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Which Province will have the cheapest cannabis?

Which Province will have the cheapest cannabis?

With only a handful of provinces releasing their plans for the legalization of the recreational market we can look at two of those provinces to determine the lowest and the highest prices that consumers in this new framework will see in their local dispensaries. No province has released their regulations yet, so we do not know if there will be any volume pricing for quantities over that gram package.

New Brunswick was one of the early participants to announce their plans, striking up a deal and an advance purchase order with Tweed and Organigram to supply the market in the province. I have previously written about the New Brunswick no bid contract here, but the prices will work out to between $6-$8 a gram. That is before the ($1) sin tax, distribution and sales costs have been added. New Brunswick has created a for-profit Crown corporation that will be responsible for the distribution and sales.

Ontario has previously announced that their target is $10 a gram.

Contrast this with Quebec whose newly released plans are similar to Ontario’s in having the provincial liquor board control sales and distribution with one key exception. Quebec, in responding to the original spirit of Bill C-45 have chosen the goal of eliminating the black market to drive their policies and ensured that the newly formed crown corporation will be set up as a non-profit. You read that right, Quebec is more concerned with the elimination of the black market that in order to reduce costs to the end user it has stated that it does not want to make a profit. All profits will be funnelled back into education programs.

So in the war of which province will have the most open market, Quebec takes a giant leap ahead.

Canadian tax plan announced for cannabis

The federal government at long last has announced their plans to tax cannabis when it opens up the recreational market next July.

The plan includes both a fixed tax cost of $1.00 for sales up to $10 as well as a percentage of 10% for sales over 10$. If this is modelled after the excise taxes on alcohol and cigarettes in Canada then this will also be subject to 13% HST.

Before we look at the windfall for the government, let’s examine what this will mean for purchasers in New Brunswick based on the numbers supplied for their awarding of a no bid contract to Tweed and Organigram.

The contract in it’s first year is estimated to be about $40m for 4 million grams for Tweed. This works out to be about $10 a gram (we have no details on whether distribution costs are included). Add on the excise tax of $1 and HST and the cost jumps to $12.43 a gram(about $348 an oz) . Below is a quick table to show the price to consumer with the excise and HST taxes applied.

Price per gram
With excise tax
With HST
Price per oz

This table just reflects the current costs of cannabis flowers. Once we get to top market cannabis extracts the additive cost for consumers starts to jump.

Price per unit
With excise tax
With HST

Trudeau also announced that this excise tax would be split with the provinces. Based on a $10 per gram charge and the estimate of 600 metric tons needs to meet the initial demand, the tax windfall per province looks like the following;

Percentage of population
Estimated Cannabis sales (gr)
Provincial Excise Taxes
Federal Excise Taxes + HST
British Columbia
Nova Scotia
New Brunswick
Northwest Territories

 While provinces like Ontario that have a windfall of new tax generation of over $110m. Provinces such as the Yukon will have to stretch to have their taxes of $300K to administer a program. Look to more news of the Feds having to send more money to some provinces to ensure that all the programs are running to the same standard.

New Brunswick – are they moving too fast?

New Brunswick – are they moving too fast?

Where some provinces have yet to move on legalization, provinces like New Brunswick are ahead of the curve – but is the move that they made in the best interests of the marketplace?

New Brunswick Finance Minister Cathy Rogers announced the formation of a new Crown corporation that would be charged with overseeing the regulations governing the sale of marijuana in the province. The actual selling will be a third party framework that will be decided in the coming months.

Along with that announcement was a parallel disclosure that the newly formed Crown Corporation (which was still a numbered company at the time of annoucement) has signed an agreement with Organigram and Canopy Growth to supply 9 million grams (9000kg) of cannabis a year to this new organization. That sounds great in practice but New Brunswick has basically created a monopoly of two companies in the province.

By the numbers, if Canada requires *600,000kg of cannabis in year one then New Brunswick, with only 2% of the population would need 12,000kg. By ordering 9000kg they have in fact killed off more than 75% of the market to competition. While New Brunswick may have contacted each LP in Canada and invited them to bid, searches of the provinces public bid and tendering systems reveal no such transparency.

Even the numbers sound a little dicey, basically the government is purchasing cannabis by the gram with no real discount for volume. The deal is estimated to be between $40-60million for 5-9million grams of cannabis. This puts the pricing at between $6-$8 per gram that’s between $214-$225 an ounce without any taxes, distribution and sales costs added in. It looks like New Brunswick users will find a better deal on the black market.

*low estimate