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.