Cannabis Beverage

TAM in Canada
The hype around Cannabis beverages
Let’s quickly explore the hype around Cannabis beverages, in particular in the Canadian market.

The analysis is intended to provide some insight into the potential TAM and revenue impact to LPs
specifically for Cannabis beverages.

Key assumptions*:

1. Market share per BDS analytics reflects the project mature market for Cannabis;
2. Estimated TAM reflects sales at the retail level; and
3. Estimated markup from wholesale to retail is relatively accurate.

*Model can be adjusted to reflect various scenarios (Change in TAM, market share markup etc.). Analysis herein reflects the assumptions show in this presentation.
To understand the
projected impact to LPs.
Let’s first review the
estimated market share
by category in more
mature and comparable
markets.

Non-flower categories
are relatively more
mature and complex
than Canada (SKU
complexity and
competition is high).

Note the expected shift

away from flower as the
market matures. For this
analysis the 2022 est.
market share will be
used
Zooming into a very
competitive and mature
market, we can see the
shift away from flower
over time.

The shift is attributable

to the availability of new
SKUs and formats.

A similar trend is
anticipated in Canada as
the market matures.
Now let’s dig into the
Cannabis beverage
category.

Beverages in more
mature markets still
represent a relatively
low % of the total
market share of edibles.

Note that this analysis

does not factor in the
increase in market share
related to new beverage
formats or a shift in
consumer preferences.
Analysis

Onto the analysis!

Note the estimated TAM and CAGR is highly

variable. The model can be adjusted to reflect
actuals or a change in projections.

For the purpose of this analysis, the high and low

end of the TAM for 2019 was set at $3.5B and
$2.5B respectively. The outputs in the following
slides are based on the average for each year.

Also note that the projected growth is based on a

CAGR of 20% which may/may not reflect actual
growth. Note that forecast for 2023 and beyond
may be substantially off (market saturation likely
and growth will not be straight line).
 Analysis - Market Share assumption
Assumptions for market share are based on data
from BDS analytics (see previous slides).

The breakdown is re-stated here to brief discuss

the assumptions used for the outputs in the
subsequent slides.

Assumption used for the Canadian market is

based on the “mature” market share by category
and the 2018 market share category breakdown
for edibles.

Note that this assumption and changes to the

underlying assumption can result in a large
variance in the outputs.
 Analysis - Retail Value by Category

Based on the prior slides in the analysis section,

this table is intended to show the estimate dollar
value at the retail level for each category.

Note the following:

● Does not factor impact or reflect any
assumptions around excise taxes.
● Uses the average market size from slide
6.
● Market size by category is based on
assumption from slide 7.
 Analysis - Edibles
Based on the prior slides in the analysis section,
this table is intended to show the estimate dollar
value at the retail level for each sub-category in
the Edibles category.

Note the following:

● Does not factor impact or reflect any
assumptions around excise taxes.
● Uses the average market size from slide
6.
● Market size by category is based on
assumption from slide 7.
● Note, that edible categories here do not
align with what is currently available in
the market in Canada (Limited edible
SKUs introduced in CQ4 ‘19). The intent
is to demonstrate what the market
value could have been using a mature
market model and applying that to the
projected TAM.
 Analysis - Project LP revenue by market
share
This final output of the analysis is based on the
cumulative assumptions and data used on the
prior slides.

The output is intended to demonstrate that the

absolute dollar value of the edible market is
projected to relatively low vs. other more
attractive categories.

Opinion:
Assumptions used in the analysis are very
aggressive in term of market size and market
share for edibles. As at CQ2 ‘20, there are still a
limited # of edible SKUs available, in particular in
the beverage sub-category.
Disclaimer:
Investment in this particular category is difficult to The analysis here is intended for discussion purposes only. The primary objectives are:
substantiate without a major change in the 1. To facilitate discussion around assumption on market size and share at the category and sub-category level.
2. To understand in absolute dollars what portion of the market can be captured by beverages. To simplify this
underlying assumptions (in particular around
point, think of this “In a mature market and assuming the TAM is correct, what is the $ value of the
market share). beverage sub-category? How large would it need to grow to substantiate a large investment (PP&E, R&D,
other incremental OPEX)?
Sources

https://bdsa.com/wp-content/uploads/2019/01/BDS-Analytics-Top-10-Trends-2019.pdf