Opinion: The Canadian cannabis industry has not been the source of profit promised to investors. Here’s how to improve it

Alison Gordon is the former CEO and Founder of 48North Cannabis Corp., and Co-Founder of Other People’s Pot in-store agency.

Cannabis plants grow inside the Thrive Cannabis production facility in Simcoe, Ontario on Tuesday, April 13, 2021. THE CANADIAN PRESS / Tara Walton

Tara Walton / The Canadian Press

Canada’s legal cannabis industry is about to turn 3, but don’t expect to see a lot of celebrations among retailers and producers.

Legal marijuana has not proven to be the big source of money promised to investors, nor has it produced good products consistently. Every aspect of the cannabis supply chain is a struggle: paper-thin margins; oversaturated retail trade; limited product innovation; lack of manufacturing efficiency; and low brand loyalty are just a few of the many problems.

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Three years later, we have enough data to refute many of what some believed to be the risk factors associated with cannabis that inspired the extremely restrictive cannabis law. If the government does not make changes quickly, we will lose many of the businesses, jobs and taxpayer dollars that the industry currently provides. Canadian consumers will end up with a seamless oligopoly producing substandard cannabis products.

When the federal government reviews the Cannabis Act, here are 10 steps that would revitalize the domestic industry:

1. Reduce excise taxes

One of the biggest challenges in the industry is the heavy taxation of licensed cannabis (LP) producers. LPs pay the federal government $ 1 for every gram of cannabis sold, along with provincial taxes and other fees. Producing cannabis in the legal market is much more expensive due to increasing regulations, packaging, provincial council distribution costs, secure shipping, and a workforce with limited experience. . Taxes were designed to represent 10 percent of MSRP (retail price), but the reality is that taxes average 20 to 30 percent of a producer’s turnover. This is not viable for a large majority of LPs, most of which have no margin for their results.

2. Review the provincial distribution

The Cannabis Act delegates all forms of distribution to provincial governments. Most provincial boards have chosen to manage distribution on their own, and as a result government agencies have a monopoly on purchasing and pricing. On average, provincial distributors charge a 35-45% mark-up on products, even though they do not engage in many of the traditional functions of a distributor, such as helping to secure storage space in outlets. sale to detail. Therefore, cannabis companies have to find another way to compete for storage space, such as hiring sales agencies or strengthening the internal sales team, which is another cut of the cake. limited profits of a producer.

3. Stop taxing medical cannabis.

Health Canada approved medicinal cannabis over 20 years ago, but patients still struggle to access affordable, quality products that are becoming useful for treating opioid addiction, PTSD, side effects of cancer treatment and more. Taxing medical cannabis comes at a high cost to the patient, who can turn to the unregulated market – which cannot guarantee the safety or quality of products – to access affordable cannabis. As such, many LPs have turned entirely to the recreational market.

4. Mark (a little)

Without standard branding tools, consumers have no way to identify the differences between products, and their only available criteria are THC percentage and price. This creates a race to the bottom of the price per gram, and LPs have little incentive to cultivate and manufacture quality cannabis. A thriving and diverse industry needs consumers who can make informed decisions.

5. Review labeling requirements

Current packaging regulations require standardized health warning messages, which means even the smallest product must be placed in a large package to meet all labeling rules. There is no ease of use for the cannabis user, and over-packaging is one of the biggest complaints from consumers. Simple changes could be made to labeling requirements to bring clarity to cannabis consumers and end unnecessary packaging.

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6. Increase THC Limits

One of the main reasons that many consumers do not make the transition to the legal market is the limit of 30 grams of THC for each purchase. Regular cannabis users buy in quantity and don’t want to visit a retail store several times a week. Additionally, the food and beverage limits are so restrictive that consumers who purchase four cannabis drinks cannot purchase anything else on that visit. We cannot lose sight of the fact that eliminating the illicit market was one of the key goals of legalization. Cannabis users are just as capable as alcohol users of regulating their consumption.

7. Allow retailers and licensed producers to sell

With the inability to maintain stores with unique or differentiated products, most retailers will not survive in this oversaturated market. Provincial boards need to review their policy that “all products should be offered equally to all retailers” to allow LPs and retailers to work together to provide stores with products their customers cannot purchase elsewhere.

8. Consumption lounges open

Blocking provincial licenses for cannabis consumption salons is detrimental to the growth of a legal, safe and accessible cannabis culture. Alcohol consumption is part of the dominant Canadian culture (restaurants, concerts, bars, grocery stores, etc.). We need to move away from the “Reefer Madness” misinformation about cannabis. The ability for adult consumers to purchase and enjoy legal cannabis products under age-restricted conditions environments should be a key part of legalization.

9. Allow the sale of THC-free products outside of dispensaries.

The cannabis plant contains over 100 components known as cannabinoids, only one of which is responsible for creating a “high”. Others are used in a wide range of medical products and preparations. Canada’s strict regulations on all cannabinoids (THC, CBD, CBN) mean that all legal cannabinoid products must be sold through dispensaries. Unregulated CBD products are rampant in Canada and sold in convenience stores, fashion boutiques and salons across the country, with some retailers unaware that this is illegal. Additionally, CBD “wellness” consumers should visit recreational clinics to purchase products such as vaginal suppositories, gummies, and creams. Sales data shows that many products in this broad category are falling short of their revenue potential (and their customers), due to the lack of availability in non-cannabis retail spaces.

10. Reinvest part of the cannabis tax revenue in the industry

Cannabis is one of the only highly regulated industries in Canada that does not receive a percentage of taxes reinvested in the industry. The provincial and federal governments do not allocate public funds (for job creation or the development of small businesses) or subsidies or financial assistance to the industry, which would contribute to the survival of independent businesses and the industry itself.

I have spent eight years working in weed and much longer as a cannabis advocate and user. I fear we are losing the incredible energy, momentum, jobs and taxpayer dollars that the cannabis industry provides to Canadians if the federal and provincial governments don’t act, and quickly.

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