Four years after the legalization of recreational cannabis, the Alberta Gaming Liquor and Cannabis (AGLC) is forecast to turn a $7 million profit on cannabis in 2022-23, according to the provincial budget released on February 24, 2022. This comes after the AGLC lost $12 million in 2020-21 and is forecasted to lose $11 million in 2021-22.
At the same time, the Alberta government’s tax revenue from private cannabis sales is expected to jump from a forecast $145 million in 2021-22 to $157 million in 2022-23, an 8% increase.
Part of that predicted revenue increase can be explained by the new 6% markup on wholesale cannabis pricing that took effect on February 25. The province did not initially add any markup to cannabis prices, a move they say was to help combat the illicit market. According to a letter AGLC sent out to cannabis producers and retailers and other related stakeholders, the change in policy is a reflection of the current maturity of the legal market in Alberta more than three years in. Cost of production has also been falling.
The 6% markup applies to all cannabis products across all categories. While the AGLC sets the wholesale price, each retailer is responsible for determining its own retail, consumer pricing. The markup is offset partially by eliminating the 2% education fee that was being charged.
The 2022-23 budget also provided an update on the taxation of vaping products. In Budget 2019, Alberta became the first province to announce a tax on vaping products, they say to discourage youth vaping by making these products less affordable. Budget 2020 provided more details about the proposed tax, indicating that the tax would be introduced at a rate of 20% on the retail sale price. However, in March 2020, with the onset of the pandemic, the government paused the implementation of the tax in order to avoid placing additional burdens on Alberta businesses.
In its 2021 budget, the federal government announced its plans to bring in a federal taxation framework for vaping products in 2022, including the possibility of a federal-provincial coordination of this tax. Alberta will work with the federal government to explore a coordinated tax approach to collect a provincial tax on vaping products sold in Alberta, instead of introducing a standalone provincial tax.
The budget release comes days before the AGLC it set to shut down its cannabis retail website on March 8th, giving up its monopoly on legal online cannabis sales, which captured about 1.5% of the licensed Alberta market.
Private online sales will likely lead to an even more competitive cannabis marketplace in the province. Alberta has consistently had a strong store count relative to other provinces, and this has resulted in strong per capita sales figures. At the end of February 2022, Alberta had 752 stores, a jump of close to 30% compared to February 2021. In December 2021, Alberta’s sales were also up 11.3, to $65.7 million.