produce and sell cannabis to eligible
persons under the Access to Cannabis for
Medical Purposes Regulations and will
include licensed producers of recreational
cannabis when that data becomes
available. The number of industry
establishments has experienced dramatic
growth since the Canadian government
first began issuing production licences to
private vendors in 2013, and these
establishments are largely concentrated in
the nation’s most heavily populated
regions. For instance, Ontario is expected
to account for 38.7% of the total Canadian
population in 2018, as well as a
substantial 51.9% of all industry facilities.
Moreover, Ontario is expected to continue
playing a major role within the industry in
coming years, as the Ontario government
has made plans to open 80 cannabis
stores by 2019 and 150 stores by 2020,
after the passage and enactment of the
Cannabis Act in 2018.
The distribution of industry
establishments is also subject to provincespecific regulations, as provinces and
territories are primarily responsible for
overseeing the distribution and sale of
cannabis products in their region.
Additionally, under the Cannabis Act,
provincial governments can increase the
%
Business Locations
SOURCE: IBISWORLD
minimum age in their region, lower
the possession limit, restrict where
adults are able to consume cannabis
and create additional rules for growing
cannabis at home. As a result of this
flexibility, industry establishments are
largely concentrated in regions with
relatively lax regulations and substantial
public support, such as British Columbia.
In 2018, British Columbia represents the
second-most popular destination for
licensed producers in Canada,
accounting for an estimated 22.6%
of industry establishments.
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19
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration in this
industry is M
edium
Key Success Factors
IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
Cost Structure
Benchmarks
As a nascent and rapidly expanding
industry, the Cannabis Production
industry in Canada is currently
characterized by a moderate to high
degree of market share concentration,
though the industry is expected to
become increasingly fragmented in
coming years as new enterprises
continue to enter the market in droves.
Overall, five of the industry’s largest
players are estimated to account for a
substantial 56.2% of the industry’s total
revenue in 2018. However, the
competitive market for medical
marijuana production was only recently
established in late 2013 and the
recreational market was only opened in
October 2018, leaving room to grow.
Therefore, the dominance of major
players, such as Aurora Cannabis Inc.
and Canopy Growth Corp., is largely the
result of these companies being among
the first providers to enter the market,
replete with the agricultural and
distribution infrastructure necessary for
capturing market share. Over the five
years to 2023, the number of companies
operating in this market is forecast to
grow, causing the industry to become
increasingly competitive and limiting
the ability of existing major players to
retain market share.
Understanding government
policies and their implications
Marijuana legislation is complicated at
all levels of the government. Successful
operators must be able to navigate the
regulatory landscape at both the
provincial and federal level.
Marketing of differentiated products
Dispensaries must properly promote
their products given the differentiated
nature of edible cannabis products.
Development of effective
marijuana strains
Growers that can develop the most potent
and effective strains can potentially
attract greater demand for their products.
The following discussion segments the
cost structure of an average industry
operator. However, there are crucial
disparities between different aspects of
industry operations that are not captured
by these averages. Ultimately, retail
operations are much smaller in scale and
scope compared with the more
centralized world of cultivation,
producing a chasm between the
expenditures of these operations, chiefly
in the areas of profit and capital outlays.
Retail operations, if divorced from
Fast adjustments to
changing regulations
Regulations are constantly
changing. Growers must comply
with the latest legislation or endure
fines and arrest, and they must be
able to adjust to changing regulation
quickly and smoothly.
production capabilities, are often
profitable while enterprises focused on
cultivation are primarily unprofitable as
they develop the necessary infrastructure
for future returns on investment. As an
industry in its nascent stages, these
extremes are expected to persist until the
industry establishes itself in the broader
domestic economy.
Profit
Profit, measured as earnings before
interest and taxes, varies greatly across
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20
Competitive Landscape
industry operators, largely due to
the wide variety of province-specific
laws governing the production of
marijuana in Canada and the novelty
of the recreational cannabis market.
Overall, the industry has recorded
substantially negative profit margins
in recent years, as the market for
independent medical marijuana
providers was only formed
in late 2013 and the recreational
market was formed in October 2018,
causing industry operators to
experience significant initial capital
outlays associated with establishing
the industry’s infrastructure. In
2018, the industry is expected to
record industry-relevant profit
margins of -20.0%, though industry
profitability is projected to improve
in coming years as operators in this
nascent industry begin to benefit
from economies of scale, greater
purchasing power and other operating
efficiencies that are common in more
mature industries.
Wages
Wage costs are estimated to represent
37.4% of industry revenue in 2018, down
from 38.9% in 2013. Most marijuana
dispensaries are small-scale, localized
businesses that depend on employees for
services, resulting in high labour costs as
a share of revenue. Additionally, the
market for medical marijuana has
expanded from a single governmentsponsored provider in early 2013, to
more than 100 enterprises in 2018. This
expansion has coincided with an influx of
new workers in the industry, boosting the
share of industry revenue dedicated to
labour-related costs. However, the
production of cannabis can be more
labour intensive as companies hire highly
paid researchers to develop innovative
Sector vs. Industry Costs
Average Costs of
all Industries in
sector (2018)
100
80
Industry Costs
(2018)
-20.0
11.9
37.4
11.5
22.8
Percentage of revenue
Cost Structure
Benchmarks
continued
n Profit
n Wages
n Purchases
n Depreciation
n Marketing
n Rent & Utilities
n Other
60
45.2
23.9
40
20
6.7
5.3
17.7
0
10.0
1.7
18.9
7.0
SOURCE: IBISWORLD
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21
Competitive Landscape
Cost Structure
Benchmarks
continued
and higher quality products, offset
slightly by less highly paid harvesters and
manual labourers.
Moving forward, wages are projected
to decline as a share of industry revenue,
as operators seek to limit unnecessary
wage costs by investing in online
platforms, automated inventory systems
and other technologies that limit the
industry’s reliance on labour inputs.
Purchases
Purchases make up a significant expense
for medical marijuana providers. The
primary goods purchased by growing
facilities include soil, fertilizer and seeds,
while common purchases made by
dispensaries include storage equipment,
medical marijuana accessories and other
products that do not contain marijuana.
In particular, medical marijuana stores
need to purchase specialty lighting,
airtight containers and cases, air
conditioning and other equipment
needed to store marijuana. Additionally,
stores retail pipes, vaporizers, lighters
and other products used to consume
medical marijuana. Industry operators
may also purchase and retail edible
products that include medical and/or
recreational marijuana. Collectively,
purchase costs are expected to account
for 22.8% of the industry’s total revenue.
Rent and utilities
Expenses on rent and utilities can vary
considerably according to the size and
location of a particular facility. Industry
dispensaries are generally located in
easily accessible commercial areas to
attract consumers. However, expensive
real estate markets in major cities and
other highly commercial locations may
cause small retailers to rent their
premises instead of owning them
outright. For these operators, rent and
utilities account for a relatively large
proportion of revenue as they experience
the added cost of monthly rent. In
contrast, rent and utilities often represent
a relatively small cost for independently
owned stores located in rural areas.
Industry operators also incur significant
costs associated with warehouses and
facilities for manufacturing edible
products. In 2018, expenses on rent and
utilities are estimated to account for
18.9% of the industry’s total revenue.
Other
Most medium- to large-scale operators
use technology and capital to minimize
wage costs and improve labour
productivity. Importantly, retail
operations have a lower level of requisite
capital spending compared with
cultivation businesses, limiting their
depreciation levels in turn. Cannabis
production operations require extensive
irrigation networks, processing
machinery and in some cases, hydroponic
systems alongside temperaturecontrolled units for curing and drying,
contributing to much higher capital
outlays for these establishments. In 2018,
the depreciation of these capital assets is
estimated to account for an additional
23.9% of total industry revenue.
Similarly, expenses on marketing are
expected to represent a substantial 10.0%
of the industry’s total revenue, though
these costs are expected to decline as a
share of industry revenue in coming
years, as upcoming legislation and
shifting public opinion lessens the need
for certain advertising and marketing
efforts. Other costs include liability
insurance, security costs, legal fees,
transportation costs, research and
development expenditures and other
administration expenses. Collectively,
these miscellaneous costs are expected to
account for the remaining 7.0% of
industry revenue.
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22
Competitive Landscape
Basis of Competition
Level & Trend
ompetition
C
in
this industry is
Highand the trend
is I ncreasing
Barriers to Entry
Level & Trend
arriers to Entry
B
in this industry
are H
ighand
Decreasing
Internal competition
Industry competition is largely waged
based on product price and quality.
Marijuana can have diverse properties
and qualities, and only dispensaries that
can consistently provide high-quality
marijuana will attract demand from
consumers in the recreational and
medical markets. Additionally,
dispensaries must be able to provide
competitive prices. Customers can
purchase marijuana from a wide range
of dispensaries, making it easy to only
acquire products from the lowest-priced
dispensaries. As a result, it is important
that dispensaries use promotional
efforts to attract new customers.
Though smokable indica cannabis
products and smokable sativa cannabis
products lack significant differentiation,
there is a great degree of differentiation
in the edible cannabis products segment.
Edibles can take the form of food,
extracts and oils and range from
marijuana-infused mints, candies, baked
goods and beverages, among many other
products. Indeed, a whole field of
cannabis-infused culinary cooking has
emerged in recent years with the
legalization of medical marijuana and
the subsequent advances in cannabis oil
extraction methods. It is important that
industry operators have access to the
Regulation
While it is legal for licensed companies to
produce and distribute marijuana
products in Canada, companies looking
to receive a licence must navigate a
variety of legal issues before beginning
operation, which can be extremely
cumbersome, especially for those that
target the medicinal marijuana market.
For example, applications under the
Access to Cannabis for Medical Purposes
Regulations often require strict
background checks to ensure that
applicants are not affiliated with
newest products and are able to source
popular items at competitive prices.
External competition
The largest source of external
competition for the industry comes from
the illegal production of marijuana
products within Canada. According to
data from Statistics Canada, individuals
in Canada consumed an estimated 773.0
metric tonnes of cannabis in 2017, with
licensed, legal cannabis accounting for
just 56.5 tonnes (7.0%) of this total.
Given the lack of regulatory oversight
that comes with illicit drug production,
illegal cannabis products are often less
expensive than their legal counterparts;
however, these products are rarely
subject to safety and quality standards.
While recreational marijuana use has
been legalized, the illicit market is
expected to capture a substantial portion
of marijuana demand until the prices of
legal products come down as suppliers
boost inventories and harvest
capabilities to meet skyrocketing
demand. Producers that target the
medical market also experience
competition from pharmaceutical
companies that manufacture drugs to
treat chronic pain, cancer, HIV and
other illnesses that medical marijuana
helps relieve.
Barriers to Entry checklist
Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation and Policy
Industry Assistance
High
Medium
Growth
High
Medium
Heavy
Medium
SOURCE: IBISWORLD
organized crime or other black-market
operations. As of October 2018, Health
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23
Competitive Landscape
Barriers to Entry
continued
Industry
Globalization
Level & Trend
lobalization
G
in
this industry is
Lowand the trend
is I ncreasing
Canada had approved just 132 of the
more than 300 applications it had
received for licences to produce medical
marijuana, acting as a substantial barrier
to entry for potential entrants. At the
same time, the rate of rejection varies
considerably by province; as of October
2018, Ontario approved an estimated
one-third of all licence applications, while
British Columbia has accepted under
one-fifth of all applications.
Capital requirements
Though marijuana stores generally
experience limited capital costs due to
the relatively low-tech nature of industry
operations, companies are often
constrained by an inability to obtain
financing from traditional sources,
although legalization is expected to
bolster financing efforts. To open a
dispensary, operators must acquire a
location, hire employees, purchase
inventory and buy advertising, in
addition to satisfying various industryspecific government regulations.
However, while retail operations are
much less capital intensive, cultivation
and processing facilities require much
more upfront and continuing investment.
Even as legalization makes financing
easier to secure, the novelty of the
recreational market and the uncertain
outlook for its potential may discourage
lending from major institutions in the
near term. As economically viable
operators enter the fray and establish a
concrete footing, this obstacle is expected
to diminish. Still, fledgling enterprises
that strive to compete with incumbents
may struggle to dole out the resources
necessary to build the vast production
facilities and the economies of scale that
benefit established operators, pressuring
industry participation. Still, since
demand is expected to grow rapidly in
upcoming years, the effect of this barrier
may be less cumbersome.
While the possession and consumption of
cannabis for medical purposes is legal in
Canada, as well as the majority of states
in the United States, medical marijuana
cannot be traded internationally.
Additionally, legal producers operating in
Canada must be licensed and meet strict
requirements imposed by the Canadian
government, limiting the participation of
foreign-owned entities in the domestic
market. Consequently, the Cannabis
Production industry in Canada has
historically been characterized by a low
level of globalization.
However, the October 2018
legalization of recreational cannabis is
expected to support globalization efforts.
Since there are only two countries in the
world that have legalized recreational
cannabis, the production of marijuana for
consumption outside of medical purposes
is largely concentrated in these regions.
As a result, if other countries begin to
implement recreational cannabis
legalization legislation, the domestic
industry will be well positioned to satisfy
international demand.
Even without recreational demand, the
industry’s major players have secured
global supply chains to satisfy demand in
different regions of the world with unique
medical marijuana regulatory
frameworks. For example, Aurora
Cannabis has finished the construction of
one production plant in Denmark and is
underway on a second to accelerate the
company’s European footprint. The
company transported a shipment of
mother plants that should populate the
first facility in August 2018, signalling a
strong globalization effort. Similarly,
Canopy Growth, another industry leader,
has production and processing facilities
in Europe, South America, Africa,
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24
Competitive Landscape
Industry
Globalization
continued
Australia and North America, serving the
medicinal cannabis markets in these
regions and the recreational market in
Uruguay, the only other country to
legalize recreational consumption,
through its operations in Santiago, Chile.
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Cannabis Production in CanadaNovember 2018 25
WWW.IBISWORLD.CA
Major Companies
Aurora Cannabis Inc. | Canopy Growth Corporation
Aphria Inc. | Other Companies
Major Players
(Market Share)
Canopy Growth Corporation 16.1%
48.8%
Other
Aphria Inc. 9.2%
Player Performance
Aurora Cannabis
Inc.
Market Share: 25.9%
Aurora Cannabis Inc. 25.9%
Headquartered in Vancouver, Aurora
Cannabis Inc. (Aurora) participates in the
Cannabis Production industry in Canada
through its wholly owned subsidiary
Aurora Cannabis Enterprises Inc., which
has been licensed to cultivate, produce
and sell medical marijuana products since
February 2015. Aurora cultivates its plants
in 11 production facilities worldwide that
boast a combined funded capacity of over
500.0 thousand kilograms a year globally.
Nine of these facilities are located in
Canada while the company’s two
international facilities are in Denmark.
The company’s largest domestic facilities
include Aurora Sun in Alberta, MedReleaf
Exeter in Ontario and Aurora Sky in
Alberta with a production capacity of
150,000.0, 105,000.0 and 100,000.0
kilograms respectively as of 2018.
Financial performance
While the company is relatively new, it has
expanded through a robust acquisition-
SOURCE: IBISWORLD
focused strategy which has catapulted it
into the upper echelon of domestic
cannabis production. Between 2017 and
2018 alone, Aurora acquired 11 companies
including Hemp Co, Urban Cultivator,
Agropro and previous major players
CanniMed and MedReleaf. Alongside
strong acquisitive tendencies, the
company has focused on expanding its
markets with sales and operations across
five continents, with a heavy emphasis on
the burgeoning European market. Bereft
of major players in Europe and supported
by the 2017 implementation of the
Comprehensive Economic and Trade
Agreement between Canada and the
European Union, Aurora is positioning
itself to become a dominant player in this
lucrative medical cannabis market.
Moreover, if these countries eventually
legalize recreational marijuana as well,
Aurora will be equipped with the
infrastructure to serve this enormous
market. Still, as of the company’s 2018
Aurora Cannabis Inc. (industry-relevant operations) - financial
performance*
Year**
Revenue
($ million)
(% change)
Operating profit
($ million)
(% change)
2015
1.4
N/C
-4.6
N/C
2016
18.1
1,192.9
-11.4
147.8
2017
53.7
196.7
-95.8
740.4
2018
237.4
342.1
-396.9
314.3
*Estimates; **Year-end June
SOURCE: ANNUAL REPORT AND IBISWORLD
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Cannabis Production in CanadaNovember 2018 26
WWW.IBISWORLD.CA
Major Companies
Player Performance
continued
annual report, Aurora does not have
significant operations in the United
States, which can be a target for future
acquisition activity.
Amid the ongoing influx of new
products and the rapid development of
production facilities, Aurora has begun
innovating and branding its products,
including the recent release of Aurora
Frost, a highly concentrated THC product
that is designed to be consumed along
with medical cannabis or baked into
food. Aurora currently serves as the
dominant player in this industry, wellpositioned to target the newfound
domestic recreational market. Overall,
the company is expected to record
industry-relevant revenue of $237.4
million in 2018. At the same time, Aurora
has struggled in recent years to become
profitable, with the company recording
substantially negative profit margins
every year since its formation as it
focuses on infrastructure development
and acquisitions to position itself for
future returns.
Player Performance
Headquartered in Smith Falls, ON,
Canopy Growth Corporation (Canopy
Growth) became one of the first
companies to operate in the Cannabis
Production industry in Canada when
the company’s subsidiary, Tweed Inc.,
received a licence to cultivate, produce
and sell medical marijuana in
November 2013. Since then, Canopy
Growth has become one of the
industry’s early leaders, with the
company going on to become the first
cannabis company in North America
to be publicly traded in April 2014.
The company sells a wide variety of
popular cannabis brands, including
the company’s Tweed and Spectrum
Cannabis brands, as well as products
from Bedrocan Canada and Leafs By
Snoop, a brand of cannabis products
released by the artist Snoop Dogg.
The company has an international
footprint that spans 24 locations in
North America, Europe, South
America, Africa and Australia.
However, the company primarily relies
on production and cultivation
operations domestically, using these
various locations as distribution
networks worldwide. Accordingly, the
company’s revenue is primarily derived
from its domestic operations, making
the majority of its activity relevant to the
domestic industry.
Canopy Growth
Corporation
Market Share: 16.1%
Canopy Growth Corporation (industry-relevant operations) - financial
performance*
Year**
Revenue
($ million)
(% change)
Operating profit
($ million)
(% change)
2014
2.4
N/C
-8.2
N/C
2015
12.7
429.2
-2.7
-67.1
2016
39.9
214.2
-14.1
422.2
2017
77.9
95.2
-82.3
483.7
2018
147.7
89.6
-138.6
68.4
*Estimates; **Year-end May
Provided to: University of Alberta (2133882029) | 08 September 2019
SOURCE: ANNUAL REPORT AND IBISWORLD
Cannabis Production in CanadaNovember 2018 27
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Major Companies
Player Performance
continued
Financial performance
Outside of organic growth, Canopy
Growth has pursued a series of
acquisitions in recent years, including
the purchase of Vert Medical Inc. and
the acquisition of a controlling interest
in Groupe H.E.M.P.CA Inc. in
November 2016. In 2017, Canopy
Growth acquired Mettrum Health
Corporation then purchased a former
Hershey’s chocolate factory for
marijuana cultivation, resulting in a
total of eight licensed facilities in
Canada as of 2018. These acquisitions
have been accompanied by substantial
revenue growth, including projected
growth of 89.6% in 2018 alone. Overall,
the company is estimated to generate
$147.7 million in industry-relevant
revenue in 2018.
Player Performance
Based in Toronto, Aphria Inc. (Aphria)
participates in the industry through its
subsidiary Pure Nature Wellness (PNW),
which received its licence to produce and
sell medical marijuana in November 2014,
followed by a licence to sell cannabis
extracts in November 2016. Aphria’s
cannabis products are exclusively grown
in greenhouses, with the company’s
growing operations based in a PNW
greenhouse facility in Leamington, ON.
Online orders represent Aphria’s primary
source of revenue, though the company
also generates sales through telephone
orders and wholesale shipments to other
licensed producers in Canada.
Outside of organic growth, Aphria has
made several large-scale acquisitions in
recent years, including the $6.2 million
purchase of 80.9 hectares (200.0 acres) of
additional greenhouse space to
supplement its existing facility, as well as
the acquisition of a 16.6% stake in Canabo
Medical Inc., which operates a series of
referral-only clinics for medical cannabis.
In 2018, Aphria acquired Broken Coast
Cannabis and Nuuvera, two cannabis
production companies in Vancouver and
Bramption, respectively, to augment its
position in the recreational and medical
cannabis market. More recently, the
company has focused on a US acquisition
strategy, although this activity is not
relevant to the industry.
Ultimately, the company has grown due
to a litany of distribution agreements. For
example, in 2017, Aphria captured the
Aphria Inc.
Market Share: 9.2%
Financial performance
Due to strong demand, Aphria doubled
the size of its greenhouse in 2016, paving
the way for strong expansionary potential.
Aphria Inc. (industry-relevant operations) - financial performance*
Year**
Revenue
($ million)
(% change)
Operating profit
($ million)
2014
2015
0.6
N/C
-3.4
N/C
8.4
1,300.0
-1.1
-67.6
2016
20.4
142.9
2.6
N/C
2017
34.6
69.6
-6.0
N/C
2018
84.7
144.8
-6.3
5.0
(% change)
*Estimates; **Year-end May
SOURCE: ANNUAL REPORT AND IBISWORLD
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 28
WWW.IBISWORLD.CA
Major Companies
Player Performance
continued
attention of Shoppers Drug Mart, a
leader in the domestic pharmacy industry
(IBISWorld report 44611CA), leading to
an online distribution platform for its
products. Further, in 2018, the company
secured a distribution deal with Southern
Glazer’s Wine and Spirits to disseminate
recreational cannabis products
domestically. In line with industry
trends, Aphria has experienced
substantial growth since its formation,
and the company is projected to record
industry-relevant revenue of $84.7
million in 2018.
Other Companies
The Cannabis Production industry in
Canada is relatively new, beginning in
2001 with only one licensed player for the
production of medical cannabis.
Additional enterprises were permitted to
join the fray in 2013, which has prompted
a robust expansion since then.
Furthermore, the October 2018
legalization of recreational cannabis
consumption has opened the floodgates
to a litany of producers that are hoping to
capture market share in this burgeoning
marketplace. While there is a projected
influx of new producers and processors,
the industry remains concentrated
among established players that have the
infrastructure to cater to both the
medical and recreational markets. Plus,
recreational cannabis growers must also
be licensed by Health Canada and even
with a licence, the time between
cultivation, harvest and processing
produces a lag in the realization of
revenue, which further entrenches the
dominance of incumbents that have these
systems in place. Still, the legalization of
recreational consumption has opened the
doors for microgrowers and processors
which should encourage industry
participation, although attaining a
market share to rival the major players is
not likely in the short run.
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 29
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Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level
of capital
intensity is H
igh
This industry is characterized by a high
degree of capital intensity, with the
typical industry operator allocating an
estimated $0.71 to capital investments
for every $1.00 spent on labour inputs in
2018. Common capital expenditures for
dispensaries include the purchase of
in-store machinery, such as point-of-sale
systems, cash registers and bar code
scanners. These expenses also include
investment in computers, software,
inventory control systems and fixtures
and fittings to improve the overall
ambience of stores. More specific to
industry services, operators must invest
in temperature and humidity control
systems to ensure that they are able to
maintain the quality of their stock.
Perhaps most importantly, industry
Capital Intensity
Capital units per labour unit
1.0
0.8
0.6
0.4
0.2
0.0
Economy
Agriculture,
Forestry, Fishing
& Hunting
Cannabis
Production
Dotted line shows a high level of capital intensity
SOURCE: IBISWORLD
operators must invest heavily in security
equipment, such as video cameras and
alarm systems.
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 30
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Operating Conditions
Capital Intensity
continued
However, these investments pale in
comparison with the capital outlays of
cannabis cultivation and processing
operations, which require more
machinery and constant monitoring.
Growing methods range from relatively
less expensive outdoor growing to indoor
greenhouse operations and hydroponic
systems which require a more substantial
upfront and ongoing investment. Outlays
for irrigation systems, temperature
control systems, automated feeding
networks and other monitoring
equipment can be quite costly,
particularly for a fledgling enterprise
which, since the industry is in its infancy,
accounts for a significant share of total
industry operations. For processors,
machinery to extract cannabis oil are also
sizable expenditures and the consistent
quality assurance requirements to cure
and dry plants can be cumbersome
relative to revenue as these enterprises
begin to establish themselves. Collectively,
these various capital outlays account for a
significant share of the industry’s total
expenses since these cultivation and
processing facilities represent the lion’s
share of industry operations. Moreover,
many employees in this industry are hired
on a part-time basis, which limits labourrelated expenditures thereby contributing
to high levels of capital intensity.
Moving forward, the degree of
capital intensity within this industry
is expected to decline, as operators will
no longer incur many of the initial costs
associated with a new industry, such as
building infrastructure and establishing
supply chains.
Technology and
Systems
While the basic methods for growing
and processing marijuana plants have
not changed substantially over the past
decade, recent shifts in the legal and
cultural status of marijuana in Canada
have encouraged significant innovation
in the development and marketing of
cannabis-related products and
derivatives. For instance, edible
cannabis products represent one of
the industry’s fastest-growing segments,
and these products include marijuanainfused candies, baked goods and
beverages, among other products,
instigating demand for cannabis oils
and concentrates.
With countless new edible marijuana
products coming onto the market, the
nature of industry products is changing
rapidly, with a concomitant shift in the
processing strategies employed by
industry operators. Extracting
cannabidiol (CBD), an active ingredient
derived from hemp, is a lucrative
enterprise for most medical marijuana
product developers and increasingly,
consumer beverage manufacturers.
CBS has numerous health benefits
without the mental impairment and
euphoria of tetrahydrocannabinol
(THC), which is the principal
psychoactive constituent in cannabis
plants, making it a viable option for
medical purposes and consumer
products in situations where being
under the influence may be unsuitable.
CBD oil is currently extracted in many
ways, chief among them being carbon
dioxide extraction techniques where
pressurized carbon dioxide and
extremely low temperatures help to
isolate, preserve and maintain the
quality of CBD oil. Other processes
include using ethanol, which is ideal for
vaporizer pen cartridges, and olive oil,
although this method is primarily
reserved for edibles manufacturers.
Increased access to legal marijuana
has also improved the quality of
cannabis products. Improvement in
quality is generally measured by the
level of THC. Improved cultivation
Level
The level
of
technology change
is M
edium
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 31
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Operating Conditions
Technology and
Systems
continued
techniques range from the use of more
nutrient-rich soils to more efficient
drying techniques, which have enabled
growers to harvest both larger and
stronger yields. According to the latest
data available provided by the University
of Mississippi’s Potency Monitoring
Project, marijuana that was analyzed in
2007 had a THC level of 9.6%, the
highest level since analysts began
tracking this data in 1976.
In contrast, the process of cultivating
marijuana plants typically experiences a
low level of technology change. Outdoor
growers generally follow standard
cultivation techniques used by other
outdoor farmers, while indoor cannabis
growers require basic supplies such as
containers, lighting and humidity
control. Growers can also use
hydroponic techniques, which have
experienced notable technology change
over the past five years, although these
developments are external to the
industry. Hydroponic techniques involve
growing marijuana plants in water.
Growers require water filters, pumps,
growing trays and humidity control.
Many industry operators also cultivate
new marijuana strains, which involves
finding plants with desirable
characteristics then artificially fertilizing
plants, making the accrual intellectual
property rights a significant enterprise.
Revenue Volatility
The Cannabis Production industry in
Canada is characterized by a very high
degree of revenue volatility. The current
industry of medical marijuana providers
was only recently formed in late 2013,
when Health Canada first began issuing
licences to Canadian companies other
than the one legally licensed producer
since 2001 to produce and distribute
cannabis to individuals holding a medical
prescription. As a result of the industry’s
low revenue base and mounting
consumer demand, industry revenue has
surged over the past five years, with
year-to-year revenue growth ranging
from explosive growth of 139.9% in 2016
to relatively modest growth of 69.1% in
2017. Changes in the regulatory
landscape serve as the most important
driver of revenue fluctuations, including
the passage of the Cannabis Act in
October 2018, which is expected to
double industry revenue that year,
further compounding the volatility of the
current period. Additionally, demand for
medical marijuana has expanded rapidly
over the past five years, largely due to
shifting cultural attitudes toward
marijuana, an introduction of new
producers and the growing acceptance of
medical marijuana in treating or
alleviating symptoms in a variety of
medical conditions, including cancer and
Alzheimer’s disease.
At the same time, consumers who use
medical marijuana do so because of
medical needs; as a result, most use
industry products regardless of the
performance of the economy. In addition,
the aging population has led to an
increase in demand for a variety of
medical services and treatments, because
senior citizens consume a
disproportionately large number of
pharmaceuticals relative to the rest of the
population. This loyal and stable base of
consumers somewhat limits fluctuations
in industry revenue growth in the long
run. Nevertheless, the industry is
projected to remain highly volatile in
coming years due to its novelty as players
establish their operations.
Level
The level
of volatility
is V
ery High
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 32
WWW.IBISWORLD.CA
Operating Conditions
Revenue Volatility
continued
Regulation and Policy
Level & Trend
he level of
T
Regulation is H
eavy
and the trend is
Decreasing
Overall, the Cannabis Production
industry in Canada is subject to a high
degree of regulation from government
bodies. The possession and consumption
of cannabis for medical purposes was
first legalized in Canada in 2001. Under
new regulations, individuals with a
medical prescription were permitted to
grow a small amount of their own
cannabis or purchase cannabis from a
single Health Canada-affiliated producer.
In 2013, the Marihuana for Medical
Purposes Regulations (MMPR) were
enacted in Canada, expanding legal
access to marijuana for medical purposes.
Under this law, Health Canada began
issuing licences to Canadian companies
to produce and distribute dried
marijuana flower to individuals holding a
medical prescription, though these
private companies were required to
comply with strict regulations at the
federal, provincial and municipal levels.
At the same time, these 2013 provisions
meant that licences for patients to grow
their own medical marijuana were no
longer being issued.
Since then, multiple court decisions
have caused the Canadian government to
redefine and loosen restrictions on
medical marijuana sales. For instance,
according to the 2015 ruling by the
Supreme Court of Canada in R v. Smith,
restricting access to legal medical
marijuana to include only dried
marijuana products is unconstitutional.
Additionally, the Federal Court of
Canada’s 2016 decision in Allard v.
Canada found that requiring individuals
to obtain marijuana from licensed
producers violated liberty and security
rights protected by section 7 of the
Canadian Charter of Rights and
Freedoms. As a result of these legal
challenges, the MMPR was replaced by
the Access to Cannabis for Medical
Purposes Regulation (ACMPR) in August
2016. This regulation included new
legislation to satisfy recent court
decisions; for example, the ACMPR
established provisions for individuals to
produce a limited amount of cannabis for
their own medical purposes. Under the
ACMPR, Health Canada has continued to
accept applications from companies
seeking to become licensed cannabis
producers. Furthermore, all licences and
security clearances granted under the
MMPR have continued under the
ACMPR, meaning the nation’s licensed
producers have continued to supply
clients with medical cannabis.
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 33
WWW.IBISWORLD.CA
Operating Conditions
Regulation and Policy
continued
Legalization
In April 2017, a bill to legalize cannabis
was introduced in the Canadian
Parliament which was implemented in
October 2018. The legislation creates a
regulatory framework for the production,
distribution, sale and possession of
cannabis domestically, limiting persons
18 years and older to the possession of
30.0 grams of dried or equivalent nondried cannabis in public. Also, each
household can cultivate up to four
cannabis plants from licensed seeds,
although this aspect of the law is not
upheld in Quebec and Manitoba. Plus,
cannabis-infused drinks are legal as well,
instigating demand for cannabis oils and
other derivatives, with some limitations.
Under the act, provinces and territories
would be primarily responsible for
overseeing the distribution and sale of
cannabis products in their region. For
example, provincial governments are able
to increase the minimum age in their
region, lower the possession limit,
restrict where adults are able to consume
cannabis and create additional rules for
growing cannabis at home.
Industry Assistance
Government regulations
Health Canada legalized the use of
medical cannabis in 2001, dictating its
production and centralizing industrial
output in just one company, Prairie Plant
Systems until 2013. At this point, other
applications for the cultivation of medical
marijuana were accepted by Health
Canada, although the majority of these
applications are rejected for various
reasons. All other medical marijuana was
either imported or grown by individuals
with a licence to do so. In this way,
Health Canada has a longstanding role in
the medical marijuana segment as a
protector of domestic operators.
More recently, recreational cannabis
use became legal on October 17, 2018.
Health Canada, under the federal
Cannabis Act, made the nation the
second country in the world to formally
legalize marijuana use as opposed to
simply decriminalization. The legislation
has precise stipulations for the retail of
cannabis which is a form of assistance for
operators that can gain government
contracts. Each province has its own
retail framework, often controlled under
provincial liquor control boards. For
example, Ontario’s Liquor Control Board
set up a crown corporation subsidiary,
the Ontario Cannabis Retail Corporation,
to operate as the sole legal retailer of
recreational cannabis in the province.
Thus, while the cultivation and
distribution of cannabis is relatively free
of direct government assistance, retail
sales for recreational consumption are
almost entirely reliant on government
retail contracts.
Level & Trend
he level of Industry
T
Assistance is
Mediumand the
trend is I ncreasing
Industry associations
Similar to more conventional industries,
the Cannabis Production industry in
Canada is also supported by various trade
associations. For instance, in April 2018,
the Cannabis Canada Association, the
Canadian Medical Cannabis Council and
the Canopy Growth Corporation
combined to form the Cannabis Canada
Council (C3), which currently serves as a
national trade association for all licensed
cannabis producers operating under
Health Canada’s Access to Cannabis for
Medical Purposes Regulations. C3’s
mission is largely focused on promoting
the economic growth of cannabis
producers, disseminating information on
safe cannabis use and developing
industry-wide standards relating to the
production, marketing and distribution
of cannabis products.
Provided to: University of Alberta (2133882029) | 08 September 2019
Key Statistics
Industry Data
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Industry
Value Added
($m)
0.7
0.7
0.7
0.8
8.7
18.1
48.2
112.6
178.0
378.8
635.1
974.3
1,460.9
2,144.3
3,129.4
Establishments
1
1
1
1
6
23
27
37
84
133
226
321
459
628
905
Enterprises Employment Exports
1
55
-1
60
-1
66
-1
76
-6
1,100
-23
1,383
-26
1,590
-36
2,126
-76
3,664
-120
6,959
-204
11,758
-292
17,594
-420
25,991
-579
37,297
-836
54,386
--
Revenue
(%)
0.0
0.0
0.0
1,064.7
127.8
137.5
139.9
69.1
111.0
68.4
54.5
51.0
48.0
46.9
Industry
Value Added
(%)
0.0
0.0
14.3
987.5
108.0
166.3
133.6
58.1
112.8
67.7
53.4
49.9
46.8
45.9
Establishments
(%)
0.0
0.0
0.0
500.0
283.3
17.4
37.0
127.0
58.3
69.9
42.0
43.0
36.8
44.1
Enterprises Employment Exports
(%)
(%)
(%)
0.0
9.1
N/A
0.0
10.0
N/A
0.0
15.2
N/A
500.0
1,347.4
N/A
283.3
25.7
N/A
13.0
15.0
N/A
38.5
33.7
N/A
111.1
72.3
N/A
57.9
89.9
N/A
70.0
69.0
N/A
43.1
49.6
N/A
43.8
47.7
N/A
37.9
43.5
N/A
44.4
45.8
N/A
IVA/Revenue
(%)
41.18
41.18
41.18
47.06
43.94
40.13
45.00
43.83
40.98
41.33
41.16
40.86
40.57
40.23
39.96
Imports/
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Revenue
($m)
1.7
1.7
1.7
1.7
19.8
45.1
107.1
256.9
434.4
916.6
1,543.1
2,384.7
3,600.6
5,330.4
7,832.2
Annual Change
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Key Ratios
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Exports/
Revenue
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Revenue per
Employee
($’000)
30.91
28.33
25.76
22.37
18.00
32.61
67.36
120.84
118.56
131.71
131.24
135.54
138.53
142.92
144.01
Imports
----------------
Wages
($m)
0.6
0.6
0.6
0.7
7.7
18.1
43.9
103.1
172.9
342.9
578.5
877.0
1,306.9
1,899.2
2,777.9
Domestic
Demand
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Per capita
disposable income
($)
29,846.5
30,138.3
29,929.6
30,301.3
30,916.9
31,411.6
32,308.7
32,558.3
33,037.2
33,799.5
34,449.6
35,218.9
36,080.0
37,002.8
38,026.5
Imports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Wages
(%)
0.0
0.0
16.7
1,000.0
135.1
142.5
134.9
67.7
98.3
68.7
51.6
49.0
45.3
46.3
Domestic
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Per capita
disposable income
(%)
1.0
-0.7
1.2
2.0
1.6
2.9
0.8
1.5
2.3
1.9
2.2
2.4
2.6
2.8
Wages/Revenue
(%)
35.29
35.29
35.29
41.18
38.89
40.13
40.99
40.13
39.80
37.41
37.49
36.78
36.30
35.63
35.47
Employees
per Est.
55.00
60.00
66.00
76.00
183.33
60.13
58.89
57.46
43.62
52.32
52.03
54.81
56.63
59.39
60.10
Figures are in inflation-adjusted 2018 dollars.
Average Wage
($)
10,909.09
10,000.00
9,090.91
9,210.53
7,000.00
13,087.49
27,610.06
48,494.83
47,188.86
49,274.32
49,200.54
49,846.54
50,282.79
50,920.99
51,077.48
Share of the
Economy
(%)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.01
0.01
0.02
SOURCE: IBISWORLD
Provided to: University of Alberta (2133882029) | 08 September 2019
Cannabis Production in CanadaNovember 2018 35
WWW.IBISWORLD.CA
Jargon & Glossary
Industry Jargon
IBISWorld Glossary
CANNABISThe plant from which medical marijuana is
harvested.
EDIBLESEdible cannabis products, often in the form of
baked goods or candies.
DISPENSARYDesignated medical marijuana retail
stores.
JOINTA rolled cigarette containing dried marijuana,
often hand-rolled by the consumer.
BARRIERS TO ENTRYHigh barriers to entry mean that
new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
INDUSTRY REVENUEThe total sales of industry goods
and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
CAPITAL INTENSITYCompares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labour. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labour; medium is $0.125 to $0.333 of capital to
$1 of labour; low is less than $0.125 of capital for every
$1 of labour.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
“real” growth or decline in industry metrics. The inflation
adjustments in IBISWorld’s reports are made using
Statistics Canada’s implicit GDP price deflator.
DOMESTIC DEMANDSpending on industry goods and
services within Canada, regardless of their country of
origin. It is derived by adding imports to industry
revenue, and then subtracting exports.
EMPLOYMENTThe number of permanent, part-time,
temporary and casual employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISEA division that is separately managed and
keeps management accounts. Each enterprise consists
of one or more establishments that are under common
ownership or control.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTSTotal value of industry goods and services sold
by Canadian companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in Canada.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
INDUSTRY VALUE ADDEDThe market value of goods
and services produced by the industry minus the cost of
goods and services used in production. IVA is also
described as the industry’s contribution to GDP, or profit
plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%; medium is 5% to 20%; and high is more
than 20%. Imports/domestic demand: low is less than
5%; medium is 5% to 35%; and high is more than
35%.
LIFE CYCLEAll industries go through periods of growth,
maturity and decline. IBISWorld determines an
industry’s life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industry’s products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENTBusinesses with
no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
PROFITIBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
VOLATILITYThe level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.
WAGESThe gross total wages and salaries of all
employees in the industry. Benefits and on-costs are
included in this figure.
Provided to: University of Alberta (2133882029) | 08 September 2019
www.ibisworld.ca | 1-800-330-3772 | info @ibisworld.ca
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