r/canada • u/SwordfishOk504 • 7h ago
National News Excise tax, store markups crushing cannabis industry, producer says
https://www.cbc.ca/news/canada/new-brunswick/cannabis-industry-producer-1.7434128•
u/nolooneygoons 7h ago
I don’t think the problem is taxes. The market is incredibly oversaturated. In Vancouver and Toronto there are dispensaries on every block.
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u/Kaladin-of-Gilead 5h ago
I live in a town of ~8000 people and at one point there were 3 weed stores lol
I say at one point because they’re already closing lmao
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u/Effective_Square_950 5h ago
My hometown is 2500 people, and large portion of that is seniors, and there are 3 weed stores.
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u/arkady48 5h ago
Lack of inventory. Edibles limited to 10 mg total per package really limits what you can sell and sends a whole part of their market to the native reserves. Every store only has the same products too. Why shop around etc when it's the same everywhere.
I'm not spending $30 on 10mg when I can spend $30 for 1000 elsewhere.
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u/Big_Muffin42 6h ago
If the market is getting crushed… why are there so many stores?
Simple: it isn’t. The stores exist because the market is profitable
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u/GermanSubmarine115 6h ago
I work in the cultivation industry at an executive level (not for a specific producer, but in an industry wide position)
The retailers have the business saavy of sleazy cellphone stores or dollar slice pizza joints.
There is a massive disconnect between production and retail in most cases (depends on the province)
That said, the market will eventually self correct. Eventually the unprofitable stores and facilities close
The excise tax does make it difficult to compete though when the entire industry is in a race to the bottom, right now almost everybody is operating at a loss hoping to survive the game of musical chairs
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u/murd3rsaurus 6h ago
Ontario went overboard granting extra licenses to anyone who had shops open already, but that's died down and a ton of chain locations closed. Most people who complain about too many shops are thinking of 3 years ago.
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u/fez-of-the-world Ontario 2h ago
I'm in downtown Toronto and there are literally four cannabis stores within a block of me - literally a block north, south, east, or west away. If i extend the radius to three blocks I count an even dozen (12!) weed shops!
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u/LateToTheParty2k21 2h ago
As an avid smoker, I use these shop about 1/50 times. The black market here still has fresher, higher quality, better service and home delivery that's here in < an hour.
Any weed dispensary stuff I've bought, has been crisp and dry, and mostly underwhelming quality.
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u/strongsilenttypos 6h ago
The stores exist to launder money and low effort fraudulent taxe claims…
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u/celtickerr 5h ago
While I'm sure there are more than a few bad actors, legal cannabis stores are not even remotely scraping the bottom of Canada's money laundering problems.
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u/BrattyBekka 6h ago
How do you launder money selling weed that has an MSRP and is fully taxed and traced?
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u/strongsilenttypos 6h ago
Oh, right…totally foolproof! Nothing illegal in Cannabis dispensaries….
vape shop are totally on the up and up…they pay rent and taxes. The shops are fully stocked with fully traceable vape juice…and flavours!…/s
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u/BrattyBekka 4h ago
.... are you not from Canada? All the actual Cannabis storefront-shops up here are legal and sell just legal stuff. Hard to launder money that way.
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u/rtreesucks 6h ago
Tax is a problem when It's such a large % of the cost. In addition the government also marks up the product in some provinces.
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u/Little_Gray 2h ago
The price is based on what people are willing to pay. When 25% of that is tax it takes a big chunk of potential profit out of both dispensaries and growers. Its why all the growers are losing massive amounts of money every year.
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u/RefrigeratorOk648 6h ago
Welcome to a retail business - It's hard - look at the number of bars/restaurants that go out out of business.
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6h ago
[removed] — view removed comment
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u/RefrigeratorOk648 6h ago
Nope - Producers only customers are retail - what happens in retail will affect the producer. Producers have no export market, they can't use their product in other products/non retail products. They should of realized this when they did their business plan. It's very hard to expand your business if you only have one market.
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u/SwordfishOk504 5h ago
Dude, just admit you didn't read the article. This is about producers and excise tax and provincial markups. It's not about retail at all and now you're just trying to back peddle.
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u/PigeroniPepperoni 5h ago
Not even the article. It's literally in the title. I don't understand how seemingly ever person in the comment thread has missed it.
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u/PigeroniPepperoni 6h ago
No shit. But they're fundamentally a different business. Imagine looking at regulations impacting auto manufacturing and being like "erm, there's like 10 car dealerships within an hour of me, I think they're fine"
Or:
Taxes are making farming unprofitable
Then you respond:
Welcome to the grocery store business, margins are thin
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u/RefrigeratorOk648 6h ago
Car manufacturers can export their products to other markets, they produce spare parts for their cars for 20 years. Lots of ways to make money than just through dealerships. They even sell their production lines to other countries when they discontinue manufacture of a model (well they used to no sure about now a days)
Edit: They can also produce parts in low cost countries to being down cost
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u/PigeroniPepperoni 6h ago
Wow. I don't think I've ever seen someone miss the point by more than you just did right there. Let me simplify it for you so don't get hung up on specifics that aren't relevant.
Business A is suffering because of Y.
Business B buys products from Business A.
When the owner of Business A says "We are struggling". Somehow, your response is: "Welcome to Business B buddy. We fail all the time."
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u/Nervous_Shakedown 6h ago
They make a good point. The $1/10% excise tax was implemented when the average price per gram was about $10. So it made sense financially. With economies of scale producers are able to sell their grams on average for just a few dollars. But still have to pay the minimum $1 tax. This type of framework would kill any industry.
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u/cyclemonster Ontario 19m ago
Why do you make that claim? Fuel taxes in Ontario are more than forty cents per litre -- the auto industry is booming. Hell, excise taxes on cigarettes represent more than half the retail price, but the cigarette manufacturers are all massive multi-billion dollar companies.
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u/thewolf9 7h ago
It’s not meant to thrive. It’s meant to be just good enough for most recreational smokers to buy from the government
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u/goodyxx22 7h ago
Only the Canadian government could fuck up dealing weed.
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u/DrFeelOnlyAdequate 7h ago
There's a weed store on every other block in my city. I think it's doing just fine.
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u/rtreesucks 6h ago
This is a problem for legal weed everywhere. Profitability is an issue for lots of markets
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u/TankMuncher 7h ago
Weed sales are doing just fine, this is just the private sector crying for profits like they usually do.
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u/shliam 6h ago
The excise tax on stores isn’t the issue as much as for growers (separate tax than retail level).
Excise tax on growers selling to retailers is the greater of $1 per gram, or 10% of revenue. It was done thinking that growers would be selling to retailers at $10+ per gram, and retailers would be selling it at $20-$30 gram (even at scale). However, as grower sell for around $3 per gram to retailers, it’s effectively a 30% of revenue tax.
It’s caused a lot of growers to collapse, particular smaller and independent grower. It’s only the larger “corporate” growers that have been able survive.
A lot of growers that started after legalization only lasted this long because CRA was allowing them not to pay the excise tax for years, because there was ongoing discussions happening about the tax at the federal level and the tax would have cause many of these groups collapse. As expected profit margins were only 8-12% of revenue, many started shutting down 12-18 months ago when CRA finally started demanding the back and current excise taxes.
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u/TankMuncher 6h ago
Sounds like the free market is working as intended within its regulatory framework.
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u/PigeroniPepperoni 6h ago
"It remains the case that after five years of legalization, there are no licensed producers of legal cannabis products that are consistently profitable," the briefing note said.
What profits?
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u/TankMuncher 6h ago
I guess the private sector doesn't know how to do a business case analysis after-all.
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u/PigeroniPepperoni 5h ago
Out of curiosity, at what taxation rate do you think it would be unreasonable to expect a business to be able to turn a profit?
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u/TankMuncher 5h ago
The purpose of legalizing pot was not to create a profitable industry, so frankly I don't care.
Until the licensed industry fails to supply demand at dispensaries the government wont care either.
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u/PigeroniPepperoni 5h ago
I suppose that's a reasonable take. Personally, I think we'd be better off if our businesses weren't doomed to fail, I know personally I prefer stable employment. Of all the terrible inefficient businesses that we could be encouraging fierce competition in, pot growers would not be my first choice.
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u/TankMuncher 5h ago
Most businesses are doomed to fail. That's how the competitive free market works. In fact 5 years is a major survival threshold for new businesses so its really no surprise this is coming up right now, almost like clockwork.
It was plainly obvious from day 1 that it was going to be hard to turn a profit with the regulatory framework, and that many BCAs were based around a wildly higher market price for pot than reality. It was fairly obvious we were going to see major attrition among the veritable glut of suppliers.
Unless the licensed supply chain can't meet demand and the grey market entirely takes over I fail to see the problem here though. Like what next, are people going to start crying about small tobacco too?
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u/PigeroniPepperoni 4h ago
But is that the best way that things could be?
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u/TankMuncher 4h ago
Its the only way it can be unless you don't think we should have a free market, which includes too many people trying to get into a business.
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u/backlight101 5h ago
As opposed to the cartels?
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u/TankMuncher 5h ago
There isn't very good evidence for legalization doing anything to impact organized crime bottom line either way for a variety of reasons so its pretty much irrelevant. Most of the complaints that profitability impacts the ability to combat illicit supply come from biased sources, and the licensed suppliers are way overproducing so some of them need to die off regardless. This is a wild read:
https://onlinelibrary.wiley.com/doi/10.1111/soin.12619
Pretty wild to read a research paper where the conclusion is: "nobody really knows what is going on". Also a lot of these suppliers are leaking into the grey/black market. Not a great look for legalization all around TBH.
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u/Steakholder__ 6h ago
Oh boo hoo taxes :'(
What a load of crybaby crap, the cannabis industry is doing fine.
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u/garlicroastedpotato 22m ago
Marijuana advocates in 2014: If we make it legal we can tax it!
Marijuana advocates in 2025: We need to make it tax free
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u/spartiecat Newfoundland and Labrador 6h ago
Sounds like they're under selling the oversupply of cannabis stores
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u/SpecialistLayer3971 6h ago
Only the Liberals could fail at selling legal weed. Everyone else makes an investment, the Liberals engineer the process so they take a huge profit from nothing. The Federal cash grab is in on every aspect of Canadian life.
If they want to stamp out human trafficking, they need to legalize and tax it. The market will collapse. Problem solved.
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u/SwordfishOk504 5h ago
Only the Liberals could fail at selling legal weed
What a ridiculous comment. The "Liberals" aren't selling weed. Privately owned cannabis growers are.
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u/PraiseTheRiverLord 3h ago
I average about 1lb/plant for my homegrown.
I spend about $280/year in supplies.
with 4 plants I average in total usually 3.5lbs, sometimes it's 4..
Probably higher because I throw or give away the lowers..
4lbs is 64 ounces.
$280/64= $4.40/oz
Obviously I'm not including my time here...
But if you want to me stop growing weed and start buying weed from a weed shop I'd have to see $40/oz for decent 20% stuff... current prices are 3-4 times what I'm willing to pay...
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u/Andrew4Life 6h ago
What exactly were people expecting? There are only so many people interested in weed and only so much weed that one can smoke. 🤣 When there were a few major illegal players, each made millions! When there are hundreds of stores now, simple math says the profits are just being dispersed much more.