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Good Riddance Summer of Discontent!

As if the headwinds of high taxes, fees, and mark-ups hasn’t been challenging enough for the regulated cannabis sector, the disruption that plagued the provincial monopoly distributors in Ontario, British Columbia and Quebec has us shouting enough is enough!

Nearly four years into legalization and it seems like governments have lost the public health narrative in favour of the get rich quick scenario. As government coffers swell with a bevy of direct and indirect taxes and fees, they’ve lost recognition for the licensed producers and retailers that are fighting it out for market share with an entrenched illicit market. Investors, both small and large, have been subsidizing the nascent market, increasingly drained by lower margins and mind-numbing regulations.

Fragility of Monopoly Distributors

The 2022 Summer of Discontent has badly exposed the fragility of Canada’s monopoly distributor model for cannabis and may be contributing to a new awareness that a high cost/low performance approach isn’t going to cut it in the competition for legacy market consumers.

COVID may have led various governments to recognize the essential nature of cannabis, but by the summer of 2022 we had the three biggest provinces simultaneously sputtering. While Quebec’s labour challenges were merely rotating, Ontario and BC outright seized up as the monopoly chokepoint succumbed to the leak, the breach, the walk-out, and the strike.

One national legalization law may be the envy of many globally, but once 13 provincial and territorial distribution bureaucracies have had their customization weed wack, we end up with a costly hodge podge that leaves us hard pressed to survive, much less compete.

Framing the Conversation for Reform

No matter what traditional territory you stand upon in Canada, we believe these three fundamentals help to frame the conversation:

1.      Distribution mark ups should be as low as possible and align with the principal of “reasonable return for capital expended” and the reality of competition with the illicit market needs to be accepted.

2.      Government monopolies choosing category winners and losers for cannabis isn’t a good idea. This smothers innovation and creates needless barriers for small producers. Build upon the progress with uniform bar codes and implement GS1 (a common language) as a shared provincial/territorial platform for receiving product offerings from licensed producers and processors.

3.      Eliminate the risk of monopoly choke point distribution models by encouraging the development of hybrid direct ship approaches for licensed producers and processors of all sizes. Stop telling private retailers they are incapable of curating the right selection of products for their local market.

Since each province and territory is quite different, it’s difficult to generalize, so these three fundamentals might not work in every jurisdiction. That is the joy of doing cannabis business in Canada. One national law and 13 provincial and territorial adaptations!

Impact of Excise Taxes and Mark-ups

Mark-ups and excise rates really do vary across the country as well. In May, at our Grass on the Hill Industry Lobby event in Ottawa, we released a study conducted by the consulting firm EY that shed a lot of light on the impact of excise taxes and mark-ups on our financial viability, and on our ability to compete with the legacy market.

Using the Ontario Cannabis Store (OCS) for reference, the report indicated that the all-in government burden of taxes, fees and mark-ups comes in around 60% leaving little for the regulated growers and retailers.

Recently the profits (not excise and other taxes, just distribution profits) from provincial distribution monopolies were profiled in the press and they confirmed suspicions that the only ones making any money are the governments. That’s what leads me to wonder if decision makers have largely lost sight of the public health objective of shrinking the legacy market? Shouldn’t there be pronounced strategies to grow the pie beyond the approximately 50/50 legal vs. legacy market?

At C3 we think so! That’s why we are really trying to motivate our cannabis community to build a stronger voice to politicians. All politics is local after all, and if there’s one sector and community that’s everywhere, it is us. It is cannabis!

Review of the Cannabis Act

On September 22 Ottawa released its long-awaited statutory review of the Cannabis Act (Bill C-45). Throughout the delay and right up until today, C3 has been calling for a broad scope and a commitment to timely action. Urgency is reflected in our #SOSCannabis campaign where we help you to personalize your message about #urgentactionrequired.

Grass on the Hill

On October 17 and 18, 2022 C3 will be hosting our fall Grass on the Hill Industry and Lobby Day and we will take stock of things as we reach our 4th Anniversary. Where will you be on the 4th Anniversary? We invite you to join with us in Ottawa. Come meet your MP and gain the skills and tools to be pro-active and confident in the world of advocacy – otherwise known as self-preservation for regulated sectors.

Anytime you need support or information, check out the toolkit of reference materials on our website at

George Smitherman is the President and CEO of the Cannabis Council of Canada. George has been active in the cannabis sector since 2014 and in a past life served as Deputy Premier of Ontario and Minister of Health, Energy and Infrastructure. George is a daily cannabis consumer and acknowledges the role cannabis has played in aiding personal health transitions away from opioids and alcohol.

Tags: C3 (16), Cannabic Act (1), Cannabis Council of Canada (29), cannabis legalization (7), cannabis reform (1), cannabis review (1), cannabis strikes (1), George Smitherman (27), SOSCannabis (1)